Insider Insights: Predictions for New York City Real Estate in 2024

 

As I look towards my life and business in 2024 I am excited and thankful. Excited for the promise of a new year that comes with some very cool projects, excited about The Agency, my new brokerage and thankful for my health, friends and family. I would be lying if I didn’t say that I am also a little bit thankful that 2023 is over because 2023 was an abysmal year for real estate. It was the slowest/worst year since 1993 for real estate sales thanks primarily to the Fed rate hikes which were the most aggressive since the 1980s.

The good news is that the worst is probably over. Buyer activity is picking up since December because the impending market change is now registering on the hive mind. I have been telling people privately since the summer that I think Q4 2023 and Q1 2024 were likely going to be the best time for buyers this cycle and I would bet money on 2024 being a transitional year that is starting out as a buyer’s market (even if its not a very satisfying buyer’s market) and is going to finish as a seller’s market. Sub 6% mortgage rates are on the horizon and with that should come more inventory and more transactions. But keep in mind that lower rates should mean inflationary pressures on pricing and if more inventory comes on the market, that will have a deflationary effect. If that leaves you asking the question, “so what does that mean for pricing?” you are not alone. My expectation is that lower rates will spur both demand and supply. The primary result of this will be more transactions but pricing will most likely move mostly sideways for the first half of 2024.

I wish you happiness, health and prosperity in the coming year. Read on below for my Top 6 questions on the real estate economics of 2024.- CT.

 

 

I hope so! But consider this, what if we have already landed? A soft landing seemed so unlikely a year ago that perhaps we never imagined what it would look and feel like. Goldman Sachs is predicting a 15% chance of recession this year and thinks we are in the “final descent” to a soft landing. Inflation is on track to continue to cool but that doesn’t mean we will see the cost of goods and services (or real estate) return to 2019 pricing. Wall Street is excited about the stock market in 2024 which is great for investor confidence but you have to wonder how so many analysts forecasted a lackluster 2023 when the S&P 500 closed out the year at a 25% increase thanks to a 70% rally in the Magnificent Seven megacap tech stocks. 

The result of the Fed’s final meeting of 2023 was a continued pause on further inflation-driven rate hikes. Queue the collective sigh of relief. The optimists (like NAR, and the Mortgage Bankers Association) believe that we will see rates drop to 6-5% as early as Q2, in time for the spring market. Fannie Mae is predicting 7% for most of the year with a drop to 6.5% by the fourth quarter. I think both those estimates are conservative and I expect we will see jumbo mortgage rates at 5.x% this year. 

I believe we are at (or very close to) the bottom in terms of pricing. The best deals of the year will be had by those buyers who are ready, willing and able in the first quarter to scoop up places that have been sitting on the market or that have recently dropped their prices. Inventory is still tight and there is a lot of pent up demand out there which keeps propping up prices. There are plenty of sellers who will take advantage of the high demand, trade up or down, or cash out. Pricing correctly will be more critical than ever as most buyers will feel entitled to discounts. Buyer and seller mentality will of course be largely influenced by how the media portrays the housing market. Housing starts went up dramatically at the end of the year as builder confidence grew. This is very positive news. We can’t build new houses as fast as we need them and are still playing catch up from the pandemic. One important question to keep in mind is whether shipping issues in the Red Sea will constrain supplies to the construction industry, causing delays and materials inflation?

I think on a macro level it will not change much. Now the seller has to directly compensate the buyer’s agent (as opposed to it going through the listing broker). But it would be a very bad idea for sellers to de-incentivize buyer’s agents by not offering a good or at least decent commission to them – particularly in a not-so-hot market. In red hot markets in the future, you might see more sellers trying to save a point on buy-side commissions and still getting deals done. But whether that ends up actually saving the seller money is a different question.

If history is any indication, you better get everything into contract in the first half of the year. According to Jonathan Miller, the Manhattan coop market historically begins to dip in July in an election year with an average 13% drop in transactional volume by September. I’ve also read that polling can greatly affect the housing market. For instance, if the incumbent’s numbers are high there will be less volatility in the housing market because consumers accept that they will be getting more of the same in terms of fiscal policy. Conversely, markets do not like uncertainty so if it’s a tight race or a new president with unknown policies it will create more volatility. People hold off on big purchases if the future is uncertain.

6) What will happen to you in 2024?

The final and most important question is, how will you be taking advantage of this transitional market? Whether you own or rent, will you be staying put? Moving? Upsizing or downsizing? Cashing out? Investing? There is no one-size-fits-all answer here. Let me know if you need a sounding board.