2024 Real Estate Law & Market Recap
The real estate industry has had quite a few significant developments this year. Below are some of the key events of 2024:
1. Settlement Agreement & Practice Changes
In March, the National Association of Realtors settled a lawsuit by agreeing to pay $418 million in damages and revising longstanding rules regarding broker commissions. These changes were implemented in August and aim to increase transparency in commission practices. The settlement is expected to prompt other real estate associations to adopt similar practices, particularly regarding clear disclosures about commissions.
2. PCDA Changes
As of March, a new law requires homeowners to provide prospective buyers with a completed property disclosure form. This is due before signing a purchase contract for residential real estate, although it excludes co-ops, condos and properties in HOAs that aren’t owned in fee simple by the seller. Sellers are also no longer permitted to waive this requirement by offering a $500 credit at closing. Disclosures must reflect the seller’s actual knowledge, but do not require further investigation of the property.
3. Transfer on Death Deeds (TODDs)
As of July 2024, Section 424 was added to the Real Property Law, introducing the Transfer on Death Deeds in New York. This new provision allows property owners to designate a beneficiary who will inherit their real property automatically upon the owner’s death, thereby bypassing the probate process. This simplifies estate planning, reduces costs and provides certainty for individuals whose primary residence is their main asset.
4. Challenging Housing Market Conditions
The 2024 housing market has been difficult for real estate market participants looking for affordable housing due to high interest rates, which appears to have kept home prices elevated and housing inventory low.
Housing demand remains strong, particularly for affordable units, yet there’s an inadequate supply. This is made worse by high interest rates, which have made once-affordable housing now out of reach for many due to increasing borrowing costs.
The lower housing supply is due, in part, to existing homeowners experiencing the “lock-in mortgage effect,” in which they’re hesitant to sell their homes and trade their sub-5% mortgage rates for rates exceeding 7%. According to various studies, most current homeowners hold mortgage rates below 5%. In fact, one Realtor.com study revealed that 74.6% of homeowners had rates below 5% and 84.2% had rates of less than 6%. This dynamic significantly restricts housing supply despite strong demand for affordable housing.
Developers are similarly constrained by high borrowing costs, which have contributed to the lower housing supply. Specifically, high interest rates have suppressed new real estate developments because developers rely heavily on financing.
5. “City of Yes” Approved
On December 5, the New York City Council passed the modified “City of Yes” proposal from New York City Mayor, Eric Adams’, which is aimed at addressing the city’s housing crisis.
This zoning reform is expected to lead to the construction of up to 80,000 new housing units throughout the next 15 years (down from the 109,000 new housing units envision in the original plan). It also includes $5 billion in investments in housing infrastructure, such as sewers and flood mitigation and public spaces.
Notable aspects of the updated plan include:
- Allowing mid-rise housing (three to five stories) near certain transit hubs.
- Facilitating accessory dwelling units (ADUs) with restrictions in areas prone to flooding or with single family zoning.
- Allocating 20% of units in new medium- and high-density developments for affordable housing at specific income thresholds.
- A three-tiered system for parking mandates based on neighborhood characteristics.
- Easing constrictions around the conversion of offices and other non-residential buildings into housing.
