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Archives for October 2022

Irvine Housing Market: Prices, Trends, Forecast 2022-2023

October 17, 2022 by Marco Santarelli

Irvine Housing Market

Real estate was booming in California but the market is now cooling off as mortgage rates continue to rise. This cooling is beneficial for the health of the real estate market since the record-breaking price increase and hyper-demand were unsustainable. The Irvine housing market also saw a massive decline in sales in August (-52.4%) while the median home price reached $1.68M, a +16.4% change from last year.

Irvine, California is overshadowed by Los Angeles located forty miles to the northwest. It is, however, a suburb of that rapidly expanding housing market and a niche housing market in its own right. Irvine, California is a one-hour drive from Los Angeles if the highways aren’t snarled with cars.  The Irvine housing market is certainly part of the L.A. metro area, though many residents tend to work in Orange County.

The city of Irvine is home to around three hundred thousand people. We won’t say that cities like Anaheim are suburbs of Irvine since they’re as large (or larger) as Irvine itself. These LA suburbs have seen significant growth as people move out of the overpriced and often dangerous LA area while trying to maintain quality of life and proximity to high-paying jobs.

Inventory is low and prices are rising. There is no doubt that it is in the midst of a seller's market. Homes are selling in days, and sellers are commanding premium prices for their properties due to their high demand. Are you interested to know how competitive the Irvine housing market is? Let us discuss up-to-date information on market conditions, price movement, and real estate trends, among other things.

Irvine Housing Market Trends

Irvine is a city in Orange County, California. It is the most expensive market in Southern California. It has become a melting pot for the Southern California community. The Irvine real estate market has always done very well because of its easy excess to all major freeways and highways with lots of options for public transportation.

The CAR's August 2022 report indicates that the median sale price of single-family homes in Irvine is $1.68M, with median days on the market being 16 days. With prices continuing to rise as a result of a lack of inventory, now is an excellent time for homeowners to sell. Although the hot seller's market has cooled significantly due to rising mortgage rates, it continues to offer homeowners good returns.

  • Existing SFR Home Sales in Irvine in August 2022 were 78, down 52.4% year-over-year.
  • The Existing SFR Median Price was $1.68M, up 16.4% year-over-year.
  • Total Active Listings in the month were 182, a +78.4% change from last year.
  • Median Days on the Market were 16 days.
  • The Sale-to-List Price ratio was 99.8%.
  • % of Active Listings with Reduced Prices was 30.8%.

As per the real estate company named Redfin, in August 2022, Irvine home prices were up 13.4% compared to last year, selling for a median price of $1.3M. On average, homes in Irvine sell after 35 days on the market compared to 29 days last year. There were 201 homes sold in August this year, down from 376 last year.

  • Sale-to-List Price was 99.5%.
  • 34.8% of Homes Were Sold Above List Price.
  • 37.9% of Homes Were with Price Drops.
  • Only some homes for sale in Irvine get multiple offers.
  • The average homes sell for around the list price and go pending in around 35 days.
  • Hot homes can sell for about 3% above the list price and go pending in around 20 days.

Irvine Real Estate Market Forecast 2022-2023

The real estate data from Zillow shows that the typical home value in Irvine is $1,297,176. From 2019 to 2020, home prices were up by about 4.5%. Last year has been sizzling hot for sellers as Irvine home values went up 21.2%. The supply is very tight and with all the other factors considered, at this time, it is unlikely that the Irvine housing market will see a price decline in 2022. As of August 2022, Irvine home values have gone up 21% over the past twelve months.

Irvine is a master-planned city in Orange County, California, the United States in the Los Angeles metropolitan area.

  • The typical home value of homes in Irvine City is $1,297,176, up 21% over the past year.
  • Orange County's home values have gone up 13% year over year to $997,821.
  • The typical home value of homes in the Los Angeles-Long Beach-Anaheim Metro is $972,828.
  • Los Angeles metro home values have gone up 8.5% over the past year.
  • The Los Angeles metro housing market forecast ending with August 2033 is negative.
  • Zillow predicts that Los Angeles metro home values may decline by 2.2% between Aug 2022 to August 2023.
  • If this forecast is correct, Los Angeles metro home prices will be lower in the 2nd Quarter of 2023 than they were in the 2nd Quarter of 2022.
Irvine Real Estate Market Forecast
Graph Credits: Zillow.com

Irvine Real Estate Investment Overview

Now that you know where Irvine is, you probably want to know why we’re recommending it to real estate investors. Investing in real estate is touted as a great way to become wealthy. Should you invest in Irvine real estate? Many real estate investors have asked themselves if buying rental property in Irvine is a good investment? You need to drill deeper into local trends if you want to know what the market holds for the year ahead.

We have already discussed the Irvine housing market forecast for answers on why to put resources into this market. Regulatory restrictions on top of environmental regulations make it incredibly difficult to develop open land. It also drives up the cost of redevelopment, such as when you tear down a small home on a large lot to build anything from a modern 2600-square-foot home to a duplex. This slows down construction and redevelopment in the Irvine housing market and limits supply overall.

That’s aside from local and state regulations that drive up the cost of labor and materials. Conversely, it ensures significant appreciation of any Irvine real estate investment property. Although, this article alone is not a comprehensive source to make a final investment decision for Irvine we have collected ten evidence-based positive things for those who are keen to invest in the Irvine properties. Investing in Irvine properties will fetch you good returns in the long term as the home prices in Irvine have been trending up year-over-year.

Irvine Real Estate Appreciation

If you're a home buyer or a real estate investor, Irvine has unquestionably been one of the best long-term real estate investments in the country over the last decade. According to Neigborhoodscout, Irvine has had some of the highest home appreciation rates of any community in the country over the last decade.

Irvine real estate has appreciated by 103.21 percent over the last decade, which equates to an annual appreciation rate of 7.35 percent on average, placing Irvine in the top 20% of all cities for real estate appreciation. Irvine's appreciation rate over the last twelve months has been 18.78 percent. According to NeighborhoodScout data, during the latest twelve months, Irvine's appreciation rate, at 14.53%, has been at or slightly above the national average.

While real estate’s mantra can be summarized as “location”, the Irvine real estate market is defined by it. Home prices in the Irvine housing market are certain to go up because the city is entirely built out. And they can’t build up into the regional and state parks directly east of the city. Nor can they spread west, since cities like Corona Del Mar and the Crystal Cove State Park hem it in on the western edge.

Everything to the north and south is built out. That means that the only way one could increase housing stock is to tear down existing stock and build taller, denser, or both. Conversely, people are willing to pay a premium to live in the Irvine area given the wealth of dedicated greenspace.

Some of the best neighborhoods in or around Irvine, California are Northwood, Woodbridge, Westpark, Tustin, Tustin Legacy, Woodbury, Laguna Altura, Cypress Village, Turtle Rock, Pavilion Park, and Stonegate. Shady Canyon has a median listing home price of $7.6M, making it the most expensive neighborhood. Oak Creek is the most affordable neighborhood, with a median listing home price of $718.9K.

Here are some of the best neighborhoods to invest in Irvine real estate because they have the highest appreciation rates since 2000 (List by Neigborhoodscout.com).

  1. Hidden Canyon
  2. Parasol Park
  3. Solano At Altair / Celestial At Altair
  4. Oak Creek West
  5. Terrace
  6. Turtle Rock West
  7. University Park
  8. Foothill Ranch
  9. Irvine Spectrum / Irvine Medical and Science Complex
  10. Westpark South

The Job Market

Orange County is Southern California’s tightest job market. Unemployment is less than 3 percent, and many of them are good-paying professional jobs. That’s one reason why many choose to live in Irvine. Given the horrors of regional traffic, anyone working at UC Irvine, Verizon, Irvine Company, or Broadcom typically chooses to live here so they aren’t commuting three hours a day to these good-paying jobs.

Irvine Rental Prices Are Rising

In Irvine, 50% of households are occupied by renters. It is easy to find a cheap apartment in a place no one wants to live, though the reasons why demand is low could range from abundant gunfire at night to a lack of jobs and people in the area. The Irvine housing market sits at a sweet spot. The City of Irvine consists of 8 zip codes and is often designated as one of the safest cities to live in. It has reasonable rental rates compared to expensive California coastal real estate prices, and it has a high quality of life rating.

This isn’t a matter of opinion. It was determined by WalletHub. That’s why the Irvine real estate market came in eleventh on the Wallethub ratings, the best city in California according to their metrics. Sometimes a housing market can only be gauged by the competition. For example, the 2,500 monthly rental rate in the Irvine housing market sounds insane to those used to 1000 a month rents in the heartland. Yet this is only a few hundred dollars more a month than a renter would pay in neighboring Anaheim.

The more accurate comparison is the Irvine real estate market relative to Newport Beach directly to the west. Renting in Irvine is several hundred dollars cheaper a month than Newport Beach and other towns sitting on the Pacific shore, yet you’re just as close to major employers. Rent control hurts renters entering a market because those in the rent-controlled market have a major incentive not to move. This results in older singles and couples staying in the apartment in which they raised their children.

The same thing is found in California due to Proposition 13. Many retirees and childless middle-aged couples can’t afford to move until they can no longer stay in their home, since they’d pay higher property taxes on a smaller condo or two-bedroom home than they pay in their grandfathered four-bedroom suburban house. That drives up both rental rates and property prices in the Irvine real estate market.

As of September 29, 2022, the average rent for a 1-bedroom apartment in Irvine, CA is currently $2,805. This is a 3% decrease compared to the previous year. Over the past month, the average rent for a studio apartment in Irvine decreased by -3% to $2,505. The average rent for a 1-bedroom apartment decreased by -4% to $2,805, and the average rent for a 2-bedroom apartment remained flat.

  • The average rent for a 2-bedroom apartment in Irvine, CA is currently $3,574, up 8% compared to the previous year.
  • The average rent for a 3-bedroom apartment in Irvine, CA is currently $4,300, up 12% compared to the previous year.
  • The average rent for a 4-bedroom apartment in Irvine, CA is currently $5,438, up 10% compared to the previous year.

Proposition 10 prevented rent control from being imposed on single-family homes and apartments built after 1995. The vote to repeal Prop 10 was one of the most expensive legislative battles in California history, but the statewide rent cap went into effect in September 2019. Now rental rate increases are capped. You may find deals on Irvine real estate investment properties by those who just want to get out before their hands are tied or their profit margins eroded. This parallels the potential opportunities created by Oregon’s statewide rent control law. People afraid they’ll lose money become eager to sell.

The Relatively Friendly Environment for Landlords

California is tenant-friendly. However, local jurisdictions range from outright hostile to property owners to lukewarm. We’ll say that the Irving real estate market is one of the least hostile to property owners. For example, Orange County had fewer restrictions on why you could evict a tenant. They had the 30/60 day notice to quit rules or the minimum the state required at the time. There was less risk of squatters ruining an Irvine real estate investment property and being protected by the courts than you would with a Los Angeles real estate property.

The Large Student Market For Investors

Student markets always present an excellent opportunity for real estate investors. The student market is almost immune to inflation. The value of the property is almost directly proportional to its proximity to campus. And in the case of the Irvine real estate market, potential student renters are competing with locals for limited rental spots.

The robust rental market gives an Irvine real estate investment property extra value since the demand for the rental isn’t tied directly to the rise and fall of one particular school. Conversely, UC Irvine is home to around 30,000 students. That means the demand for an Irvine real estate investment property near campus won’t fall 10 percent because they built a new dorm or two.

Buying or selling real estate, for a majority of investors, is one of the most important decisions they will make. Choosing a real estate professional/counselor continues to be a vital part of this process. They are well-informed about critical factors that affect your specific market areas, such as changes in market conditions, market forecasts, consumer attitudes, best locations, timing, and interest rates.

Irvine’s housing market seems expensive, but that is in line with local real estate trends. The area remains stable and strong, though recent legislative trends along with ongoing regulations make this a great time to buy.

NORADA REAL ESTATE INVESTMENTS strives to set the standard for our industry and inspire others by raising the bar on providing exceptional real estate investment opportunities in the U.S. growth markets. We can help you succeed by minimizing risk and maximizing profitability.

investment properties for sale

The other best place to invest in real estate is Boulder, CO. The Boulder metro area is becoming a high-tech hub, driving up rental rates and property values. Others are lured here by the promise of high-paying jobs or attending school somewhere they can intern at Big Tech firms without paying a fortune. Boulder’s economy is stabilized by the presence of government research institutes and the proximity to Denver’s buzzing economy.

The median rent in the Boulder real estate market is $2500 per month. Even in the older downtown area, rents hover around 2300 dollars a month, and that figure is predominantly one and two-bedroom apartments. Rents are inflated by the massive number of students in the Boulder real estate market.

Another upcoming market to choose for real estate investment is Vancouver, WA. Vancouver, Washington is a steadily growing, appreciating real estate market. Investors here will profit from Portland’s mistakes while earning greater returns than if they invested in one of the more expensive housing markets in the region. The Vancouver WA housing market has a sizable student market. Better yet, it isn’t limited to a single school. Washington State University Vancouver has more than three thousand students. It is the second-largest Washington State campus. Gateway Seminary is home to around two thousand graduate students.

Let us know which real estate markets you consider best for real estate investing!


Remember, caveat emptor still applies when buying a property anywhere. The information contained in this article was pulled from third-party sites mentioned under references. Although the information is believed to be reliable, Norada Real Estate Investments makes no representations, warranties, or guarantees, either express or implied, as to whether the information presented is accurate, reliable, or current. All information presented should be independently verified through the references given below. As a general policy, Norada Real Estate Investments makes no claims or assertions about the future housing market conditions across the US.

References

Market Prices, Trends & Forecasts
https://www.car.org/marketdata/data/countysalesactivity
https://www.zillow.com/Irvine-ca/home-values
https://www.redfin.com/city/9361/CA/Irvine/housing-market
https://www.realtor.com/realestateandhomes-search/Irvine_CA/overview
https://www.neighborhoodscout.com/ca/irvine/real-estate
https://www.zumper.com/rent-research/irvine-ca

Oppressive regulation
https://www.ocregister.com/2018/06/19/hot-real-estate-markets-to-cool-in-2020-experts-predict/
Limited used home regulation
https://www.nber.org/digest/apr05/w11108.html
https://www.washingtonpost.com/opinions/2019/06/15/comeback-rent-control-just-time-make-housing-shortages-worse/

Regulatory effects
https://www.latimes.com/politics/la-pol-ca-proposition-10-rent-control-20181106-story.html
https://www.multifamilyaccounting.com/oregon-was-such-a-nice-place-rent-control-is-going-to-ruin-it/
https://www.latimes.com/california/story/2019-09-05/how-california-cap-rent-increases-would-work
https://www.nytimes.com/2019/09/11/business/economy/california-rent-control.html

Landlord friendly
https://www.rentcafe.com/blog/renting/states-best-worst-laws-renters
https://www.ocsd.org/gov/sheriff/divisions/custody/court/civil/evicting.asp
https://www.occourts.org/self-help/landlordtenant/
https://www.wsj.com/articles/the-hostile-occupation-of-carlos-lopezs-house-1527892100

Quality of life versus rent
https://wallethub.com/edu/best-cities-for-renters/23010/

Deal for renters
https://www.rentcafe.com/average-rent-market-trends/us/ca/irvine/
https://www.rentcafe.com/average-rent-market-trends/us/ca/anaheim/

Job market
http://www.irvinestop10.com/Employers.aspx
https://www.globest.com/2018/12/28/oc-is-socals-tightest-job-market/?slreturn=20190905122235

Filed Under: Growth Markets, Housing Market, Real Estate Investing

New Housing Construction 2022: Housing Starts & Permits

October 17, 2022 by Marco Santarelli

new housing construction

New Housing Starts 2022

The housing market continues to face considerable headwinds from rising interest rates and interruptions in the building material supply chain, which boost construction costs. Housing Starts refer to the number of new residential construction projects that have begun during any particular month. Estimates of housing starts include units in structures being rebuilt on an existing foundation.

According to the U.S. Department of Housing and Urban Development and the U.S. Census Bureau, housing starts in the United States tumbled 9.6 percent month-over-month to an annualized rate of 1.446 million units in July of 2022, the lowest since February of 2021 and well below market expectations of 1.54 million.

The housing sector has been cooling down amid soaring prices of materials and rising mortgage rates. Single-family housing starts sank 10.1 percent to 916 thousand, the lowest level since June 2020. Starts for units in buildings with five units or more slipped 10 percent to 514 thousand. Starts were lower in the Midwest (-33.8 percent to 139 thousand), the South (-18.7 percent to 710 thousand), and in the West (-2.7 percent to 367 thousand) but rose in the Northeast (65.5 percent to 230 thousand).

New Housing Construction Trends 2022

The U.S. Census Bureau and the Department of Housing and Urban Development have now published their findings for July new residential construction permits. The latest reading of 1.674M was down 1.3% from the June reading and is above the Investing.com forecast of 1.650M. Building permits in the US decreased 1.3% to an annualized rate of 1.674 million in July of 2022, the lowest level since September last year, compared to forecasts of 1.65 million.

Single-family authorizations dropped 4.3 percent to 928 thousand units, while approvals of units in buildings with five units or more rose 2.5 percent to 693 thousand. Building permits declined in the West (-12 percent) and the South (-0.1 percent) but increased in the Northeast (9.3 percent) and Midwest (8.1 percent).

Privately‐owned housing completions in July were at a seasonally adjusted annual rate of 1,424,000. This is 1.1 percent (±14.8 percent) above the revised June estimate of 1,409,000 and 3.5 percent (±15.5 percent) above the July 2021 rate of 1,376,000. Single‐family housing completions in July were at a rate of 1,009,000; this is 0.8 percent (±12.2 percent) below the revised June rate of 1,017,000. The July rate for units in buildings with five units or more was 412,000.

New Housing Construction
Source: U.S. Census Bureau

According to NAHB analysis of quarterly Census data, multifamily for-rent housing starts surged during the second quarter of 2022 to 142,000 units, the largest quarter for rental multifamily construction since the second quarter of 1986. The market share of rental units of multifamily construction starts bounced back to 96%. In contrast, the historical low share of 47% was set during the third quarter of 2005, during the condo building boom. An average share of 80% was registered during the 1980-2002 period.

The NAHB also gets input from builders on how confident they are in the housing market based on buyer behavior, and sales, and incorporates any forecasts as well. Increasing inflation and borrowing rates are reducing the number of prospective homebuyers and dampening builder morale.

In August 2022, builder sentiment fell for the eighth consecutive month as rising interest rates, ongoing supply chain issues, and high home prices continued to exacerbate housing affordability issues. The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) revealed that builder confidence in the market for newly constructed single-family homes fell six points in August to 49, marking the first time since May 2020 that the index fell below the key break-even measure of 50.

In the past month, roughly one-fifth (19%) of home builders who responded to the HMI survey reported lowering prices to increase sales or limit cancellations. The median price reduction for those using such incentives was 5%. Moreover, 69% of builders cited rising interest rates as the leading cause of declining housing demand, according to the survey.

All three components of the HMI declined to their lowest levels since May 2020. Current sales conditions dropped seven points to 57, sales expectations for the next six months fell two points to 47, and buyer traffic dropped five points to 32. Looking at the three-month moving averages for regional HMI scores, the Northeast fell nine points to 56, the Midwest dropped three points to 49, the South fell seven points to 63 and the West posted an 11-point decline to 51.

“Tighter monetary policy from the Federal Reserve and persistently elevated construction costs have brought on a housing recession,” said NAHB Chief Economist Robert Dietz. “The total volume of single-family starts will post a decline in 2022, the first such decrease since 2011. However, as signs grow that the rate of inflation is near peaking, long-term interest rates have stabilized, which will provide some stability for the demand-side of the market in the coming months.”


Sources

  • https://www.nahb.org/
  • https://www.census.gov/
  • https://www.nahb.org/blog/2022/08/multifamily-for-rent-starts-experience-record-quarter

Filed Under: Housing Market

NYC Real Estate Investment: Where to Invest in New York City?

October 4, 2022 by Marco Santarelli

New York City is one of the most expensive real estate markets in the world, and it regularly tops lists of the most expensive markets in the United States. It is known for its powerful tenants' union and difficult eviction process. What then makes NYC real estate investment attractive? Why do so many invest in NYC real estate market?

The truth is that NYC real estate investment is not one thing. There are radical differences between over-priced and over-built luxury areas and the relatively affordable neighborhoods where people compete for apartments and homes. And there are neighborhoods where people want to live and pay a premium to do so. That’s why all real estate is, ultimately, local.

NYC real estate is most likely to be a profitable investment when rented out over a long holding period. If you are looking to make a profit, you don’t want to buy the most expensive property on the NYC real estate market and expect to make a good profit on rents. Perhaps you are looking for a slightly different hold-over, an investment property in NYC that you might move into or sell at retirement in the future.

If you looking to buy a home, you should also consider a thing called a tipping point. Nationally, the median tipping point is around two years but in New York, it’s 5.8 years. The higher a home is priced, the longer you’ll need to stay in it to make the investment pay off relative to renting. Keeping aside the impact of the pandemic, strong job growth is another factor for investing in NYC real estate.

New York City has been the driving force behind employment gains in New York State. Job growth in the City has outpaced the State (and the nation) every year since the end of the recession. New York City has become less dependent on the securities industry for economic growth.

Other industries such as tourism, tech, health care, and business services are driving job growth and reducing the unemployment rate to record lows. In February, before the pandemic forced the shutdown of the economy, the employment rate in New York City was 3.4%, a historic low, and the state labor department counted a record 4.698 million jobs.

Is NYC Real Estate A Good Investment?

Regardless of the recent crisis, real estate is still a good, long-term investment. If you look back 10 years, real estate is still valued much higher than it was. And if you have tenants paying your mortgage, it makes the investment that much more profitable. As with any real estate investment, the more you know about the location, the better off you’ll be. NYC real estate investment has a track record of being one of the best in the nation.

That is why it is no surprise that despite being an expensive real estate market, a lot of people want to buy investment properties in NYC. There are abundant opportunities & neighborhoods to choose from when investing in New York City. The best neighborhoods for NYC real estate investment are not just relatively affordable.

They’re considered desirable to New York City's residents and see appreciation in property values as a result. They allow you to charge market rents regardless of the property’s value, and you aren’t taking a risk with the money you’re investing. Before you begin, it is important to have a well-thought-out plan in place.

 What Makes NYC Real Estate Investment Attractive To Investors?

  • NYC real estate is a good investment because New York City is the most populous city in the United States.
  • It is the center of the New York metropolitan area, the largest metropolitan area in the world by urban landmass.
  • The current metro area population of New York City in 2020 is 18,804,000 – Macrotrends.net.
  •  New York City has been described as the cultural, financial, and media capital of the world.
  • It is an important center for international diplomacy.
  • As many as 800 languages are spoken in New York.
  • New York is home to more than 3.2 million residents born outside the United States.
  • Which is the largest foreign-born population of any city in the world as of 2016.
  • New York City has been ranked first among cities across the globe in attracting capital, business, and tourists.
  • The highest no. of foreign investors choose NYC for real estate investment – Both commercial and residential real estate sectors.
  • New York City is a global hub of business and commerce, as a center for banking and finance, retailing, world trade, transportation, tourism, real estate, etc.
  • Many Fortune 500 corporations are headquartered in New York City.

      New York is a fairly walkable city in Queens County with a population of approximately 8,174,290 people. NYC has been one of the hottest real estate markets in the nation for many years. Despite the cooling off, New York City regularly ranks among the most expensive real estate markets in the world. However, that’s due to demand that simply hasn’t let up.

      It’s a relatively good time to buy a property in New York as housing inventory is on the rise and competition is less. Currently, the NYC housing market is relatively more friendly to buyers than sellers. With the phased opening of the economy, buyers have been quicker to return to the housing market. It seems they want to cash in on the opportunity to purchase their favorite properties despite high interest rates.

      Keeping aside the short-term impact of the ongoing pandemic, let’s take a look at the number of positive things in the NYC real estate market which can help investors who are keen to buy an investment property in this city.

      The Impact of International Buyers in New York

      Despite all the talk about the one percenter dominating this and that, the truth is that the international elite is bolstering the price of luxury real estate in New York City. They see NYC real estate investment as part of a multi-pronged approach. The property is almost certain to appreciate, so it is an investment. Owning a piece of the NYC housing market gives them a place to stay if they have to flee their home country. The money invested in the NYC housing market is typically not reported to their government, and it is almost guaranteed not to lose value. Ironically, foreign owners like these are much more willing to take a modest loss when they sell when they are no longer interested in the property.

      New York City's Expanding Luxury Development

      New York’s rent control laws don’t apply to luxury units, and developers have chosen to build these instead of the affordable housing the city needs. However, this development isn’t limited to the densest parts of New York City. For example, Staten Island’s North Shore is seeing new luxury condo construction. Interest in the area is driven by both the improved transit via the new ferry service and luxury buyers seeking relative bargains. This is aside from the oversupply of luxury penthouse units in the NYC housing market.

      NYC Rental Market is Strong

      The factors that led to the incredibly high rental rates in the NYC real estate market haven’t changed. One is the sheer number of people crammed into such a small space. Another matter to consider is all the zoning regulations that limit housing supply, though New York City has had the sense to give tax breaks to those who turn warehouses and commercial properties into rental units.

      This means that non-residential properties can be a viable NYC real estate investment, assuming you can get permission to turn them into lofts, condos, or apartments. Strict eviction laws that make it difficult to remove tenants who are a nuisance, time-consuming to remove if late on rent, and nearly impossible to get rid of it in a rent-controlled unit all force property owners to charge much higher rent in the NYC housing market. It is the classic case of cost-shifting causing others to pay a fortune.

      The median rent in New York City now exceeds three thousand dollars a month. One-bedroom apartments and studios rent for roughly three thousand dollars a month, while two-bedroom apartments rent for about 3,800 dollars a month. This is why the NYC real estate market is one of the most expensive in the world.

      Current Rental Trends Due to Economic Affects of the Pandemic:

      The pandemic reversed a decade of unrestrained rent growth in New York. High unemployment leads to higher vacancy rates, as the New Yorkers could no longer afford to live in the city. It also led to lower demand for the rental inventory piling onto the market as leases expired throughout the summer.

      Due to the exodus of Manhattan renters to Brooklyn and the suburbs, there has been a rise in vacancies and falling rents. As demand continues to decrease, rent prices are likely to fall more than they did during the Great Recession. On the other hand, soaring vacancies and rental discounts have attracted a range of renters to neighborhoods that previously would have been unaffordable.

      The first signs the city is making a comeback have appeared, with Manhattan and Brooklyn lease signings seeing the highest surge in the past 13 years. The current rental trends (as shown above) that new leases are increasing but since many of the rental market metrics remain very weak, further price declines would likely occur in the coming months.

      The Zumper New York City Metro Area Report analyzed active listings across 15 metro cities to show the most and least expensive cities and cities with the fastest growing rents. The New York one bedroom median rent was $2,114 last month. New York City was the most expensive market with one-bedrooms priced at $3,420 whereas Newark was the most affordable city with rent at $1,350.

      Here are the places where it makes sense to invest in rental properties in the New York City Metro Area. These are the places where the demand for rentals is growing strong in 2022.

      The Fastest Growing Cities For Rents in New York City Metro Area (Y/Y%)

      • New York City had the fastest growing rent, up 37.9% since this time last year.
      • Poughkeepsie saw rent climb 37.7%, making it rank as second.
      • Hoboken was third with rent jumping 37%.

      The Fastest Growing Cities For Rents in New York City Metro Area (M/M%)

      • East Orange had the largest monthly rental growth rate, up 5.3%.
      • Stamford rent grew 5.2% last month, making it the second fastest growing.
      • Hackensack & West New York were tied for third with rents both climbing 5.1%.
      NYC Rental Market Trends
      Source: Zumper

      The Known Opportunities for Bargain Hunters

      The NYC real estate market may seem dominated by five and ten thousand dollars a month apartments in Tribeca, but there are much cheaper neighborhoods. If you’re considering buying NYC real estate investment properties, start looking in neighborhoods like East Brooklyn, High Bridge, and Saint Albans. The average rent for apartments in Saintalbans is roughly 1200 dollars a month, while rents are less than 1500 a month in High Bridge. Since property values are based on multiples of the rental income, this means that you can snap up a small apartment building in the cheapest NYC real estate market for the cost of one luxury condo.

      The Overall Cooling of the NYC Housing Market

      The NYC housing market can be described as cool, though some will call it a buyer’s market. Things slowed down significantly in 2016 and 2018 as several groups of international buyers found it harder to buy properties or had less need to do so. On top of this is the trend of properties selling below their asking price unless they’re the cheapest unit in the neighborhood. Sales volume has increased somewhat, but there is a wider selection now than several years ago. More importantly, prices are a tenth to a quarter below their 2015 highs.

      This is a good time to buy an NYC real estate investment property because the market will continue to warm up as long as the economy remains stable. NeighborhoodScout's data show that during the latest twelve months, New York's appreciation rate, at 5.25%, has been at or slightly above the national average. In the latest quarter, New York's real estate appreciation rate has been 1.04%, which annualizes to a rate of 4.22%.

      The Softening New York Luxury Market

      The increasing supply of luxury real estate relative to demand is leading to more being done to sell units at their list price. For example, luxury apartment buildings are offering more and more amenities to justify their high monthly rents. Another sign that the market is softening is the growing time on the market for such properties. A few notable properties have sold only after being subdivided into more “affordable” luxury units.

      This means that investors with the money could buy a larger unit as a form of NYC real estate investment, subdivide it, and then sell it for a profit. If you have the cash and can close on the property, you could buy these premium properties for up to half of the listing price, too. The alternative is buying slow-moving one and two-bedroom apartments knowing they’ll eventually be worth more.

      We mentioned the softening of the NYC housing market already, especially at the higher end. We brought up the increased amenities being used to fill luxury properties that aren’t being held as an NYC real estate investment. However, many properties may sit on the market for years. This is enabled by a large number of properties not lived in year-round and those who simply don’t want to reduce the price tag of their property to a point lower than what they paid for it. As listings pile up and the ongoing carrying costs like high property taxes rack up, expect to see a wave of sellers who will mark down their New York City real estate to move it because they can’t afford to wait to sell it.

      The Legislation on the Table Will Increase NYC Rental Rates

      There are around a million rent-stabilized apartments in New York City. There are several bills in the Democrat-controlled state senate and a massive tenant’s rights push that will likely lead to tighter restrictions on landlords. For example, it would be harder to get apartments removed from the rent-stabilization policy and limit the ability of landlords to raise rents after existing tenants move out.

      While this hurts landlords who own rent-controlled properties, stricter rent control rules result in a reduction in housing supply and rents going up five percent more than they would have otherwise. Conversely, landlords who don’t want to deal with the hassle anymore may be willing to sell properties at a discount simply to get out from under the oppressive regulations.

      Disclaimer: Covid-19 may have impacted the NYC real estate market in a way that is not 100% accurately reflected here. When referencing the data published on this page for investment-related decisions, please keep in mind that the data provided here is not solely responsible for depicting the market's current reality.

      Where To Invest In New York City Real Estate?

      For real estate investors, buyer's markets are the perfect time to buy an investment property since there are fewer buyers to compete with and prices are lower. New York City is composed of five boroughs. Each borough is coextensive with a respective county of New York State. Here are some of the buyers-friendly neighborhoods in NYC where investing in real estate makes sense. These neighborhoods have been selected from different boroughs.

      1. Real Estate Investment in The Upper East Side, Manhattan, New York

      The Upper East Side or UES is a desirable area where almost no one can afford to buy real estate. It is a neighborhood in the borough of Manhattan in New York City. One publication found that the Upper East Side had a tipping point of 30 years. The tipping point is a measure of how long you have to live there to be better off buying than renting. Yet the area is home to a surprising number of relative bargains, and a good place for investing in NYC real estate.

      The building boom of luxury apartments has led to a glut of inventory. This is why the average home price remains around 1.8 million dollars, the price it was five years ago. And people are trying to move properties to get out from under the mansion tax. If you think this area is going to rebound, this is a great time to buy.

      But which neighborhoods are ripe for NYC real estate investment? Yorkville is experiencing a boom because the Second Avenue subway has just arrived. Yet it remains less expensive than “blue chip” Upper East Side neighborhoods. Expensive is relative when you want to invest in NYC real estate.

      For example, the apartments west of Lexington Avenue go for 2,500 to 3,000 dollars a square foot, while those in Yorkville are closer to 1,500 dollars a square foot. The entire Upper East Side is, on average, safer than most of New York City. And because it is so expensive, you can find many amenities for families with children.

      Latest Housing Trends in Upper East Side

      Currently, Upper East Side is a buyer's market, which means that the supply of homes is greater than the demand for homes. Hence, buyers have a wide range of choices and an advantage over sellers in price negotiations. Sellers are typically dropping their asking prices to be more competitive.

      According to Realtor.com, the median list price of homes in Upper East Side was $1.4M in December 2020, trending down -1.4% year-over-year. The median listing price per square foot was $1.3K. The median sale price was $1.1M. As we write this, there are 3019 active rental listings (houses and apartments) on Realtor.com with a median rent of $2,590.

      On average, homes in Upper East Side sell after 175 days on the market. The trend for median days on market in Upper East Side has gone down since last month, and slightly up since last year.

      2. Real Estate Investment in Inwood, Manhattan, New York

      Inwood is more affordable than other Manhattan neighborhoods. For example, buying is a better choice for potential residents after five years. For comparison, the tipping point for all of Manhattan is twelve years. Another point in favor of this area is that it isn’t seeing a wave of new development that hurt home values in Murray Hill. All of this is because Inwood is located at the very tip of Manhattan.

      Why would we suggest NYC real estate investment in a community that is literally on the edge of New Jersey? The area is low-rise. It is a mix of single-family homes and apartments up to eight stories high. They are proposing zoning changes to allow much taller buildings, but that hasn’t happened. This results in a shortage of affordable high-density apartments and steady appreciation. The home prices in Inwood have gone up 14 percent in the past five years.

      And if you buy property now that could be redeveloped into high-density housing, you will see significant returns on that investment. If high-density development doesn’t come, the numbers still make sense for real estate investors looking to invest in New York City. The median home costs just over half a million dollars, while median rents are a little over two thousand dollars a month.

      The area won’t lose its green space. Inwood Hill Park is known for its somewhat natural forest, and it is laced with walking trails. Yet you can easily commute to downtown, as long as you aren’t trying to get to the East Side. A side benefit of the Inwood area is the close-knit community and its generally family-friendly atmosphere.

      Latest Housing Trends in Inwood

      Currently, Inwood, NY is a buyer's market, which is typically good news for buyers. There are plenty of houses on the market, and interest rates are lower than usual. According to Realtor.com, the median list price of homes in Inwood was $465K in December 2020, trending up 3.3% year-over-year. The median listing price per square foot was $510. As we write this, there are 103 active rental listings (houses and apartments) on Realtor.com with a median rent of $1,750.

      3. Real Estate Investment in Washington Heights, Manhattan, New York

      Washington Heights is another Manhattan neighborhood that provides some great real estate investment opportunities. It is seeing steady appreciation because it is more affordable than the alternative. The average person can justify buying over renting if they will live there for more than five years. It is also a great opportunity for NYC real estate investment because you can find condos that cost less than a thousand dollars a square foot.

      Another point in favor of Washington Heights is that there are tax abatement condominiums that offer excellent rental rates with a lower overall tax bill. On top of that, there are several expensive colleges in the area. That results in a larger than average renter population that is almost insensitive to rental rates. Because there are several such schools in the area, you don’t have to worry about a diversified real estate portfolio out of fear that the student market will collapse if the main campus closes.

      The Washington Heights area is benefiting from slow, steady appreciation. The average two-bedroom home sells for 650,000 dollars; these properties sold for 550,000 dollars five years ago. That’s twenty percent appreciation over five years or four to five percent annual growth. It is also far better than the flat property prices for Manhattan as a whole.

      Latest Housing Trends in Washington Heights

      Current trends show that Washington Heights is a buyer's market, which means that the supply of homes is greater than the demand for homes. Most buyers in this neighborhood want to offer less than the asking price. You can grab the edge in this neighborhood and get your purchase offer accepted at the price you deserve.

      According to Realtor.com, in December 2020, the median list price of homes in Washington Heights was $599K, trending up 9.1% year-over-year. The median listing price per square foot was $682. The median sale price was $894K. Heights sold for approximately the asking price on average in December 2020. As we write this, there are 696 active rental listings (houses and apartments) on Realtor.com with a median rent of $1,910.

      On average, homes in Washington Heights sell after 272 days on the market. The trend for median days on market in Washington Heights has gone up since last month, and slightly up since last year.

      4. Real estate Investment in Bay Ridge, Brooklyn, New York

      Brooklyn is one of the more affordable areas in the New York City metro area. The average tipping point for Brooklyn is 4.17 years. And Bay Ridge is cheaper than average, though that will soon change. We’d recommend buying real estate in Bay Ridge before the inventory is snapped up by first time home buyers being advised to buy here.

      Why invest in Bay Ridge? Bay Ridge has a suburban feel. That’s because the long commute to Manhattan prevented dense development. It is going to see a boom in valuation because it now has a direct ferry service to Wall Street. This is in sharp contrast to the temporary deals you might find in brownstone neighborhoods like Brooklyn Heights, Clinton Hill, and Fort Greene.

      Property has become very cheap in these areas because of the uncertainty about the Brooklyn-Queens Expressway as well as the fact many don’t want to live there during construction. We don’t recommend buying apartments for as little as 100,000 dollars that may be hard to rent out and may not sell for much in the future. Brooklyn's Bay Ridge is much more stable.

      The average two-bedroom apartment sells today for a little over half a million dollars, 100,000 dollars more than it would have five years ago. That’s roughly ten percent annual appreciation for five years. Bay Ridge received a C from Niche.com on its crime and safety, but that’s close to the NYC average. Its public schools get a B. It has better than average amenities for parents aside from the fact they can afford to live here. All these factors make it a good neighborhood for NYC real estate investment.

      Latest Housing Trends in Bay Ridge

      Current trends show that Bay Ridge is a buyer's market, which means that the supply of homes is greater than the demand for homes. According to Realtor.com, the median list price of homes in Bay Ridge was $598.5K in December 2020, trending down 7.8% year-over-year. The median listing price per square foot was $537. The median sale price was $539K — 3.74% below the asking price on average in December 2020.

      As we write this, there are 182 active rental listings (houses and apartments) on Realtor.com with a median rent of $1,800. Houses tend to sell for less and sit on the market for a longer period of time before receiving an offer. On average, homes in Bay Ridge sell after 169 days on the market. The trend for median days on market in Bay Ridge has gone up since last month, and slightly up since last year.

      5. Real estate Investment in Bedford-Stuyvesant, Brooklyn, New York

      Bedford-Stuyvesant in Brooklyn has several advantages over other Brooklyn neighborhoods in New York City. The older housing stock tends to be cheaper to buy, and you can dramatically increase its value by renovating it. The area is starting to appreciate as high-end cafes and stores move into the area. And the area offers far lower property tax rates. This is on top of the areas in New York City where you can find cheaper real estate for investment.

      For example, homes in Bedford-Stuyvesant have an average cost of 1.4 million dollars, while the same classic brownstone costs 2.5 million in Williamsburg and 3.5 million in Cobble Hill. This means there is plenty of room for appreciation. A side benefit of NYC real estate investment in Bedford-Stuyvesant is how many of the properties have already been subdivided, allowing you to pay the same price for a single-family home while enjoying multi-family rental income.

      This area has several points in its favor for those considering NYC real estate investment. It is a slowly appreciating, stable market. For example, it has seen roughly 16 percent appreciation over the past five years. That’s two to three percent appreciation a year for the building itself. Yet you can rent out a single bedroom apartment for a little over two thousand dollars a month, while two-bedroom yields 2,500 a month in rents.

      Latest Housing Trends in Bedford-Stuyvesant

      The current trends show that Bedford-Stuyvesant is a buyer's market, which means that the supply of homes is greater than the demand for homes. According to Realtor.com, in December 2020, the median list price of homes in Bedford-Stuyvesant was $1.3M, trending up 4% year-over-year. The median listing price per square foot was $791. The median sale price was $1M. Homes in Bedford-Stuyvesant sold for approximately the asking price on average in December 2020.

      As we write this, there are 713 active rental listings (houses and apartments) on Realtor.com with a median rent of $2,350. In a buyer's market, homes linger on the market longer. On average, homes in Bedford-Stuyvesant sell after 167 days on the market. The trend for median days on market in Bedford-Stuyvesant has gone up since last month, and slightly down since last year.

      6. Real estate Investment in Long Island City, New York

      Long Island City is arguably the best real estate investment opportunity in Queens, New York. The average home price is around 1,200 dollars a square foot. This means the average home costs more than a million dollars. However, the east side of the neighborhood costs much less. Eastern neighborhoods in Long Island City cost just over half a million dollars and less than eight hundred dollars per square foot.

      The area is seeing appreciation as people move here as they’re priced out of Brooklyn. However, the area doesn’t have the same access to the Long Island Rail Road. This is why appreciation remains strong but is not skyrocketing. For example, the average home price in the area has risen from 640,000 dollars to just over 900,000 dollars over the past five years.

      That’s nearly ten percent growth year over year for five years. But there is still room to go higher. Is Long Island City a good place for families? It is given a B by Niche.com on crime and safety, and that’s pretty good for New York City. Schools are a B, as well.

      Latest Housing Trends in Long Island City

      The good news for buyers is that Long Island City, NY is also a buyer's market. If you're looking to invest here, you'll have more choices and fewer buyers to compete with. Homes are sold for less, relative to their listing price. On Realtor.com, the median list price of homes in Long Island City, NY was $899K in December 2020, trending down -23.5% year-over-year. The median listing price per square foot was $1K. The median sale price was $920K — 2.54% below the asking price on average.

      As we write this, there are 1,478 active rental listings (houses and apartments) on Realtor.com with a median rent of $2,225. In this neighborhood, homes linger on the market longer. On average, homes in Long Island City, NY sell after 165 days on the market. The trend for median days on market in Long Island City, NY has gone up since last month, and slightly up since last year.

      Disclaimer: When referencing the median rents of the local neighborhoods, please keep in mind that the data provided was taken from different credible sources. While deemed reliable, it may not accurately depict the current reality of the local real estate market. The pandemic may have impacted rent rates in a way that is not yet reflected in this blog.


      References:

      • https://www.realtor.com/
      • https://www.niche.com/places-to-live/n/long-island-city-new-york-city-ny
      • https://www.renthop.com/average-rent-in/bedford-stuyvesant/nyc
      • https://ny.curbed.com/2017/6/22/15851010/nyc-best-neighborhoods-to-buy-vs-rent
      • https://www.nytimes.com/real-estate/guide/manhattan/upper%20east%20side
      • https://mommypoppins.com/new-york-city/uptown/upper-east-side
      • https://www.brickunderground.com/buy/where-to-buy-and-not-in-NYC
      • https://www.brickunderground.com/live/neighborhood-secrets-inwood
      • https://www.nytimes.com/real-estate/guide/manhattan/Inwood
      • https://www.nytimes.com/real-estate/guide/manhattan/washington%20heights
      • https://www.nytimes.com/real-estate/guide/brooklyn/bay%20ridge
      • https://www.niche.com/places-to-live/n/bay-ridge-new-york-city-ny/
      • https://www.nytimes.com/real-estate/guide/queens/long%20island%20city
      • https://housemethod.com/blog/best-new-york-city-neighborhoods-for-real-estate-investment/
      • https://ny.curbed.com/2019/2/18/18229286/luxury-nyc-condos-real-estate-report
      • https://www.businessinsider.com/new-york-city-luxury-real-estate-not-selling-penthouse-gimmicks-2019-2
      • https://www.brickunderground.com/blog/2015/01/rent_stabilization_misconceptions
      • https://ny.curbed.com/2019/5/14/18617990/new-york-rent-control-tenants-rights-landlords
      • https://www.cnbc.com/2019/04/01/manhattan-real-estate-sales-fall-for-sixth-straight-quarter.html

      Filed Under: Real Estate Investments Tagged With: New York Real Estate Investment, NYC investment properties, NYC Real Estate Investment, Real Estate Investing

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