Noble Black, a broker at Douglas Elliman, keeps getting calls from New Yorkers looking to buy an apartment. They all tell him the same thing: that they’re kind of, sort of looking and to call them if he spots a place at a great price that checks all of their boxes. Great, he thinks, I’ll just add you to the list. “I’ve got a list of 50 people like that,” he says, but there’s a problem. “The market is not dead. This is not the market where sellers are having to fire-sale.”
After a year like this one, buyers are desperate for some good news. If you wanted to buy a home in New York, or really almost anywhere, 2022 kept getting worse — home prices soaring, hitting a record $1.25 million median for a Manhattan apartment just before mortgage rates rose to highs that this generation of buyers hasn’t seen (7 percent interest for a 30-year fixed-rate mortgage, anyone?). More recently, rates have fallen slightly to 6.31 percent and prices for Manhattan apartments started falling too. But, as Black says, this is not the beginning of a bigger shift. What many realtors, economists, and mortgage lenders agree on is that there may be a window at the beginning of next year to buy a house at today’s rates (or as rates potentially slide later in 2023). But barring a catastrophe (like an all-out recession), the odds of getting a home at a “fire-sale” price are slim to none.
Some realtors, however, are still trying to make 2023 happen. “It’s the best time to buy in the next three years,” Mihal Gartenberg, a broker at Coldwell Banker Warburg, is telling her clients. The way she sees it, interest rates will go up in the spring, but some sellers are desperate now — like the backers of new developments who have started throwing her clients free storage and parking: “all the bells and whistles,” she says. Jeremy Kamm, another broker with Coldwell Banker Warburg, agrees. He had to bring down the price of a Brooklyn Heights duplex by 5 percent this fall before it sold and sees next year as “an opportunity for buyers to jump in knowing there’s less competition, knowing sellers are worried about their listing lingering.”
But most sellers are probably not going to make dramatic moves in 2023. Things have already slowed down significantly this year. In Douglas Elliman’s November report, Jonathan Miller’s firm counted fewer than half the number of homes for sale that there were in November 2019. The appraiser sees two reasons for this: Sellers don’t want to give up a low mortgage rate for a higher one, or they just sold their home in the boom. “Because rates were so low for so long, that inventory was wiped clean,” explains Miller, so those thinking about selling have the luxury of time. “It takes about 12 to 24 months for a homeowner to capitulate to market conditions without feeling like they left money on the table.” He believes that when outside factors like higher mortgage rates push down demand, prices don’t fall quickly. And right now, prices are buoyed by this problem of low supply.
Still, StreetEasy sees listings staying up longer and having their prices cut more often. In November, for the first time since 2019, listings stayed up for 75 days on average before going into contract, and their prices were cut more often than in November last year. As for next year, Miller sees “zero change” in prices but thinks interest rates will fall to a place where buyers can stomach the numbers — just below 6 percent. Rich Sharga, executive vice president of market intelligence at ATTOM, predicts the same thing: home prices plateauing in New York City and the mortgage rate edging down slightly to above 5 percent. That will help some New Yorkers make the leap to buy a place. Meanwhile, Sharga thinks buyers will readjust their expectations in other ways: “Those prospective home-buyers are now maybe looking farther outside the metro area, smaller places, older places, trying to figure out what they can really afford.”
This is exactly what some realtors are encouraging their clients to do. Leonard Steinberg, an executive at Compass, says buyers need to stop looking for trendy interiors and start looking for good bones. “I call it the Calacatta-marble insanity,” he says. “It’s almost like they’re looking at a home the way they’re looking at a minidress.” Deborah Rieders, a broker at Corcoran who specializes in townhomes, says that even this fall, her clients were making what she considered high offers for renovated properties and still getting outbid. So she has been showing them that there’s value in fixer-uppers. “I think you can get those houses at a slight discount right now, because people are afraid of doing work,” she says.
But most New York City home prices are still a fantasy for many residents, and the city has been trying to change that in drips and drabs, first, by increasing supply: This year, the city’s Housing Authority is building 18 homes in Brooklyn and Queens, financing an affordable co-op in Chelsea, and funding a task force to push so-called “zombie” homes back into the market. Meanwhile, the city’s Housing Preservation & Development department is trying to boost buyers, spending a record $9 million on $100,000 forgivable loans. Do the math, and that’s just 90 families.
More recently, the mayor, governor, and council speaker released grander plans that may make a difference in the long run. This month, the mayor announced a “moonshot” to build half a million homes over the next decade — more than twice as many as New York added over the last ten years — in part by rezoning a swathe of the Bronx near two planned Metro-North stops to allow for 6,000 new homes. Another rezoning plan would turn the light manufacturing wedged between rapidly gentrifying neighborhoods along Brooklyn’s Atlantic Avenue into mixed-use developments that could include apartments. Governor Hochul backed the plan saying, “We will need every community, every town, and every city to do its part to make housing accessible and affordable for all.”
Those kinds of announcements might come across as empty politicking, but to people who have been pushing this line for years, they are somewhat of a shock. “The fact that the city and the state are in political alignment, and both focused on housing, is quite unusual,” says Sarah Gerecke, a fellow at the Housing Finance Policy Center. “There may be a lot more support for some of the changes it takes to have more people housed.”
Still, those plans will take years to build. And New Yorkers are ready to buy now. “I still think there’s pent-up demand from people about to purchase in the spring who were thwarted by the spike in rates,” says Miller. That demand doesn’t just come from New Yorkers but from everyone who wants to become a New Yorker, which means that even if prices fall nationally next year, they might not fall here.
Black, the Elliman broker, thinks what will probably happen is buyers will cave first. “Eventually, people get used to higher rates. Tired of waiting, something comes on that excites them,” he says. In short, for buyers who aren’t priced out, they will give up their real-estate fantasies and settle for less to do what so many have done before them: stretch their finances thin to afford a sliver of reality — maybe a postwar shoebox with a view of a brick wall but, preferably, one with good bones.