NYC real estate market: 2022 recap and 2023 predictions

The New York City housing market went through a major shift this year. In 2022, New Yorkers had to face some of the lowest and highest mortgage rates in history, record-breaking rents, rising home prices, and bidding wars. NYC renters, homebuyers, and developers all have something to wish for in the upcoming year. But what changes in the NYC housing market are more likely to come to life?

In the first half of 2022, the NYC real estate market has been breaking one record after the other. The number of homes sold across the five boroughs skyrocketed in the first quarter of this year, as many buyers rushed to lock in lower mortgage rates. This spike in demand and low inventory caused an increase in home prices. In the second half of 2022, the interest rates rose above 7 percent, the highest level in 20 years. Expensive borrowing costs led to a slowdown in the housing market, but the asking prices remained elevated. 

The end of the year brought some relief to NYC homebuyers. The mortgage rates fell below the 6.5 percent mark, causing a slight increase in application volume. However, the StreetEasy “2023 NYC Housing Market Predictions'' report suggests that interest rates will not drop significantly any time soon. By the end of 2022, NYC homebuyers were able to regain some negotiating power. However, the limited for-sale inventory keeps them from having the upper hand. 

In 2022, NYC rents broke many records. The average rent in Manhattan climbed to $5,058 a month, the new all-time high. Since then, the asking rents have been going down. However, the rising mortgage rates pushed some New Yorkers away from their dream of owning a home, and they returned to renting. The elevated demand for rental units and limited inventory will likely prevent rent prices from falling in 2023. 

The rise in construction activity might help lower home prices. In the first half of this year, the number of new building filings soared amid the expiration of the 421-a tax abatement. The city issued nearly 60,000 permits for new homes in the first six months of 2022, according to the data provided by the NYC Department of City Planning. This surge in the number of permits might help address the rental inventory shortage in the upcoming years. 

Although, in many ways, New York City has returned back to pre-pandemic times, it seems that remote work is here to stay. As more New Yorkers prefer to work from home, many offices remain half empty. The conversion of offices into residential buildings requires changes in the zoning laws. But it might help bring more people back to commercial districts and increase the supply of affordable housing. 

Some elected officials, including Mayor Eric Adams, expressed their support for cutting red tape and making it easier to transform offices into residential units. Low inventory of affordable housing remains one of the biggest challenges for New Yorkers, and 2023 might become a turning point for addressing this issue. 

Resources:
“2023 NYC Housing Market Predictions: What Renters, Buyers, and Sellers Can Expect,” by Kenny Lee (StreetEasy, 2022)

“NYC Real Estate Projections For 2023: Here's What Experts Expect,” by Matt Troutman (Patch, 2022)

“More Turbulence Expected for NYC’s Real Estate Market in 2023,” by Celia Young (Commercial Observer, 2022)

“2022 Was the Year for Working From Home, Will Things Change in 2023?” by Tony Owusu (The Street, 2022)