While many buyers in this market are sitting on the sidelines waiting to see what will happen next, others are finding opportunities: to become first-time home buyers, to take advantage of low-interest rates, and even the chance to upgrade to larger homes. This month we wanted to take some time to discuss why certain people feel this is an opportune time to buy and where they see value in the market.
What Amazon Means for Nyc Real Estate. With Amazon’s announcement that it will split its second headquarters with Long Island City, the future of Queen's real estate looks a lot different than it did just a few weeks ago. The WSJ is already reporting a ‘cono frenzy’ in LIC and we expect to see the area outperform the rest of the NYC market in the months to come. In addition to LIC, we expect neighboring areas like Greenpoint, Sunnyside, Astoria, and areas in Manhattan with easy commutes to do well.
A Great Time to Upgrade. Many sellers and buyers view each real estate transaction individually rather than looking at the big picture. For example, say you live in a $2M two-bedroom and have been wanting to make the move to a $3M three bedroom. If the market is down 15%, then you’d have to sell your home for $1.7M — but you can buy your new $3M home for $2.55M, netting you a savings of $150,000. By waiting for the market to go up by 15% and selling your home for $2.3M, your new $3M home will now cost $3.45M, netting you a loss of $150,000. This mentality paired with historically low-interest rates makes it a fantastic time for an upgrade.
Rising Inflation to Move Home Prices Higher. Apple product prices are going up. Airlines are paying about 40% more for fuel than a year ago and raising fares. Trucking costs are up 7% annually. U.S. manufacturers are paying roughly 8% more for aluminum, 38% more for steel. 15% more for Chinese-made quartz countertops, 10% more for imported cabinets because of tariffs, than a year ago. Paint supplier Sherwin-Williams raised prices in its own stores up to 6% in October. A Big Mac costs 4.7% more and a Domino’s Pizza 5.9% more. “They,” say inflation is around 2% but is that accurate?
The latest round of US tariffs has hit about $10 billion worth of Chinese products exclusive to home building and remodeling, according to the National Association of Home Builders. The tariff starts at 10% but could rise to 25% by the end of the year. That would be equivalent to a $2.5 billion tax increase on the industry. Homebuilding inflation is rising, which makes replacement costs higher. We are already hearing from contractors that we work closely with that the cost of plumbing supplies imported by China has gone up 15-20% over the last three weeks.
Inflation could be good for maintaining valuations of real estate and investors looking to protect themselves can find shelter in real estate.
We hope you and your family have a very happy Thanksgiving.