Co-op and condo boards that rely on flip taxes to replenish their reserve funds may consider going to Plan B as the city — and the nation — appear to be entering a housing recession.
In August, 63% of the cities in RealtyHop's Housing Affordability Index, including New York, experienced drops in asking prices, signaling the start of a housing recession accompanied by decreased sales and housing starts. With an overheated housing market, interest rates above 5%, and the highest inflation since 1981, buyers struggle to find homes within their budget. As more and more prospective buyers pause on buying, sellers are forced to lower their expectations and adjust to a market that’s finally cooling down after two record-breaking years.
“I think we’re in a housing recession right now,” Robert Dietz, chief economist at the National Association of Home Builders, tells Politico. “After a year and a half of post-COVID housing strength, this isn’t just a retrenchment to a more normalized trend — this is definitely a weakening.”
RealtyHop ranks New York City housing as the third least affordable in the country, behind Miami and Los Angeles. The median list price here dropped to $900,000 in August, the third consecutive month when median home prices decreased compared to a year ago, when the city was enjoying a housing rebound.
“House prices were elevated going into this monetary policy change, and this is a big interest-rate shock we’re seeing,” Brian Coulton, chief economist at Fitch Ratings, tells Politico. “We’re heading into a monetary-tightening-driven slowdown, and housing is going to be affected by that more than the economy overall.”
How severe will this housing recession be? No one knows for sure, but in a note Tuesday warning that the housing market has “further to fall,” Goldman Sachs economists predicted that home price growth would “slow sharply in the next couple quarters” and fall to 0% in 2023.
And how long will the recession last? “Things are going to turn around probably sometime next year," predicts Daryl Fairweather, chief economist at the brokerage Redfin. "But I’m not sure how positive a turnaround it will be — if it’s going to come back full steam or it’s going to be a lackluster recovery because of the economic backdrop." She adds that after years of historically low interest rates, something had to give: "It was just a couple months ago the housing market was in danger of overheating. This is definitely a necessary evil, in a way.”
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