NYC RE in 2025 - bull/bear cases

Bull case - rate cuts with a soft landing, pent up demand from the last 2 years of high rates. Affordability arguably better than 10 years ago for high end NYC wage earners.

Bear case - we already had simultaneous low rates & high wage growth in 2021-2022 and NYC RE didn't run up much. Employment is tight and no one is getting 2021-2022 level raises anytime soon. Rates are going down but we aren't talking 2.8% mortgages unless we get a hard landing recession and cut straight thru into 2026.

can anyone explain why the new condos on the UES sell out quickly for between 5 and 25 million , while the older co ops languish on the market for the same price as 15 years ago

Value, Because of stuffy/difficult coops boards and most coops apartments needing renovation. Then there is 20% new building premium due to updated infrastructure, bigger windows, and layout etc. New development condo market on UES has slowed down as well.

the people who buy the five or 25 million new condo, are much richer than the people who are reluctant or unable to buy the one or two million co op. Why are there hundreds of rich buyers of the expensive new condos, when all the newspapers write that the rich are moving to non income tax states like Florida

Value, You have to provide some data about the number of new condos sold by price point vs coops sold and total inventory available. Florida migration has been more or less over for a while.

Value, partly because the $5 or $25 mm condos aren't necessarily housing, in some cases they're safe deposit boxes for wealth, sometimes global wealth. But I agree -- I'm a broker, and I've had a million-dollar co-op for sale for four months, and I can't find anyone poor enough to want an apartment that's discounted because it needs renovation but at the same time rich enough to get past the co-op board. That segment was narrowing pre-Great Recession, and it just keeps getting more and more hollowed out every year.

FP - I think you hit the nail on the head here "I can't find anyone poor enough to want an apartment that's discounted because it needs renovation but at the same time rich enough to get past the co-op board. "

I used to joke that I was too poor to buy a cheap coop before. Now I suppose I'm too rich to want to bother with a value purchase & reno.

300 - Agreed, I think you can decompose the condo price premium into multiple premiums you can attribute +/-10% to each category (and not everyone cares about every category):

1) financial - liquidity premium & higher leverage / lower net worth allowed

2) freedom premium - no board interview & call option on being able to rent out unit

3) move-in ready premium

4) modern unit premium - things you often can't reno your way out of (W/D, HVAC, windows, ceiling height)

5) modern building amenities (gym, pool, whatever)

On the main topic, I think Manhattan real estate (ex new development ultra-luxury) looks good on a relative basis vs many other metro areas and burbs which are up 30-50% while Manhattan prices has stagnated. Rents are also up significantly in under $15k segment. Estate condition stuffy coops in particular seem to be very good value if you are willing to renovate.

BK townhouses seem to be fully priced now factoring in tax benefits etc.

When anything starts to get traded not for what it is but because it's some sort of financial instrument with no linking of the trade price to some tangible inherent value, watch out for volatility

@30 - I firmly believe that factor was priced into NYC RE from say 1998-2017 or so. Lot of GenX/elder millennial buyers baked in large appreciation rates into their buying and played the trade-up game.

Post 2017 tax changes & the reality of the last 10 years of meh appreciation, I think that's fallen by the wayside.

A LOT of people in my circle around then did the whole [studio/small 1BR -> big 1BR/small 2BR -> big 2BR/3BR] trade up cycle. Meanwhile in the last 5-10 years more people I know went straight from renting to buying the big-enough 2/3BR terminal apartment one & done.

The former were clearly banking on the financialization of the RE market while the latter just wanted shelter. I don't think it's just my getting older in that time period either as it was my 10-15 year old friends in the former case and my same-age cohort in the latter.

You could probably speak to how the mix of buyers today compared to 15-20 years ago.
Do you see the under-30 crowd buying small apartments with short holding period expectations anymore?

Will there be some change that pushes GenZ to drink the koolaid? I don't know.

Steve, How does buy vs rent look for 1 and 2 bed rooms?

@300 - I think the R v B math is very neighborhood & market segment dependent.

For example, right now if I was still in UWS market like I was 8 years ago, it looks like you can get a pretty nice 2bed/2bath doorman rental for $8~9k/mo no fee. What would the equivalent unit for-sale be?

Check out386 Columbus - $8.5k (probably snag it for $8k).. or sale at $2.1M (monthlies $2.2k dues + $1.7k tax = $3.9k), if you have a 20% down market rate mortgage you are all-in at ~$15.5k/mo. This seems like a great rental opportunity as your all-in ownership outgoing is almost 2x rent, and taxes+condo dues are 50% of the rent alone.

Similarly 200 Riverside Blvd - $2M sale w $4200 monthlies = ~$14k/mo all-in vs $7200 rental ... wow. Note the rental unit rented for $6800 way back in 2016 too, so rent isn't going anywhere.

I think UWS is really a weird market because rent has also gone nowhere. I can rent in my old condo for ~10% more than my last last lease nearly 10 years ago.

North Brooklyn the rent vs buying monthlies are much tighter than this. $7.5k rent in condos can be bought for closer to $1.6-1.7M (not $2M) with $2.5k monthlies (not $4k). Or $11k all-in/mo vs $7.5k rent.. with the monthlies consuming 33% of the rental income (vs 50-60% on UWS listings).

Re: neighborhood differences
Filtering for 2bed/2bath/doorman/wd in unit, no price limits condo vs rent-

* LIC has 2-3x as many rentals as sales
* WBurg has only 1.1x as many rentals as sales
* Both UWS & UES are inverted - there are MORE sales than rentals in this segment - there are 0.7x as many rentals as condo sales (note I am not including coops which will invert it more)

If you remove the in-unit WD filter & condo filter, the number of rentals is actually 0.5x number of sales in UWS, making the sales market arguably even softer looking.

This is quite a bit different than what I'd expect. I think some explanatory factors would be where all the recent development has been and the number of buying-to-lease investors who bought in those new developments.

It is interesting that the rental yield in UWS/UES remains poor in my opinion vs WB/LIC, despite there being so many units for sale relative to rentals.

It does remind me that often sale & rental markets are completely independent with not a lot of people cross shopping.

How does this unit fit into your r v.b equation Steve?

https://streeteasy.com/building/the-clayton/4e

@Keith - thats actually pretty good pricing, and probably flex to a 3rd bedroom for a small kid, though I think its a little dark/lower ceilings than I'd prefer (despite the listing claiming high ceilings). Also I hope the floorplan has a typo because the 2nd bed is 4ft9in wide?

That said it's a coop, and I'd rather rent for 20% less monthly in the 70s, with terrace and 2nd bath being full - https://streeteasy.com/building/stonehenge-70/1005?from_map=1

Or 80s, 2nd full bath and 20% lower monthly - https://streeteasy.com/building/the-sagamore/015c

Or rent in the 90s, 30% less, full 2nd bath and in-unit w/d, gym, etc
https://streeteasy.com/building/266-west-96th/2103?infeed=1

Good catch! That is a typo.

I’d love to own on the UES. But to paraphrase @front-porch, too poor to buy a condo and don’t want to deal with a coop board. Unfortunately, the dream of returning to NYC for our golden years is passing us by.

Time wounds all heels.

@GeorgeP Western Inwood is quite nice and very affordable. Also some very beautiful housing stock there.

George P, Midtown east close to 57th street for Park Access. 25% lower prices than UES.

Seems to me that a significant contributor to price stagnation in Manhattan in recent years reflects a value shift absorbed by rapidly increasing taxes and labor costs (e.g., maintenance) that far outpaces inflation. There is no end in sight to those headwinds.

Just to use the example on West 72nd street raised in a prior recent thread about declining values, if you look at the prior listing for that unit 2+ years ago, the monthly taxes + maintenance was about $4700. It is now 6400. That 1700/month nut alone might account for all of the "lost value" since its 2022 purchase.

@sport - exactly what caught my eye but I neglected to post about, and you can see across other listings in that condo.

What happens to coop valuations if they start getting taxed as aggressively as condos?
Whoever follows Adams is going to have some serious budget holes to fill.

and a Bull case (for 2026) - by some act of commission or omission, the SALT caps expire and NYC buyers are back in 2016 era math in terms of how many RE dollars their gross paycheck translates into..

@nyc_sport If I understand you correctly if maintenence (ie taxes) rises faster than inflation union labor is the cause.

@MTH - due to prevailing wage law bill the city passed, non-union buildings are forced to pay union wages as well or give up primary residence abatement, since ~2022.

https://www.habitatmag.com/Publication-Content/Bricks-Bucks/2021/September-2021/Co-op-and-Condo-Tax-Abatement-To-Be-Tied-to-Prevailing-Wages#:~:text=The%20prevailing%20wage%20and%20benefits,prevailing%20wages%20is%20available%20here.

I think sport is also pointing out that labor for all forms of maintenance your building needs to bring vendors in for has shot up far more than inflation.

@steve123 - Interesting. So you don't have to belong to a union or pay union dues to benefit from union negotiations. Seems strange.

MTH -- The cost of ownership for NYC real estate has skyrocketed, particularly in the past 10 years, and particularly in Manhattan. Taxes are an obvious and easily identifiable hole. The taxes on my (now former) apartment went from $16k to almost $50k in 20 years (no abatements, 120 year-old building converted to condos in late 1980s). But the increasing labor costs adds layers of expense.
As Steve noted, need to pay union rates -- the super cost in our 9 unit building doubled (not so much because of the hourly rate, but because you have to pay the hourly rate with implied benefits, even for a super that works 12 hours a week). The most recent Local Law 11 cycle in our 7 story building was $300K. What happens if everyone has to go electric in 10 years?

I am among the crowd who finds it meaningless to talk about investment returns on a primary residence. Still, I just sold the apartment I lived in for 20+ years, and moved into a rental. And while the rent vs own math clearly favors renting now, at least at higher ends of the price spectrum I can say from personal experience that the rental inventory is no remote substitute for owning. How much one is willing to trade in that debate is an interesting question.

>> And while the rent vs own math clearly favors renting now, at least at higher ends of the price spectrum I can say from personal experience that the rental inventory is no remote substitute for owning.

Yes, it is absolutely dreadful.

https://streeteasy.com/rental/4522254

Does the prevailing wage law include fringe benefits? That's an added cost.

Who could have possibly imagined that taxes would go up so much when NYC budget went from $68.5 billion to $112.4 billion in a decade

@inonada - Cozy!

@30yrs That does not sound like a sustainable trajectory.

Part of the problm is increasing credentialization of the workplace. Here's an interesting idea to bring down costs: https://www.pa.gov/en/governor/newsroom/press-releases/governor-shapiro-leads-the-nation-on-eliminating-college-degree-.html I taught in the NYC public school system briefly. It was much too difficult to get into (the degrees and certificates they required were overkill) and it was too hard to eliminate lazy or incompetent teachers once hired. This was largely due to the union's bunker mentality.