This is YoY Q1 for NYC. I’d be curious whether this holds for the first half of the year. Likely no. Bay Area prices are also expected to fall due to market volatility.
I think the reason for this is pretty intuitive: more expensive (NYC/Bay Area) homes are purchased by high income people. And higher incomes are more affected by the stock market because high comps are composed of higher % stock. Someone making 200k might have 20% stock. Someone making 600k might have 50% stock. So a 10% drop in stock market costs the first person 2% of their comp and the second person 5% of their comp.
1. Stock is mostly a tech thing, which is a smaller percentage of NYC home buyers.
2. Real estate is a safe haven asset to put capital into. In uncertain markets some buyers will choose real estate over stock or other more risky investments. NYC real estate is a highly valued asset globally.
3. Real estate prices in prime global locations (London, Dubai, NYC) are determined more by global liquidity than by local wages.
4. Recessions often impact real estate prices less than stock prices. 2007 was an outlier because of how many defaults occurred in real estate. In general the mortgages today are much stronger than before.
5. If mortgage rates decrease then that would have upwards pressure on housing valuations.
EDIT: Prices might come down, but I wouldn't expect fantastic bargains in NYC.
I live and own in NYC. Stock is very much also a part of comp in finance as well (I’m not in it, but my wife is).
I think you are spot on that prices will come down slightly (bonus pools will drop and that matters) but NYC real estate is rarely a bargain (or at least hasn’t been since 1998).
2009 - 2013 there were some good bargains in LIC and other areas. It will take a major recession to see some prices come down again to some reasonable level.
Also, I wonder what the volume of transactions is. Because I see little inventory (I was looking into Brooklyn), and perhaps only new construction is selling, which means it skews prices higher (new construction is always more expensive).
While the bigger investment banks pay mostly stock at the higher comp levels, most everyone depends on salary and, or course, bonus. In the highly paid buy side trading firms, bonus is your salary or multiples. No doubt people buy into the stock market with that.
So your analysis about stock market performance and the housing market isn't completely off, when it comes to NYC. You just need to compare the Bay Area and Mag 7 type performance with NYC and S&P performance.
The job market, too. It's confusing, it seems like there's not as much selling or buying as in boom times, because of uncertainty (at least anecdotally). The median price is meaningless if the number of sales is down.
I think the reason for this is pretty intuitive: more expensive (NYC/Bay Area) homes are purchased by high income people. And higher incomes are more affected by the stock market because high comps are composed of higher % stock. Someone making 200k might have 20% stock. Someone making 600k might have 50% stock. So a 10% drop in stock market costs the first person 2% of their comp and the second person 5% of their comp.