With the Fed announcing that they will be holding off on any rate hikes in the near future, we expect to see many buyers that have been on the fence start to pull the trigger. These buyers have been driven by the idea that as rates go up, prices must come down, and they should continue to hold out for a better deal to come along. This combined with hot equity markets should lead to more pending sales.
Construction Costs Continue to Rise New York City’s construction costs have increased from 2017 to 2018 by approximately 5% (about twice the rate of inflation). Nationally construction costs have risen by 3% to 4%, and similar to New York City has been on an incline since 2010. New York average construction costs (noted as high estimates) for Class A office space were $575 per square foot, with Boston at $475, Chicago at $450, Washington, DC at $425, LA at $350, San Francisco at $330, and Denver at $255 per square foot.
Residential construction spending was up 3.4% during the month, and was 0.6% higher for the year.
New Yorkers Fleeing to Florida Florida had the highest level of net domestic migration from July 2017 to July 2018, according to U.S. Census data released in December. New York State had the largest overall population decline, followed by Illinois. Florida also has been steadily creating jobs in recent years, gaining 231,000 jobs in 2018, a 2.7% increase over the previous year, and bringing the unemployment rate down to 3.3% in December. New York Gov. Andrew Cuomo blamed a $2.3 billion state shortfall on the new federal tax law that he said is driving people to leave New York state.
The Affluent Have Been Renting and Forego Building Equity The affluent are increasingly renting, according to multiple studies. Renters earning $150,000 or more per year were the fastest-growing group of renters. Between 2007 and 2017, top-earning renters increased by 175%, while homeowners within the same income bracket exhibited a 67% growth rate. Out of the 43.3 million renters nationwide, 2.1 million are top earners according to the latest available U.S. Census data. Back in 2007, there were only 774,000 high-income renters. Since 2008, the average size of a newly-built rental apartment has shrunk by 52 square feet, or 5%, to 941 square feet. Apartments have become much more expensive to rent — the average price has risen 28% over the last 10 years to $1,944. That equates to $700,000 over a 30 year period if rent prices stay the same.....$1,944 per month jumps to over $2,600/month simply applying 1% inflation rent hikes annually.....or $815,000. With nothing to show for it - zero equity - at the end of the day.
Amazon Pulls Out of NYC - Amazon has canceled their plans to build their Corporate Campus in Long Island City. There was fierce opposition by the local community about Amazon coming into the neighborhood. I am sure there were several pros and cons about Amazon building a community in this neighborhood. This news raises several questions.
1. what effect does this have on the local real estate market in Queens (Astoria, LIC, Sunnyside)
2. what effect does this have on other large companies considering calling NYC home? If the largest retailer in the world couldnt make it happen, who can?
3. and perhaps most importantly, what will NYC do with the $3 Billion Dollars in subsidies that Amazon was in line to receive? If you are NYC resident, do you think these funds should be used to improve the MTA? We would love to hear from you and what your thoughts are on this.