Issue 113 – Where is the Real Estate Market Heading? The Big Questions

As we head into fall, I am often asked about where the real estate market is heading. This year, numerous competing issues are making it difficult for me to predict exactly what will unfold. The spotty movements of this past summer raise some very big questions that we need to have answered before knowing how everything will shake out.

In general, since the pandemic, people generally value their downtime much more. Summer is a time of respite for many, eager to take a break from the stress and intensity of work—and news of all the executive orders, proposed legislation, global politics, and world wars.

Post-pandemic demand for real estate was fueled by one of the biggest run-ups in history, resulting in the typical selling times for property no longer existing and being seasonally defined. However, inflation and mortgage rate hikes have forced people to wait on the sidelines.

I think many sellers are hoping that the president’s consideration of eliminating the capital gains tax may provide a significant opportunity for those who have been sitting on properties for decades to reap a solid return on their investment.  

As such, it would allow them to cultivate true wealth creation by saving on considerably high capital gains, which in turn becomes the catalyst for people to be able to buy and sell with a higher profit. As with all political maneuvers, it remains to be seen how this will ultimately play out.

CNBC breaks it down this way:  

  • Under current law, property sales are subject to capital gains taxes once profits exceed $250,000 for single filers or $500,000 for married couples filing jointly.
  • Since 1997, those thresholds have never been indexed for inflation, and more home sales are subject to capital gains as property values rise.

“Homeowners who have lived in a home as their primary residence for at least 24 months in the five years before the sale receive an exemption on the first $250,000 of gains for individuals and $500,000 for married couples filing jointly,” Newsweek reports.

The National Association of REALTORS’ research has found that nearly 29 million homeowners, roughly one-third of the market, already face potential capital gains taxes if they sell, “and that number is expected to climb sharply over the next decade.”

“These tax burdens create a ‘lock-in effect,’ especially for seniors, discouraging people from selling and keeping much-needed homes off the market,” Newsweek summarizes.

This proposal aside, at the end of the day, we are dealing with a much more fundamental issue in NYC: the mayoral race. Until it is decided who is elected, we won’t know what is going to happen here, especially whether the potential new legislature could lean towards socialism or capitalism. Ultimately, who is in power will determine how the city values real estate as an asset.

If the Democratic nominee, Zohran Mamdani, wins the election, potential real estate impacts involve rent stabilization and affordability, such as a rent freeze for rent-stabilized apartments. This could potentially disincentivize property owners from investing in maintenance and improvements, impacting the quality of NYC housing stock.

Mamdani also claims to want to invest in 200,000 publicly subsidized affordable housing units over a 10-year period. Some experts suggest this large-scale construction effort would be wrought with challenges.

More importantly, according to CNN, Mamdani’s real estate proposals are sending jitters through the NYC luxury real estate market. His proposed “millionaire tax” would prompt luxury home buyers and owners to consider moving out of state, which could significantly impact this market segment. Additionally, developers and investors would also face reduced incentives.

Fox Business concurs, citing a real estate expert who reports, “Consumers are taking a step back to wait and see how this plays out, because if a socialist is elected mayor of New York City, I don’t think it’s going to be good for the long-term health of our local economy and the real estate industry.”

While Andrew Cuomo and current mayor Eric Adams are still duking it out as NYC’s independent frontrunners, a win for Cuomo would ostensibly mean prioritizing and streamlining development processes, potentially leading to faster approvals and fewer regulatory roadblocks. He is also a proponent of zoning changes, which can lead to gentrification in some areas. As such, Politico suggests the well-heeled industry is rallying around his bid for mayor.

And lastly, if Adams secures a win, he would likely continue to keep housing supply a central focus, particularly with his “City of Yes” initiative, which aims to build up to 80,000 new homes in 15 years, and his “Manhattan Plan” to add 100,000 new homes in that borough over the next decade. Like Cuomo, his plans would include zoning changes, massive conversions, and encouraging development around transit hubs. Adams also supports allowing accessory dwelling units (ADUs) and eliminating parking mandates for new construction to facilitate the creation of housing. According to a NY1 segment this summer, “Mayor Eric Adams may be the new favorite candidate of the city’s business and real estate community.”

If Adams is successful in increasing housing supply and affordability, he could possibly slow the rapid real estate appreciation NYC has seen lately, especially in the luxury market, according to NY1. “Some wealthy New Yorkers have expressed concerns about potential tax increases or changes in policy under a different administration, potentially accelerating their plans to move outside of NYC.”

Lastly, the Republican candidate, Curtis Sliwa, would likely modify or repeal Adams’ “City of Yes” initiative and revert zoning to its previous state. This could mean a slowdown or halt to development projects already in motion and deter others from starting at all.

Sliwa does suggest ending unfair property tax increases on working-class owners and forcing large corporate landlords to pay more. He might also repeal the 2019 laws targeted at rent-stabilized landlords.

According to the New York Post, in essence, “a Sliwa victory could lead to a shift in real estate priorities, with a stronger emphasis on local zoning control, fair taxation for homeowners and renters, and the revitalization of existing housing stock, possibly impacting large-scale development and corporate real estate interests.” 

As we watch all this play out, eager buyers and sellers are sitting on the sidelines, ready to cast their lines once the direction of potential changes and local initiatives becomes clear. Only time will tell, but one thing is already clear: The real estate market in NYC is always a key focal point, not just locally, but nationally and globally. All eyes will be on NYC this fall, keen on seeing what transpires and how real estate experts guide clients to maximize their value.

Issue 127 – The Price Isn’t the Price

A new calculation is changing what a New York apartment is actually worth. For decades, NYC real estate has been obsessed with price per square foot. However, now we may be entering the era of cost per year.

Consider two apartments of the same size, price, amenities, light, view, and location. If one has $6,000 in carrying costs and the other $11,000, are they really worth the same amount?

Increasingly, I would argue they are not because buyers aren’t simply purchasing apartments anymore. They are purchasing the economics of the buildings they’re in, which are starting to matter enormously. Think: insurance, labor, utilities, repairs, taxes, assessments, energy compliance, staffing, capital improvements, and reserves. While monumentally important, none of these photograph well, but all determine whether an apartment is easy to own — and eventually sell.

We have always understood that certain characteristics affect value: a lower floor trades differently from a higher one, an awkward layout matters, a protected view commands a premium, and poor light equals a discount. However, I contend another discount is related to the aforementioned carrying costs.

The sexiest amenity in New York real estate may soon be a healthy balance sheet. That sounds less exciting than a lap pool, unless you are the one writing the checks. Operating costs in New York have been rising, putting pressure on building budgets and making previously deferred capital projects harder to ignore.

The 2026 New York City Price Index of Operating Costs — which tracks expenses for the city’s rent-stabilized building stock — illustrates the broader pressure. Over the five years through 2026, insurance costs in that index increased more than 80%. Maintenance increased 29%, utilities more than 26%, administrative costs more than 21%, and labor nearly 16%.

Those figures aren’t a direct proxy for every condominium or cooperative in Manhattan. But they illustrate something anyone involved in operating New York buildings already understands: buildings are getting more expensive to run.

One mistake buyers can make is falling in love with the apartment and treating the building as secondary. In New York, you aren’t just buying four walls; you’re buying into a small economy. You’re inheriting its management decisions, staffing structure, physical plant, reserve philosophy, insurance exposure, and capital planning.

A building that deferred maintenance may appear inexpensive today because it hasn’t yet charged owners for the work it needs. That doesn’t necessarily make it inexpensive. It may mean the bill hasn’t arrived yet. Conversely, a building that recently completed an expensive façade project, replaced major mechanical systems, or invested in energy efficiency may initially appear less attractive because owners have already absorbed those costs. We need to consider which building presents the greater risk over the next decade. The answer isn’t always obvious from the monthly maintenance number.

Buyers understandably love low carrying costs, and brokers value them because they make a property easy to market. But low monthly charges deserve as much scrutiny as high ones. A good broker asks: Why are they low? Is the building extraordinarily well managed? Does it have other income? Are the reserves substantial? Or has the board resisted increasing common charges while postponing expensive work?

An important distinction exists between efficient and underfunded. A well-run building with appropriately funded reserves may ultimately be far more economical than one with artificially low monthly charges followed by recurring assessments. It’s not just the number that is meaningful, but the story behind it.

Few words cause more anxiety in a New York transaction than “assessment.” Even here, context matters because not every assessment is a red flag. An assessment financing a necessary capital improvement can actually strengthen the building. A new roof, elevators, façade work, upgraded mechanical systems, or energy improvements may protect long-term value.

The more important questions a sales pro considers are: What is the assessment for? Why didn’t reserves cover the expense? Is it part of a thoughtful capital plan or the latest in a recurring series of emergencies? And, perhaps most importantly, what comes next? A $500 monthly assessment with a clear end date concerns me considerably less than a building with no assessment, minimal reserves, and several million dollars of foreseeable work.

New York’s environmental requirements add another layer of complexity. Local Law 97 places emissions limits on many large buildings and creates increasingly stringent requirements over time. The encouraging news is that the overwhelming majority of covered privately-owned buildings are currently meeting the applicable limits.

But buyers should still understand what their particular building is facing; Has the Board commissioned the appropriate studies? What capital improvements may eventually be required? Has money been allocated? Is compliance incorporated into long-term planning? The concern isn’t whether a building faces a penalty today; it’s whether the building has a credible plan for tomorrow. That, increasingly, is part of due diligence.

New development creates its own version of this problem. Buyers are understandably attracted to pristine buildings with spectacular amenities and, sometimes, surprisingly reasonable initial common charges, but what will the building actually cost to operate when it is fully functioning?

Pools, spas, private dining rooms, screening rooms, landscaped terraces, playrooms, fitness centers, and mechanical systems all require staff, maintenance, and money long after the sales office closes.

The glossy brochure tells you what you’re getting. The budget tells you what you’re buying — both matter.

This conversation also requires nuance when comparing co-ops and condos. A co-op’s maintenance can initially look dramatically higher because it often incorporates expenses that a condo owner pays separately, including the shareholder’s proportionate share of the building’s real estate taxes. A condo may show a lower common-charge number while property taxes sit alongside it.

So, comparing maintenance to common charges without understanding what each includes is meaningless. The correct question isn’t: Which monthly number is lower? It is: What is my total cost of ownership, and what am I receiving in return? I believe strong building economics will increasingly become an amenity in their own right.

Brokers spend an immense amount of time learning how to talk about marble, appliances, ceiling heights, views, and finishes. We should be equally capable of explaining the financial health of the building we’re selling, because that is a big part of valuation.

None of this means price per square foot is irrelevant. It’s still an important metric. But like any metric, it becomes dangerous when used without context.

I’ve spent my career watching New York buyers pay premiums for things that cannot easily be replicated, including light, views, ceiling height, architecture, location, outdoor space, great proportions. But I always add another thing to the list: financial soundness. That may not command the same emotional response when someone walks through the front door. But increasingly, it may command something just as valuable – confidence, which matters in uncertain markets.

For years, we’ve asked buyers how much apartment they can afford. Now we need to start asking them how much building they can afford.  Because in New York, you don’t just buy the apartment — you inherit the economics beneath it.

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