What's in store for co-ops and condos in 2024? Monthly maintenance and common charges will continue to rise, thanks to the relentless pressure of rising costs. But on the bright side, interest rates will come down, which will likely lead to a loosening of a sluggish real estate market.
Rising costs are mostly due to the usual suspects —insurance, inflation, taxes, energy — that crunched boards’ budgets this year, Gustavo Rusconi, vice president and director of management at Argo Real Estate, tells Brick Underground. “It’s going to be another tough year,” he adds. “The insurance markets for general building insurance have increased significantly; we’ve seen increases anywhere between 20 and 40% for insurance.”
The insurance market isn’t likely to loosen up next year, Rusconi says. Plus, it’s not yet clear how the cost of oil, still used by thousands of buildings in NYC, may change due to the war between Israel and Hamas. Gas and electricity bills are expected to go up in January, after rising this year. Property taxes, which make up the lion’s share of any co-op’s operating expenses, are expected to rise in the 2023-2024 fiscal year, according to a report from State Comptroller Thomas DiNapoli.
Monthly fees paid by co-op shareholders and condo unit-owners have soared almost three times faster than the rate of inflation, Bloomberg reports. Ever-tougher rules on inspections as well as preparations for the city's strict new climate law, Local Law 97, are adding hundreds or even thousands of dollars to monthly bills for residents already paying some of the world’s highest housing costs.
Most property managers expect monthly charges to rise by 3 to 6% in 2024. Mark Levine, principal at property manager EBMG, says he hasn’t seen hikes less than 3 to 5%, while Daniel Wollman, the CEO of property manager Gumley Haft, says the co-ops and condos in his portfolio are expecting to see a 3 to 6% percent rise in monthly fees. Andy Marks, senior vice president of new business and marketing at property management firm Maxwell Kates, has seen increases in the range of 4 to 5% so far.
Now for some good news. The Federal Reserve announced in mid-December that it was essentially done raising interest rates, and in fact, was preparing to possibly cut them in 2024, Crain's reports. Lower interest rates should have a cascade of desirable effects, some economists say. A larger pool of prospective buyers could push reluctant sellers to put their co-ops and condos up for sale, boosting supply after a 2023 when a lack of inventory locked the market.
But even good news can't mask the fact that life isn't fair. On the ownership side, condos continue to fare better than co-ops. It's possible that potential co-op buyers failed to pass muster at elite buildings because of elevated loan costs. Their debt-to-income ratios may just not have penciled out. Whatever the case, sales at some well-known co-ops this year suggested just how hard it can be to market them. Falling interest rates should help burnish their appeal.
Here's hoping co-op and condo buyers and sellers are in for a Happy New Year.
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