New York City’s housing market has largely recovered from the financial crisis of 2008, but that doesn’t necessarily mean that buying a home here is, in the long run, a good investment. That’s the conclusion from a new report by StreetEasy, which looks at how home values in the city have changed in the 10 years since the Great Recession.
Even though New York was hit particularly hard by the crisis, the recovery has been relatively swift, and strong: According to StreetEasy’s research, more than 450,000 home sales have been recorded since the 2008 crisis, with the total value exceeding $400 billion. No doubt that a rash of expensive sales has contributed to that—the first NYC home sale exceeding $100 million did close in 2015, after all—but smaller sales with modest gains are more the norm, per StreetEasy’s data.
Additionally, home values have overall gone up since the post-crisis low of November 2011; StreetEasy found that those have risen by a whopping 30 percent in the past seven years, at an average of nearly four percent per year.
But even with such a strong recovery, StreetEasy’s senior economist Grant Long cautions against buying into the notion that real estate is always a solid investment. “Stories of massive financial windfalls among buyers who managed to time the recovery from the 2008 financial crisis can tempt others into believing that owning a home in the city will always be profitable,” Long said in a statement. “But a closer look at the numbers shows that it’s not always easy to make money on real estate in New York City, particularly when there are so many other investment options out there.”
According to the report, investing in the S&P 500 would have been far more lucrative over the past few years; its value has more than doubled since the crash, and would have provided a larger return on investment than, say, buying an apartment and hoping its value would increase.
And as the report notes, timing is everything: “Only half of those who bought in the two-year period leading up to the collapse of Lehman Brothers and have since resold earned the 10 percent necessary to offset the costs of buying and selling,” per the report, and those who bought pre-crisis fared particularly poorly.
If you’re looking to buy a home right now with the intent of using it as a primary residence, you may be in luck: There are now more homes than ever currently for sale in New York City, according to StreetEasy’s data; prices are falling; and there’s a solid chance that those looking to sell won’t get the prices that they’re seeking.
But for those who merely invest in the market, treating it like a real-life game of Monopoly, there are probably better options. “The fact is that for those looking for an investment rather than a home, a range of other financial opportunities offer greater income, a better historical track record, deeper liquidity, lower transaction costs, and far fewer headaches than buying a New York City apartment,” per the report.