The Tough Part

Last week, I started a three-part year-end wrap-up on the big wins and challenges from 2023 and what we can expect in 2024. Last week, I wrote about The Upside.

This week, I am reviewing the most significant challenges we faced this year in the New York City housing market. None of these are a surprise, and all of these will follow us into next year. There are no simple or straightforward answers, but it doesn't mean we should stop trying to find them.

Housing Crisis:??Our city is desperate for more affordable housing, and when I say this, I do not mean low-income housing. I mean housing affordable to those with a healthy middle-class income. The reason why this doesn’t exist in New York is multi-faceted. The land is still too expensive for a developer to build that type of housing and make a profit. Construction costs, financing costs, permitting fees, and antiquated zoning regulations only compound the problem. The only solution here would be robust public-private initiatives that offset some of the costs for developers and coordinated efforts to adjust old regulations. The alternative is more of what we have: housing for the very rich or the very poor, and the people who are the heartbeat of the city - artists, actors, teachers, firefighters, shopkeepers, etc. will have no place here. They barely do now, and it shows.

City Services:??City services have not seen the bounce back they hoped for after COVID. Again, the reasons are complicated. Lack of political will and concentrated funding, an influx of asylum seekers stretching what money there is even thinner, and the continued fallout from drug and mental health crises. There are a lot of problems and not enough money or know-how to fix them. The tax revenue lost due to people and businesses leaving the city has exacerbated an already challenging situation. Strong, experienced leadership is the only way through this, and I don't see that on the horizon.

Mortgage rates:??High mortgage rates were the death knell for many in this year's $1-3M range. These buyers were simply the victims of bad timing. After years of historically low-interest rates, the influx of government cash into the economy during COVID had its day of reckoning. Basic economics tells you that cheap money brings inflation and that inflation is brought down by making that money not so cheap - interest rate hikes, which are, of course, tied to mortgage rates. Inventory is low, mainly because sellers are not moving as they can't afford to move. So those people selling right now are selling because they NEED to sell, and buyers are in the driver's seat - if they can afford it, and that depends on the mortgage rates. It was a vicious cycle if there ever was one. Good news - we are already seeing mortgage rates drop, and with the Fed promising more interest rate drops next year, it should create more movement.

The good news is that these issues are all fixable, but it won't be easy. We will need strong leadership to pull it off., but New York has weathered far worse storms, and I have no doubt it will move past these as well.

Side Bar:

Every week, I have at least one person reach out to me to ask me exactly what ?“Padkos” means. ?If you look in the dictionary, it’ll tell you that it’s an Afrikaans expression (derived from Dutch) that means “African snacks or provisions for a journey”. I always get a smile out of hearing Americans say the Afrikaans word “Padkos”. My objective for this newsletter remains to give the reader some “food for thought along the way” as we navigate life in New York and the real estate market.

Let’s do this!

Shaun