Will the NYC real estate market crash?
My job is to represent potential purchasers and sellers in Real Estate closings in New York City. It’s pretty cut and dry. I have no idea where the market is going (although clients always ask me, as does my family). No idea if people are going to make or lose money. But, with this gig, you get a front row seat of what’s going on in the marketplace. Here’s what I see:
1. Mortgage Contingencies, the “Reset” button in real estate closings in New York, where you can get your money back if a bank won’t lend to you, are all but gone. If you even suggest it, real estate brokers pass out on the spot (crying occurs before that.)
2. Price per square foot in places like Brooklyn are soaring. Soaring. They dropped for the first time in 2 years in 2014 (wait for it…) because there were more sales in “less expensive” area in Brooklyn, while sales declined in more expensive areas because there’s no inventory.
3. The average listing price for Brooklyn homes for sale on Trulia was $992,411 as of November 2014. Brooklyn…
4. Our good mayor is making promise after promise to somehow build and preserve 200,000 affordable housing units within 10 years. Also, several lucky New Yorkers will receive a unicorn. This isn’t happening.
5. Just a few years ago, interest only loans were as toxic as wearing an “I love Chris Brown” t-shirt. Things change. The return of Interest only loans is back in full force. You can also finance 97% down (and, really, always could have) and Uncle Sam is on the hook (LOL on us, amirite?) Not to fret, FHA default rates are improving from the 36% default rate in 2007. Read that again, please.
6. The income divide is growing in this City. In fact, it’s the worst in the Country.
7. I donated food at the Bowery Mission the other day. They’ve been in existence since 1879. They feed thousands upon thousands of homeless people in New York City (which, coincidentally, has spiked). They’re completely out of money and are pleading for funding (you should fund them). Physically across the street, 250 Bowery has been completely sold out for over a year. Penthouses sold for $6 million dollars. The cheapest apartment sold for $925,000.00 If you peek outside your floor to ceiling window, you’ll see dozens of homeless looking for a place to sleep for the night.
8. Since the “crash” of 2008, home prices in New York City have skyrocketed. “You playin, Danny.” No, Mom, I’m not. Prices in Williamsburg have gone up 175% in 6 years. Where else? Oh, you know, traditional neighborhoods like Central Harlem (61%), East Harlem (43%) and Washington Heights (103%).
9. During that same time period, Median income actually dropped by 8% from 2007 to 2012. Huh?
10. It’s a contentious topic, but foreign investors are buying New York City up like never before. Stability schmability, but it’s worth noting.
11. New construction is on fire. Except most new construction being built in New York City looks like this and is for people who buy things for this much.
Will the NYC Real estate market crash?
I don’t say this to suggest some sort of crash is coming, but it is beyond troubling, and I don’t mean that in a flippant “the neighborhood is changing” kind of way. I do not see a way that this continues the way it has. The popular adage after 2008 was, “Remember, your house is not a bank. Do not count on appreciation.” You can find that advice here, here and here. Everything I’ve been witnessing for years tells me that people think otherwise. This will not end well.