I keep hearing the same misconception about NYC real estate: that with the rise of interest rates, the bottom is about to fall out and prices are going to go down. But the situation really isn’t that bleak. In fact, we’re entering a new cycle in the market with a larger buyer pool and new sources of money. The inventory crunch is only just beginning to pick up steam.
Here are three reasons why you can be excited about where the NYC market is headed:
Institutions have started ramping up their real estate investing. All over the world, venture capital funds, hedge funds, and real estate investment trusts are buying up real estate – and they have been for years. They are picking up assets that were traditionally owned by private entities or mom and pop investors who have decided to cash out due to multiple factors. It’s especially true in the outer boroughs of New York City. They buy up several multifamily buildings, improving them, and renting out the apartments at new premiums.
Last year, institutions spent $77 billion on homes in the US in a single six-month period. There’s so much capital out there, and these entities still have more money to spend. That means demand will be kept high.
The real estate market always rebounds
Everyone is freaking out that the interest rates have to go up at some point because the economy is recovering, inflation is high, and it is time for people to go back to work. How can a .5 – 1% change in interest rate kill the market after everything we have been through? The real estate market always rebounds.
Exhibit A: the progressive mansion tax of 2019. When news broke of raising the mansion tax for purchases over $2 million, people went crazy trying to sign contracts ahead of the deadline. The end was near and it was scary for everyone! Then it came and went, and people calmed down. Sure – sales dipped briefly but they inevitably climbed again, and now it’s a distant memory. People don’t even talk about it anymore.
Yes, interest will likely go up a point or two. But the rates will never be as high as they were once upon a time (like the ‘80s). There’s a whole different thought process around money right now.
Part of this paradigm shift around money has to do with the advent of cryptocurrency. Not only has it created money from no money and more overnight millionaires, but also it’s added another means to buy or sell real estate.
Homes are being listed for sale for crypto, people are paying rent with crypto, and cryptocurrency exchange stores are becoming more visible, allowing buyers and sellers to convert crypto into cash. There are a lot of benefits to using crypto. It affords more privacy and liquidity, and it can reduce the overall cost of a real estate transaction. My banker friends are all invested in the most “stable” crypto and so I am too – not my entire portfolio, but my coinbase pro is on my phone and I am using it!
The game is always changing in New York, but I feel confident it’s going to be as exciting a year as ever.