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How Will Inflation Impact New York Real Estate? Experts Share 5 Factors To Consider

New York’s bustling real estate market continues to show no signs of a slowdown, as thinning supply and increasing demand have resulted in a steady flow of deals through the summer months. The frantic pace has resulted in a steady price creep, particularly in Manhattan’s most coveted neighborhoods. But with consumer prices on the rise—the latest Consumer Price Index in July showed a 5.4% acceleration in consumer prices year-over-year—some are wondering what impact national economic uncertainty will have on the New York real estate market.

To get a better understanding, members of top Manhattan brokerage Warburg Realty shared their opinions on current market dynamics and the potential impact inflation may have on New York real estate. From rising prices to renewed international interest, here are five factors for buyers and sellers to consider.

1. Fleeting opportunities for below-market offers

I was working with a buyer earlier this year who was prepared to make a purchase on the Upper West Side for $800,000. She submitted offer after offer, expecting to get a bargain, and instead, she continued to get outbid by full-ask offers—a sign that the market was picking up. Fast forward to now and the properties that are similar to ones she was considering earlier this year are completely out of her budget, and she feels that she has missed her chance to buy in the city. — Becki Danchik

Buyers are currently frustrated with bidding wars and a real lack of good products available. Sellers are cashing out at higher prices, even over the asking price. But the feeling among buyers is that the next purchase is very difficult to find and very expensive. Yes, buyers are now realizing they waited too long and missed a golden opportunity to downsize or upsize or purchase as a first-time buyer. With rising prices, buyers who are very interested in buying are in the game and moving to close the deal. — Ted Karagannis

2. International interest provides market boost

I feel that there is a euphoria about New York City coming back slowly. We are seeing a surge in international buyers coming to New York City again looking for pieds-a-terre and investment properties. In my opinion, the inflation numbers and warnings we have been receiving are temporary and due to supply shortages during COVID, such as used cars, rentals, and lumber supply. New York City, compared to other large cities around the world, is actually quite reasonably priced. — Parisa Afkhami

3. NYC real estate remains a good investment

Rents are up and home prices are and I think that caught many people off guard. It’s Econ 101; high demand and lack of supply drives price. Good apartments (for rent or for sale) are scarce, so prices have risen. I think and hope that we see price and inventory decelerate and increase respectively. I think the price has achieved or is approaching the Covid loss percentage. On inflation: A loaf of bread and a gallon of gas are still about four bucks. The stock market is performing well. In terms of real estate, New York City and the price point that I service tends to be more insulated. However, taxes and rising pre-K to high school costs are concerns. — Chris Totaro

4. Prices are up, but it’s not all bad

I think the sentiment with buyers and sellers is both leaning towards the positive. Some buyers definitely feel like they’ve missed their chance. But what they actually missed was the chance to buy at a very heavily discounted rate. Buyers can still find a good deal as prices have rebounded to mid-2019 levels. Prices didn’t start to rebound till right before the pandemic, so a deal can still be made. On inflation, I haven’t heard any buyers mention that rising prices would affect their decision to buy. If anything, inflation would affect the under-$1 million market, where people tend to finance more. — Bill Kowalczuk

The overall sentiment of both buyers and sellers is a very positive one. I am sure there are those buyers that didn’t “pull the trigger “ during covid when prices were lower. Yes, they are probably upset that they missed that great opportunity. However, buyers who really want to buy will be open to the rising prices. Prices are only going to go up, so now is always the right time. But I don’t think that inflation will affect the New York City housing market. The market is very strong now and it will only get stronger as we move forward. — Andrea Warshaw-Wernick

5. Some may need to reconsider spending habits

Inflation has multiple effects on real estate, but the most obvious is the cost of capital (interest rates) and erosion in disposable income as the price of goods becomes more expensive. Add to this credit card and other debt (car loans, student loans, etc.) — those can impact discretionary income and savings rates. The bottom line is that buyers will have to be more exacting and mindful with their budgets, and sellers should be prepared to negotiate or reduce prices. — Rowena Dasgupta

Original article from Forbes written by Neal Leitereg and the Forbes Global Properties Contributor Group.

Joyce Rey
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