07.3.2024 PropStream
Disclaimer: PropStream doesn’t offer investing advice. We highly recommend consulting licensed professionals before investing in NYC real estate.
New York City, also known as “The Big Apple,” has a housing market valued at a staggering $2.4 trillion—more than any other U.S. metropolitan area.
When you combine NYC’s lavish real estate scene with its bustling tourism industry, it’s no surprise that this dreamy city can make an excellent place to work as an agent or investor.
Let's explore some of the current NYC market trends to learn more about the professional potential of The City That Never Sleeps.
Table of Contents
Reasons to Invest or Work in NYC
Use PropStream to Find NYC Properties For Sale
Key Takeaways:
- Due to a lack of affordability, most NYC residents rent properties.
- More homebuyers in NYC are paying in cash to combat high interest rates.
- Return-to-work mandates are changing the demand in the city.
- To study NYC markets and find opportunities, PropStream It!
1. A City of (Mostly) Renters
One of the first things to understand about NYC is that it consists primarily of renters. 69% of households rent their homes, compared to the U.S. average of 34%.
This is partly the result of high home values. In January 2024, the median NYC home was valued at $785,000. A 30-year mortgage with a 7% interest rate and 20% down payment on this home would require a monthly payment of $5,225 (including taxes and fees). Meanwhile, the median household income is only $76,607, which allows for a maximum monthly payment of $1,915 to be considered affordable (i.e., no more than 30% of your gross income).
Consequently, most NYC residents are forced to rent. To put the cost of renting in New York into perspective, the median rent in Manhattan is $3,794 per month, significantly higher than the U.S. median of $1,268.
Keep in mind that roughly half of NYC renters live in rent-regulated apartments. The city has two rent control programs: One places severe limits on rent prices for apartments constructed before 1947 with tenants living in them since 1974 (currently being phased out), and another limits rent increases for one or two years by an allowable percentage.
As a prospective investor, you must verify if your investment properties will be rent-regulated since this could significantly impact your potential ROI.
2. Cash Buyers Are on the Rise
As for the homebuyer and seller market, the city is long known for its expensive housing. Furthermore, home values rose when interest rates plummeted after COVID-19 hit (cheaper financing pushed up demand and prices).
Since then, the Federal Reserve has hiked interest rates to tame inflation. As of May 16, 2024, the average 30-year fixed mortgage rate is 7.02%. However, home values remain elevated partly due to a nationwide construction lag and current homeowners not wanting to give up their record low rates by selling (aka the “lock-in effect”).
This has resulted in a record number of cash buyers. In Q1 2024, over two-thirds of Manhattan home sales were cash purchases (up from 55% in Q1 2022), indicating that many potential buyers are unwilling to take on higher mortgage rates.
As a real estate agent, a higher ratio of cash buyers may be good news. Working with cash buyers has many benefits, including faster and more certain transactions.
3. More Workers to Return to NYC Offices
Like many urban areas, downtown NYC saw a sharp rise in office vacancies when COVID-19 forced many to work from home. Before the pandemic, the city’s office vacancy rate hovered just under 8%. By 2021, it shot up to 12%, and now it’s 15.2%. This has put downward pressure on office building values and helped spur a commercial real estate crisis, which has yet to be resolved.
However, there are signs of improvement. For example, the market asking rent for office space has stabilized roughly 7% off its peak. Furthermore, demand for office space in NYC rose nearly 40% in 2023 over the previous year, lifting demand to 75% of pre-pandemic times. By comparison, office space demand nationwide grew by an average of only 19.6%.
For real estate agents and investors, this could mean a surge of workers moving back to the city to return to the office. According to a survey of 1,000 company leaders conducted in August 2023, 90% of employers plan to implement return-to-office policies by the end of 2024. This could mean increased homebuyer demand and home values.
Reasons to Invest or Work in NYC
Now that you understand the biggest NYC housing trends, here are some reasons to invest or work there:
Steady demand. As a global financial and cultural hub, NYC consistently attracts a high demand for residential and commercial properties. Consequently, you can expect high appreciation and low vacancy rates. In 2023, for example, the rental vacancy rate fell to a multi-decade low of 1.4%.
Strong economy. NYC has one of the biggest economies in the world, with a 2020 gross domestic product (GDP) of $1.02 trillion. Furthermore, the unemployment rate is relatively low at 4.8%, and 4.73 million people were employed as of April 2024. Major industries include finance, leisure and hospitality, professional and business services, and education and health.
Tourist attractions. Though tourism took a plunge during the pandemic, it has since rebounded. In 2025, NYC is expected to welcome a record of over 70 million visitors. The average visitor spends anywhere from $1,211 to $3,008. At its peak in 2019, NYC took in $80.3 billion from tourists. Consequently, investors and agents specializing in short-term rentals may find ample work here.
Important: NYC’s legislation regarding short-term rentals restricts how you offer them. Ensure you understand laws and regulations before investing in short-term rentals.
Educational opportunities. NYC is home to many prestigious universities, including Columbia University, New York University (NYU), and the City University of New York (CUNY). These attract students from around the country, potentially making the city a great place to invest in student housing. Nearly 900,000 university students attend colleges in the state, many of which are concentrated in NYC.
Public transportation. NYC has an extensive public transportation system that includes subway, bus, ferry, and commuter rail networks. It’s also a major transit hub with freeway access to other major cities like Boston and Philadelphia. This keeps the demand for housing in the city strong.
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Frequently Asked Questions (FAQs)
How do rent regulations in NYC affect real estate investments?
Strict rent control and rent stabilization laws can limit your future rent increases, expected property appreciation, and potential ROI. Before buying a rental property, verify whether it’s impacted by rent regulations and how this would affect your returns.
What impact does the return-to-office trend have on NYC real estate?
As more companies call their employees back to the office, renter and homebuyer demand in NYC could increase.
Why is there a high percentage of renters in NYC?
NYC’s high home values make it difficult for many residents to afford a home, leading to a higher proportion of renters compared to the national average.
What’s the outlook for the luxury home market in NYC?
The NYC luxury home market experienced a slight downturn recently but is expected to rebound with forecasted growth in prices and rents in 2024.
What’s the biggest mistake first-time NYC real estate investors make?
Some of the biggest mistakes first-time NYC real estate investors make include ignoring local housing regulations, misjudging property expenses, overestimating rental income, failing to conduct due diligence, and not consulting professionals.
What’s the biggest mistake first-time NYC real estate agents make?
Some of the biggest mistakes first-time NYC real estate agents make are acquiring inadequate market knowledge, not networking enough, underestimating the competition, and failing to create a business plan.
What’s the best way to break into the NYC real estate market?
As an agent, the best way to break into the NYC real estate market is to get licensed, join a reputable brokerage, and find a mentor.
As an investor, the best way to break into the NYC real estate market is to learn the market, build a strong network, and start small.
Notes on sources:
- Data on renters and office vacancy rates, tourism, and college students taken from the New York City and New York State Comptrollers (unless otherwise cited)
- Data on median household income and median rent taken from the U.S. Census Bureau
