StreetEasy: buyers are returning to the market, but inventory remains limited

Spring is upon us, and as the weather improves, the New York City real estate market is coming out of its traditionally slow season. The 2022 spring homebuying season could be best described as record-breaking thanks to the historically low mortgage rates. However, over the past year, the average interest rate for a home loan has more than doubled, increasing the uncertainty among NYC buyers and sellers. 

More NYC buyers are entering the market despite the near 7 percent interest rates. In February, the number of listings that went into contract was up 32 percent from the previous month, according to the new report from StreetEasy. However, this increase in the number of newly signed contracts remains 21 percent below last year’s level. The NYC housing market finally begins to see more demand from buyers, but affordability remains one of their top concerns.

NYC homebuyers have regained negotiating power and are spending more time on the market searching for a home within their budget. In addition, elevated mortgage rates created a change in buyers’ preferences. Therefore, listings are spending more time on the market. In February, the typical home listed for sale on StreetEasy went into contract in 111 days, up 24 days from a year ago. 

“Despite the competition for limited inventory, soaring monthly mortgage payments left buyers with little room to stretch their budgets,” the StreetEasy report reads. “With aspiring buyers increasingly concerned about affordability, a competitive pricing strategy is even more important now than last year. With limited inventory, well-priced homes can still expect strong demand from buyers.”

Although the NYC housing market is no longer as competitive as it was in the spring of 2022, home prices remain stable. The median asking price rose more than 5 percent year-over-year for the past eight months. The asking prices may go down slightly once the inventory increases. In addition, StreetEasy predicts that mortgage rates would remain volatile in the upcoming months.

“While some buyers may think it’s best to wait out the market, a sharp drop in home prices is unlikely this year,” the report says. “Inventory of homes for sale in NYC will gradually increase in spring and early summer, but not enough to significantly slow the growth in home prices. In addition, fewer new listings are entering the market than last year as current homeowners, who locked in low interest rates prior to 2022, remain reluctant to put their homes on the market.”

Resources:

“Buyers Are Back, But Home Sales Remain Modest,” by Kenny Lee (StreetEasy, 2023)