New York City has always been one of the hottest housing markets in the US. But is 2023 a good time to invest in the NYC real estate market?
Real estate investors know that the Big Apple is a good long-term investment for several reasons, like appreciation, livability, and tourism. However, we can see the present economic conditions affect the NYC real estate market as well. There are also changing market trends and buyer behavior. So, is the NYC market still a viable option for investors in 2023?
Table of Contents
- How Is the Real Estate Market in NYC Right Now?
- 5 Forecasts From Experts on the 2023 NYC Real Estate Market
- Is It a Good Time to Buy Real Estate in NYC in 2023?
- How to Find a Profitable Investment Property in the NYC Real Estate Market in 2023
The NYC real estate market went through a lot in its past. For instance, the collapse of the Amazon headquarters deal back in 2019 was a setback for investors who prepared for increased demand and growth in New York City real estate, and Queens, in particular.
Additionally, the COVID-19 pandemic brought the NYC real estate market to a grinding halt as almost every aspect of the economy stopped.
However, we’re seeing a significant recovery take place, especially in the past year, as we enter the post-pandemic era. So, without further ado, let’s talk about the 2023 real estate market trends in New York City.
How Is the Real Estate Market in NYC Right Now?
The Big Apple, known to be the city that never sleeps, was put to a short nap by the COVID-19 pandemic. But over the past year and a half, the NYC real estate market went on a fast road to recovery and is now, once again, a hot market for investors.
However, certain developments took place in the past year, triggered by certain global events, like the war in Europe and rising global inflation. The NYC real estate market is not immune to such adverse events, getting significantly impacted by them.
As it already stands, NYC is one of the most expensive cities in the world. Real estate properties are quite pricey in this city. We took a look at current median prices in several New York neighborhoods using real estate data from Mashvisor. The data was published in December 2022 and was the latest (and final) update from Mashvisor for the year.
According to Mashvisor, the least expensive neighborhood to buy NYC property in is Fort Greene, with the median price at $645,000. The most expensive part of town is Boerum Hill, with a median property price of $3,620,000. The numbers put the median property value for an NYC property at $984,274.
Now, just because NYC housing is not as affordable as in other states, it doesn’t mean the city is in a housing bubble. Remember that a housing bubble factors in other variables, not just high prices. And since the NYC real estate market is nowhere near a collapse, there are no housing bubbles in the area.
We saw mortgage rates go from historic lows to skyrocketing prices within the past couple of years. At the time of this writing, mortgage rates for the NYC real estate market are 6.50% for a 30-year fixed-rate mortgage and 5.84% for a 15-year fixed-rate mortgage.
At this point, it seems like mortgage rates will hover around the above numbers for the earlier part of 2023. However, there is still some relief in sight for homebuyers and investors. According to Bankrate’s initial forecasts, mortgage rates are expected to drop to 5.25% at the end of 2023.
The city of New York has something good in store for first-time buyers and those who haven’t owned a residential property for the past three years. The city offers several first-time homebuyer programs to help get you started.
However, it is also worth noting that if you’re buying a property in the NYC real estate market and you intend to use it as an investment property, expect to get slightly higher mortgage rates than usual.
One of the things the NYC real estate market is known for is its luxury residential properties. NYC boasts nearly limitless options when it comes to luxury residential properties. What it lacks, though, is certainty.
While prime NYC residential properties remain a must-have in power players’ portfolios, it’s still hard to predict where this particular market is headed next. The NYC real estate luxury market is in flux, and at the time of this writing, no clear forecasts are available. Some experts foresee that this niche market will move toward neutrality, where neither buyer nor seller is favored.
5 Forecasts From Experts on the 2023 NYC Real Estate Market
Given the prevailing trends in the NYC real estate market, as well as other factors that affect it, let’s look a some experts’ forecasts about possible trends and where the market is headed.
Here are a few of the forecasts and predictions based on the current market trends and buyer behavior.
1. Lack of Affordable Real Estate
Property prices are the driving force behind all real estate sales, and affordability is key in real estate. While both property prices and rental income can be adjusted over time, property prices tend to be more rigid in a real estate transaction. Unfortunately for real estate investors, the NYC real estate market is not known for its affordable real estate.
On the contrary, New York City real estate is notorious for its expensive property prices. According to Mashvisor’s investment property calculator, the median NYC property price going into 2023 is $984,274. It is significantly higher than the state median of $748,677, which is more than the national median of $475,956.
According to the New York State Association of Realtors (NYSAR), the housing affordability index dropped from 131 in November 2021 to 89 in November 2022. The change represents a 32.1% year-over-year decrease.
Real estate sales also decreased by 23% year-over-year in November 2022. New Yorkers need an estimated income of $129,500 to purchase a property.
The above house price trends make buying an investment property competitive for New York real estate investors. However, there is a way NYC investors can find affordable real estate. All they need to do is use Mashvisor’s heatmap analysis, which will analyze all properties in the market for low property prices and let you know in which neighborhoods to find them.
2. Rental Income
Rental income is the obvious bread and butter of any and all real estate success. Fortunately for New York City investors, high rental income is a staple of the NYC real estate market. It is partly due to the expensive property prices in the city, but there are more factors to consider (some of which we will mention later).
Investing in NYC real estate, in any neighborhood, is a profitable investment. The average rental income in the market, according to Mashvisor, is $2,746 for long term rentals and $3,789 for short term rentals.
While many neighborhoods will yield high rental income, there are certain neighborhoods with superb long term rental income averages. According to Mashvisor, they include:
- Boerum Hill, with a $14,800 average rental income
- Prospect Heights, with a $7,746 average rental income
- Clinton Hill, with a $7,145 average rental income
As for vacation rentals, the following neighborhoods will give you a good monthly income:
- Clinton Hill, with a $7,056 average rental income
- Gowanus, with a $5,757 average rental income
- Downtown, with a $5,293 average rental income
3. Property Appreciation
Rental income is definitely the go-to for investing in rental properties, but appreciation (an increase in value over time) is another benefit of investing in real estate. It is certainly the case when investing in the NYC real estate market.
During the last ten years, properties in the New York housing market appreciated by over 77.08%, according to Neighborhood Scout. It equates to an average annual appreciation rate of 5.88%. Despite the disruption caused by the pandemic, the NYC real estate market appreciation rate has been a solid 10.54%.
It shows the amazing recovery in the NYC real estate market going into the post-pandemic era. In the last 12 months, the NYC housing market bounced back at a significant rate. It is above average relative to the US housing market and is higher than 50% of other cities and towns in the state.
In the most recent quarter tracked by Neighborhood Scout, New York’s real estate appreciation rate was 0.91%, which equates to an annual rate of 3.71%.
4. Buyer’s Market
Many factors make buying an investment property conducive to property buyers. Common examples include affordable real estate, low interest, and investing in a buyer’s market as opposed to a seller’s market. While the NYC real estate market falls flat for the first two factors, it is beginning to develop into the third category.
For many years now, the NYC real estate market has been considered a seller’s market, one that favors sellers over buyers. During the latter part of 2022, however, the market cooled down, moving into being categorized as a buyer’s market. It is one of the trends that are likely to go on in 2023.
There are various reasons why the New York City real estate market has been leaning towards a buyer’s market at the beginning of the year. The primary reason is the decline in real estate sales. As mentioned previously, total sales dropped by 23% year-over-year, marking the 37th straight month with decreased sales in year-over-year comparisons.
Sellers have begun lowering their asking prices as a result. A decline in international buyers has also shifted the buyer’s market-seller’s market dynamics toward buyers.
5. Rental Demand
Finally, one of the most common and most important aspects of New York City’s real estate market trends is its high rental demand.
The incredible demand in the NYC real estate market is best exemplified in its current price to rent ratio of over 30, according to Mashvisor’s investment property calculator.
When a market’s price to rent ratio is 20 and above, it is more affordable for a person to rent a property than to purchase one. The higher the price to rent ratio beyond the said threshold, the more profound the impact on the market’s affordability.
The demand of the NYC real estate market is also seen in the percentage of residents who rent out properties. Roughly two-thirds of New York City’s population reside in rental properties. With such extremely high demand, it isn’t difficult for an investor to find prospective tenants.
Is It a Good Time to Buy Real Estate in NYC in 2023?
With the current movement in trends and buyer behavior in the NYC real estate market, not to mention the present market conditions, is 2023 a good time to buy investment properties in NYC?
NYC by the Numbers
As mentioned earlier, NYC has a great rental demand, which makes it an ideal location for rental property investing as far as rental income is concerned. Let’s take a quick look at Mashvisor’s December 2022 numbers for the NYC rental property market:
- Median Property Price: $984,274
- Average Price per Square Foot: $1,770
- Days on Market: 113
- Number of Long Term Rental Listings: 17,717
- Monthly Long Term Rental Income: $2,746
- Long Term Rental Cash on Cash Return: 1.52%
- Long Term Rental Cap Rate: 1.53%
- Price to Rent Ratio: 30
- Number of Short Term Rental Listings: 10,448
- Monthly Short Term Rental Income: $3,789
- Short Term Rental Cash on Cash Return: 1.99%
- Short Term Rental Cap Rate: 2.01%
- Short Term Rental Daily Rate: $183
- Short Term Rental Occupancy Rate: 63%
- Walk Score: 55
As you can see, the monthly rental income in NYC will give you a good cash flow. However, as far as ROI is concerned, it will take you quite some time to recover your investment as the cash on cash return for both types of rental properties are below 2%.
However, what it lacks in cash on cash return, it makes up for in rental demand with a high price to rent ratio of 30 and a short term rental occupancy rate of 63%.
Pros of Buying Real Estate in NYC in 2023
Investing in NYC real estate comes with several benefits attached to it, namely the following:
- New York City is a big metropolitan city that attracts people from all over the world.
- NYC is also quite attractive to global investors, bringing in many job opportunities.
- The demand for rental properties is huge.
- The rate of appreciation for NYC real estate is remarkable.
- Forecasts and predictions point to a favorable outlook for the NYC real estate market.
On top of all the above benefits, NYC is consistently considered a hot market. Most forecasts say many positive things about the NYC rental property market, making it a good place to invest in.
If you take the time to research the current market trends and 2023 real estate forecasts and predictions about NYC, you will find a few negatives. On the other hand, there are lots of positives to investing in the Big Apple.
As an investor, it will do you plenty of good to know what the forecasts are so you can make well-informed decisions. Information is valuable in real estate investing. Knowing is half the battle (so says the ‘80s cartoon show, G.I. Joe).
Cons of Buying Real Estate in NYC in 2023
On the other hand, no matter what the forecasts say, there are also certain disadvantages to investing in the NYC real estate market, such as:
- Real estate is really expensive.
- Rental rates are also quite high for average people.
- It is pretty crowded and saturated.
- Short term rental regulations are very strict in NYC.
Housing forecasts and predictions are usually optimistic regarding NYC, but there is one recent development that rental property investors are anxious about.
Before 2022 ended, the administration of incumbent NYC Mayor Eric Adams put forth a new short term rental registration law that could remove tens of thousands of Airbnb listings in January. It is a major concern to those considering starting a rental property business and getting it listed on Airbnb, Vrbo, and other similar websites.
So, take forecasts at face value and still do your own research when investing in any rental property market. Forecasts are there to serve as a guide to decision-making. But to get the most out of any investment venture, you still need to perform due diligence.
How to Find a Profitable Investment Property in the NYC Real Estate Market in 2023
When it comes to finding profitable investment properties in NYC, you can’t leave anything to chance. As we already mentioned, on top of the forecasts and predictions, you need to do your homework about the market you’re considering, too. It applies to the NYC real estate market as well.
To make your research a lot easier and more efficient, we recommend signing up for real estate Mashvisor’s services. Once you register, you will be given access to valuable real estate data and tools that other investors can only wish to get.
Mashvisor is known for its high quality and massive database that covers nearly every market in the country. It gathers data from highly reliable sources like Zillow, Realtor.com, the MLS, and Airbnb. Its database is regularly updated, so you can get the most accurate and realistic ROI projections no matter what market you’re looking at.
On top of its data, Mashvisor is also known to provide one of the best—if not the best—investment property calculators available online today. Its calculator not only allows you to make accurate ROI projections using rental comps but also points you to the best deals in the most profitable neighborhoods anywhere in the US.
Its Property Search tool lets you get a better overview of the NYC real estate market and zoom in on neighborhoods that perform better than others based on the criteria you choose.
Get started on your 7-day free trial with Mashvisor today.
Wrapping It Up
All in all, the NYC real estate market is becoming more favorable for buyers in 2023 despite some of the disadvantages that go with the territory. The market’s high rental income, appreciation rates, and top-tier rental demand are shaping it into a buyer’s market.
If you can afford to buy an NYC real estate property, it is a good long term investment that will get you a good monthly cash flow. If you intend to sell somewhere in the future, the appreciation rate will make it worth your while.
So, to find the best investment properties in the Big Apple, simply go to Mashvisor.com and enter the neighborhood you’re interested in. Customize your search by using the real estate heatmap filters so you can determine which potential properties to buy. Working with Mashvisor will make your research and investment property analysis faster and easier.
Learn more about how Mashvisor can help you find the best deals in the most profitable markets by scheduling a demo now.