Home Price Increases In NYC Affect Surrounding States
By NICOLE MURRAY
New York City has been seeing home price gains and those Big Apple prices have trickled into New Jersey, Connecticut, and other surrounding states.
S&P Dow Jones Indices released the August 2024 results for the S&P CoreLogic Case-Shiller Indices on Oct. 29. They show New York had an annual gain of 8.1%, followed in the 20-City Composite by Las Vegas and Chicago with annual increases of 7.3% and 7.2%.
According to various real estate industry professionals, there are a few contributing factors to price jumps in New York and its metro area.
The first and most prominent factor is the COVID-19 pandemic because the urge to avoid crowds resulted in people with capital exiting the city in droves. The unexpected high demand in surrounding areas drove up prices, which has affected the status quo costs to this day.
“People left Manhattan for places to sprawl out but they brought their capital with them,” said Jules Zaphire, a real estate professional at The Pantiga Group. “They were coming to New Jersey, Connecticut, and even just outside of the city making all-cash offers, putting in hefty down payments, and driving up values like crazy.”
Bill Maier, sales manager at United Mortgage, explained that when a massive number of people left the city during the pandemic, prices remained elevated in New York because low interest rates kept payments somewhat affordable for those who needed to stay there.
Once demand returned to “normal levels” and people started returning to the city, prices inflated even more.
“New York City is seeing huge gains in housing prices because the demand is still high,” said Gabriella Lisi, a realtor associate at RE/MAX Revolution. “Even after the pandemic, people want to live in the city for its vibrant atmosphere and opportunities. You also have a lot of investors who see NYC as a safe bet, driving up competition even more.”
Another contributing factor is the work-from-home trend that has developed since quarantines began in 2020. This new dynamic has given workers the freedom to live farther from their employers than ever before.
“They want the benefits of being close to the city without the price tag,” said Lisi. “So, when NYC becomes less affordable, it spills over into the surrounding markets, pushing prices up there too.”
“People have been shopping farther and farther from the city because why pay the expensive city prices if you do not have to travel?” explained Maier. “However, areas that were once cheaper shot up because everyone had the same idea: shop where no one else was originally looking.”
There are mixed predictions on whether buyer demand will continue to expand throughout the Northeast, or if it will once again retract to the city and its immediate neighboring areas.
“I don’t think it will continue to expand,” explained Maier. “Employers are demanding people return to the office so the freedom to move farther away has been disappearing. I have multiple clients who moved away from the city or even down South because of affordability only to have to move back again.”
Zaphire disagrees. He said the remote work trend is not going anywhere.
“Bosses are getting more productivity hours from employees because there is no commute. With location flexibility, the expansion will continue to grow as buyers search farther and farther out for affordable deals,” Zaphire said.
Lisi said she expects people will continue to seek out homes outside of the city, especially if they have hybrid schedules.
“People have realized they can get more space for their money in places like New Jersey and Connecticut,” Lisi said.
Mortgage rates will likely affect the decisions of buyers moving forward.
For over a month, mortgage rates have been climbing, recently hitting 6.72%. Buyers who have been sitting on the sidelines waiting for rates to drop may stay there.
Once rates go below 6%, likely at the end of next year, prices in New York and the surrounding areas are expected to surge even more.
“Lower rates attract more buyers, which could push prices even higher in the city, and in general, due to more competition. As for New Jersey and Connecticut, demand there may stay strong since people looking for more space will still be drawn to those areas, especially if they’re priced out of the city,” Lisi said.
During their 2024 Annual Convention & Expo, leaders at the Mortgage Bankers Association presented their 2025 outlook, which included a baseline forecast for mortgage rates to end 2025 at 5.9% and remain close to that level for the forecast horizon.