NEW YORK, Sept. 18, 2018 /PRNewswire/ --
- NYC home prices have more than recovered since the housing bust, increasing nearly 30 percent (28.5 percent) from their crisis low in November 2011 — an average of 3.8 percent per year.i
- By comparison, the S&P 500 more than doubled since the New York City housing market bottomed out, increasing by 125 percent for an annual return of 13 percent.
- Homeowners who bought and sold after the crisis fared well, earning an average return of 33 percent, or 7.5 percent per year — a roughly $163,000 cumulative gain on the median priced home.
- Those who bought in the two years before the crisis and sold during the recovery have struggled to regain value, earning a median annual return of 1.7 percent — a roughly $60,000 cumulative gain on the median-priced home.
- With the inventory of for-sale homes now reaching post-crisis highs, many sellers appear eager to cash out, but are overly optimistic about the prices their units can command.
In the decade since the collapse of the housing market, nearly 500,000 homes were bought and subsequently sold in New York City, earning a median cumulative return of 33 percent – or 7.5 percent per year – according to a new StreetEasy study. Across the market, steady demand for homes led to a strong recovery in the city, driving home prices up by nearly 30 percent from their crisis low — an average of 3.8 percent per year.
While the growth in home prices outpaced the cost of other goods and services, New York City real estate dramatically underperformed the stock market. The S&P 500 more than doubled since the crash, increasing by 125 percent, or an annual return of 13 percent, compared to the 3.8 percent annual growth in New York City real estate.
Residents who bought during the upturn in the market saw substantial gains in the years after the financial crisis, while those who bought at the top of the market haven't fared as well. Among those who bought between September 2006 and September 2008 and have since sold, the median annual return on their home was 1.7 percent — a dramatic 5.8 percentage points less than those who bought just after the crisis. The typical gain on the median home bought before the crisis was $60,000, compared to $163,000 on homes that were bought and sold after the collapse. Only half of the homeowners who bought in the pre-crisis period and have since resold earned the roughly 10 percent gain necessary to offset the costs of buying and selling.
Currently, many homeowners who bought after the crisis seem to be ready to cash out. In the second quarter of 2018, the number of homes listed for sale on StreetEasy hit its highest level since the recovery. Sellers who had purchased since the crisis listed their homes for a median 41 percent premium above their purchase price, for an average return of 7.6 percent per year. But the steady home price appreciation over the last decade has started to slow: prices fell in Manhattan and Brooklyn in the second quarter of 2018, with Manhattan recording the largest annual price drop since the crisis at 1.1 percent.
As of late August, only 11 percent of the units purchased since the collapse and listed in the second quarter had sold. Those that did sell went for returns roughly in line with historical precedent: a 29 percent average total gain, or 5 percent per year. Of those homes, more than half sold for below their initial asking price.
"Buying a home is both an emotional and financial decision, but in a city filled with rental options, buying is not always the right decision for everyone — and it's often not as profitable as many think," says StreetEasy Senior Economist Grant Long. "Stories of massive financial windfalls among buyers who managed to time the recovery from the 2008 financial crisis can tempt others into believing that owning a home in the city will always be profitable. But a closer look at the numbers shows that it's not always easy to make money on real estate in New York City, particularly when there are so many other investment options out there.
"Homeownership can make sense for those able to commit to the city over the long term, and for those able to reap the rewards of various tax benefits and the ability to borrow against the value of a home. But with the inventory of for-sale homes now growing, and with prices near record highs, it's more important than ever for New Yorkers to carefully consider whether ownership is right for them, especially if a substantial return on investment is a major factor in their decision."
StreetEasy is New York City's leading local real estate marketplace on mobile and the web, providing accurate and comprehensive for-sale and for-rent listings from hundreds of real estate brokerages throughout New York City and the NYC metropolitan area. StreetEasy adds layers of proprietary data and useful search tools to help home shoppers and real estate professionals navigate the complex real estate markets within the five boroughs of New York City, as well as Northern New Jersey.
Launched in 2006, StreetEasy is based in the Flatiron neighborhood of Manhattan. StreetEasy is owned and operated by Zillow Group (NASDAQ: Z and ZG).
StreetEasy is a registered trademark of Zillow, Inc.
i According to the StreetEasy Price Index. Full methodology here.