Midtown skyline from Williamsburg (Compass)
Since the start of the decade, making accurate predictions about the upcoming year’s real estate market has grown increasingly challenging. In early 2020, no one could have predicted that sales would grind to a halt for part of the year, and in early 2022, no one could have anticipated mortgage rates nearly doubling by year’s end. Given the wild ride the market has been on since 2020, what happens to the national and local real estate market in 2024 is anyone’s best guess. That said, there are at least five factors that anyone looking to buy, sell, or invest in New York City over the coming year should have on their radar.
1. Declining interest rates
After two years of progressive hikes, the Federal Reserve has finally paused interest rate hikes, and in 2024, there are strong indications they may begin to lower rates. As of January 2024, most analysts are predicting three small half percentage point decreases by the end of the year. While this won't push mortgage rates back down to the historic lows borrowers were able to take advantage of during the pandemic, if the federal interest rate does decline as predicted, mortgage rates will follow. Given how many buyers postponed going on the market in 2023, even a small dip in rates could motivate buyers to return to the market, subsequently impacting the current lack of inventory and flat home values. All in all, this is likely good news for potential buyers and sellers.2. Stabilized inflation
Soaring inflation in 2022 and 2023 impacted the price of nearly all consumer goods, including those related to the cost of construction. With inflation rates declining, at least for now, there is hope that construction costs will also decline, easing the burden on buyers of newly constructed condos. For existing homeowners looking to renovate and add value to their properties, lower inflation rates are also welcome news. While we're unlikely to see a repeat of the home renovation boon that happened during the pandemic, stabilized and even lower inflation seems likely to help owners looking to invest in their current properties.3. New York City’s budget crisis
While declining interest and inflation rates appear likely to stimulate residential sales in 2024, New York City’s looming deficit could still put a damper on the market. As the city’s budget crisis grows, tax hikes loom, which could dissuade some investors from looking for new opportunities in New York City. But the city's budget crisis isn't just a potential deterrent for investors. Individual home buyers are typically not just looking for a property that meets their needs but also a neighborhood with robust services, from high-quality schools to libraries to safe and welcoming parks. While the impact may not be immediate, over time, the city's current budget crisis, which has already led the current administration to slash school, library, and recreation budgets, could negatively impact the demand for homes across the city’s five boroughs.4. The 2024 election
Another factor that may hold the real estate market back in 2024 is the upcoming federal election. Historically, investors tend to postpone making major decisions during election years since it can be difficult to predict where the economy and where key housing drivers, including mortgage rates, will head following an election. That said, compared to other types of investments, real estate, especially in New York City, tends to hold its value, even in the face of major market fluctuations, so it is also possible that some investors will view local real estate as a more stable investment in 2024 than stocks and bonds. For foreign buyers, however, the situation is somewhat more complicated.In New York City, approximately one-third of real estate deals involved foreign buyers in 2023. With an election on the horizon that may see former President Trump running for re-election, it is possible that foreign buyers, at least from nations that were targeted during the previous Trump administration, may be more hesitant to invest in New York City properties in 2024. If this happens, the impact on the local market could be significant. In 2023, the number of foreign buyers – many buying properties in all-cash deals – nearly tripled. If foreign buyers, including those from mainland China, choose to hold off buying until after the election, the New York City real estate market could suffer.
5. Changes to local zoning bylaw
One of the major obstacles to building more residential housing in New York City is the city's current zoning bylaws. With rezoning, many neighborhoods could add hundreds and even thousands of residential units over the coming decade. For example, a 2022 study found that just 6.3 percent of units in the Garment District are zoned residential. Since the district is home to a high percentage of underused and vacant buildings, if rezoned, the district could be home to more than 3,000 new units over the next decade. Given that rezoning commercial districts is something Mayor Adams continues to promote, there is also hope that in 2024, the city will finally begin to push through a faster and more agile approach to zoning. If it does, the city could see a range of new residential units come on the market, including in neighborhoods that have historically had few residential options.
Contributing Writer
Cait Etherington
Cait Etherington has over twenty years of experience working as a journalist and communications consultant. Her articles and reviews have been published in newspapers and magazines across the United States and internationally. An experienced financial writer, Cait is committed to exposing the human side of stories about contemporary business, banking and workplace relations. She also enjoys writing about trends, lifestyles and real estate in New York City where she lives with her family in a cozy apartment on the twentieth floor of a Manhattan high rise.
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