Homebuyers and renters are going to have it a bit tougher in 2022, according to StreetEasy's 2022 predictions.
The past two years for the NYC housing market have been quite split as home prices have skyrocketed with an increase in demand while landlords have offered deep rental discounts.
StreetEasy took a look at its data and trends to come up with five predictions it has for 2022's housing market. It sees the market continuing to recover from the pandemic, which is both good and bad, but ultimately means the housing market in 2022 will be expensive, with rents and home prices continuing to increase.
See the five predictions below:
1. The NYC sales market will continue to correct itself
Between 2018 and 2020, there was a surplus of luxury inventory based on optimistic, bubble-like behavior so prices fell. But with the start of the pandemic, demand increased and pushed home prices higher in NYC. This course correction, with demand influencing housing prices, will continue in 2022, StreetEasy predicts.
"There likely won’t be another recession that will lead to another massive drop in rates. Thus, there won’t be a sudden, externally motivated spike in demand. Ultimately, it’s up to the supply side—the new construction, the developers, the sellers—to price their listings properly in order to avoid another sales market slowdown."
Their predictions also see sustained demand from home shoppers, which means there will likely be fewer price cuts and more bidding wars, sadly. In 2021, on average, homes closed at or below their asking price in all neighborhoods in the city. That may change in 2022, StreetEasy says.
2. Pandemic rental discounts will end, bringing about a wave of new inventory and priced-out renters
StreetEasy expects there to be a "flood" of demand for new rentals and inventory in the first quarter of 2022 because discounts that landlords made on rent in 2021 will start to come to an end.
The first quarter of 2021 had the most discounts ever—42.8% of rentals in Manhattan, or 24,361 units, offered a concession (with even more in the third quarter). Many of these units returned to their gross rents within a year’s time, StreetEasy says. As these units lose their concessions in 2022, renters will face higher rents and many of them will no longer be able to afford their apartments and have to move.
Because of this, there will be a flood of inventory and demand in 2022 overall. That being said, it'll start slowly because fewer people move to the city in the wintertime making for more inventory than demand. Rents may stagnate or fall in quarter one of 2022 for this reason, but it'll be short-lived as it warms up.
3. NYC’s hot, amenity-rich neighborhoods will see more demand
In 2021, we saw that the hottest neighborhoods (SoHo, the West Village and Flatiron) were the ones with the most shopping, restaurants, and nightlife. As these sectors have reopened, it's once again important to have them nearby. StreetEasy says in Brooklyn, Dumbo, Fort Greene, Bushwick, Gowanus and Red Hook will be the most attractive places to live, for example.
4. International demand will drive up luxury home prices
Luxury housing is apparently having a moment, StreetEasy says. The topmost expensive tiers of homes in Manhattan and the most expensive tier in Brooklyn are rising the quickest.
"During the pandemic, the wealthy accumulated more wealth from the surge in many tech stocks. In addition, fully vaccinated international visitors were allowed to resume travel to the U.S. in November. This influx could lead to more international investment in residential real estate in New York City, and increased luxury demand after the pandemic pause and pent-up demand," StreetEasy says.
Home prices in the bottom price tier will remain flat, however.
5. Climate change will be a bigger consideration for NYC buyers
In 2021, New Yorkers really saw the devastating impact of climate change on the city and its infrastructure. The remnants of Hurricane Ida flooded the streets and subways, placing coastal flooding on New Yorkers' radars. FEMA recently proposed an updated flood map for New York City, which found that twice as many buildings as before were at risk. According to FEMA data, prices will go up for at least 62% of flood insurance policies in New York City. For 27,200 properties, the rise will be modest (not more than $120 a year) but for about 10% or 5,400 properties, yearly costs leap by more than $120.