There is an expectation that the growth of rent in New York City will be much slower in 2024, according to the housing market predictions made by the real estate firm StreetEasy. At the same time, the report predicts that there will continue to be more demand for homes in the city than the amount of units available and thus preventing rents from falling.
While the expectation is that inventory in New York City will further grow in 2024, it will still be smaller than the pre-pandemic levels. As a result, the rent growth across the city will continue to rise, but at a slower rate compared to 2023. The median asking price for rents in New York City rose 9.3% year-to-date 2023. As a result of the higher rents, more homes are being put onto the market as rentals. Over the same period, rental listings on StreetEasy rose 8.8%. Elevated rents and high mortgage rates will encourage more home owners to rent their space in 2024. This will then provide renters with more listings to consider when they decide between either renewing their lease or finding a new place to live.
Despite the recent increase in supply across New York City, the rental inventory in 2023 is still 16.2% less than the pre-pandemic level seen in 2019. This is unlikely to change in 2024, as the city would need to add at least 40,000 more rentals in order to reverse the post-pandemic decline. Even before the pandemic, from 2017-2019, inventory only rose by approximately 21,000 units per year.
StreetEasy does predict Manhattan is one borough that will likely see a drop in asking rents due to more inventory becoming available there. With more inventory, landlords would then have more competition attracting potential tenants, leading to smaller prices.
Another prediction for 2024 that StreetEasy made was that the hottest commodity will be new, amenity-rich condos. Despite the high premiums for these units, StreetEasy predicts they will grow in popularity in 2024. Resale listings are expected to remain scarce and mortgage rates will likely remain above 6% next year, creating a backdrop for home shoppers to consider newly constructed buildings at an increased rate.
Moving into a new building may also end up being cheaper for some people than renovating their home, due in large part to higher mortgage rates in addition to the costs of labor and material. While this may not be the case for 2024, the supply for new developments will likely slow in the near future. When this does happen, competition among buyers will rise.
The fourth and final prediction for 2024 made by StreetEasy was that asking prices will moderate as buyers and sellers start to come to terms with higher mortgage rates. Selling homes in New York City has long been difficult due to the higher price points compared to the rest of the country. With mortgage rates also increasing in 2023, there are not as many potential buyers who can afford to stay in the market.
In order to increase their chances of selling a property, sellers will need to prioritize competition over their aspirations. According to StreetEasy, these sellers will come to terms with the market, with most asking prices falling below $1 million. The price drop will likely only be modest because there is such a large amount of motivated buyers in New York City.
StreetEasy predicts mortgage rates will gradually fall below 7% in 2024, helping to increase the amount of home shoppers. While lower rates will encourage more homeowners to put their homes on the market at a broader range of price points, it still will not be enough to tilt the balance of power from sellers to buyers.