The Future of Manhattan Real Estate

February 19, 2018 | By Evan Paliotta

I must preface this piece with a disclaimer.  I am no Nostradamus, or soothsayer.  What follows is an educated guess grounded in the current information at hand.  Outcomes will vary based on neighborhood and price range.  My predictions will probably not happen…but it very well could.


Manhattan real estate is like gold; a stable long-term store of value.  Even in the aftermath of the 2008 financial crisis, the aggregate Manhattan real estate market briefly dipped and subsequently recovered at a rapid pace.  Today prices supersede their pre-recession highs.  

But why is this the case?  The short answer is that monetary policy acts with a lag.  When the Federal Reserve attempted to combat the effects of the recession by pumping 3+ trillion dollars of liquidity into the economy along with keeping interest rates at 0 for roughly 7 years, we are now seeing those actions unveil themselves via inflated asset prices (mainly stocks and real estate).

Along with political explanations for higher real estate prices, there are also demographic reasons.  There is a growing trend of people (predominantly young and vigorous individuals) fleeing the rural environments in favor of urban settings.  This trend creates a greater demand for living space.  Using basic supply and demand metrics, we know that when demand goes up, price goes up.  Usually the supply increases to offset the greater demand, however most of the land in Manhattan is already being utilized.  We can still build up but many of these structures are luxury apartment buildings and many of the newcomers don’t have a few hundred thousand dollars lying around for a 10-20% down payment.  Many move into the city to create opportunities for themselves, not merely to post up and enjoy their leisure time with their millions (although some certainly do).  

Let me be clear I hate swimming with the tide.  I deliberately try to swim against it but only when my faculty of reason permits me to do so.   When it comes to Manhattan real estate prices, I cannot contest and therefore I must concede.  With excess money printing shooting up asset prices, greater demand for homes, and little likelihood of increasing the supply of reasonably priced homes, all signs point to higher real estate prices in the years to come.  All we can do is wait and see.




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