NYC Housing Market Stays Pricey Amid Affordability Concerns

A report from the Beracha and Johnson Housing Ranking Index, a resource published by the American Real Estate Society, indicates that home prices in NYC are currently selling at a 10.0% premium on a nominal basis. The average home price stands at $709,880, significantly higher than the statistically modeled historical trend of $645,502.

However, a deeper look reveals a more nuanced picture. When adjusted for inflation, the premium drops to 3.96%, with the average price of $709,880 set against an expected price of $682,635. The Real Estate Initiative’s Top 100 Housing Markets report suggests the NYC housing market is not as severely out of balance as the nominal figures imply. Since January 2000, after adjusting for inflation, the typical NYC homeowner has seen an average annual appreciation rate of 0.76%.

For the city's renters, relief is also in short supply. The Waller, Weeks, and Johnson Rental Index, also published by the American Real Estate Society, reports an average rental premium of 5.96%. The report notes that while average rents saw a slight 0.07% decline last month, they are still up 5.25% year-over-year.

The disparity between ownership and renting adds another layer of complexity. The Price-to-Rent Report also from The Real Estate Initiative places NYC's price-to-rent ratio at $16.84 for every $1.00 of annual rent, slightly above the city's historical average of $16.56. This 1.69% premium suggests that, for now, renting offers a better value proposition than owning. Nevertheless, the current gross return for rental properties in NYC remains healthy at 5.93%.

Perhaps the most significant challenge is affordability. According to data from Stats America, the average annual pay per job in the NYC metro area is $122,133. However, the Waller, Weeks, and Johnson Rental Index reports that a household needs an annual income of $140,492 to afford the average rental unit. This gap indicates that typical annual incomes in the city fall short of covering average rental costs.

For those considering homeownership, the picture is also challenging. With the average home price at $709,880 and an average annual income per job of $122,133, the home price-to-annual income ratio for a single-earner household is 5.81. While a ratio of 3 to 5 is typically considered affordable, NYC’s metric hovers noticeably north of that range, suggesting that ownership remains barely within reach for some, and difficult for many.

Underpinning these affordability issues is the city's ongoing struggle with supply and demand. Data from the Population Estimate Program and American Community Survey reveals an average housing unit density of 2.86 people per unit, compared to the national average of 2.51. This higher density suggests that housing supply continues to lag demand, exacerbating market pressures.

With both homeownership and rentals transacting at premiums, and typical incomes failing to keep pace with housing costs, NYC's housing market is forecast to continue facing affordability issues.

On election eve for the mayor’s race, the future outcome for the housing market remains unclear.

*Crafted with assistance of Gemini AI.  Research, developed, vetted, and edited by Ken Johnson, Ph.D.

Ken Johnson, Ph.D.
Christie Kirkland Walker Chair of Real Estate
Ole Miss Real Estate Initiative
University of Mississippi