In recent years, New York has faced a strong housing demand, which until mid-2022 was managed mainly thanks to a tax incentive program, the 421a, which provided benefits to builders and gave buyers the opportunity to start paying property taxes even more than ten years after purchase.
However, an incentive expired in June 2022, and the obvious consequence was a sharp drop in units placed on the market, an event in clear contrast with the city’s needs.
Returning to more recent events, another important factor that has affected the last period was the growth in interest rates imposed by the Federal Reserve as a cure for inflation.
These events created a stagnation in which we still find ourselves today.
So, the owners, aware of the very high demand and of a historically strong market, find it difficult to meet the would-be buyers, who, although in competition with each other, struggle to match the sellers’ requests due to the high mortgage rates, thus remaining in the waiting position.
Nevertheless, there are also some positive notes. The first is that although supply and demand are not meeting, they are still present. The transactions are there, and the market is not “still.” Simply at the moment, the field is occupied above all by those who have great motivations, to which are added the players less affected by the Fed’s policies, i.e., the “cash” buyers and those who are looking into the luxury market.
Another note, hopefully positive: Do you remember the tax incentive we were talking about at the beginning? A new maxi housing law was recently finally approved, which addresses various issues, some aimed at placing new real estate units on the market, such as new rules for office-to-residential conversions and a new incentive for builders, the 485x, whose possible benefits, however, are yet to be demonstrated.
So, what could happen if these events occurred? The rate cut would offer a greater possibility of competing on a limited housing supply, increasing prices. At the same time, placing new units on the market, resulting from the new incentive, would also make a market held back by rates more accessible, and therefore, it could coincide with a reduction of asking prices. If, however, the problem of access to mortgages and supply were to be unblocked simultaneously, then we could expect to remain in the current equilibrium position and an increasing number of transactions.
