The number of homes along the route begins to increase as NY 38 approaches the village of Newark Valley. Just south of the village limits, NY 38 intersects NY 38B, a spur leading to NY 26 in Maine. The route continues into the small village as South Main Street and passes by several blocks of homes and commercial buildings. At Water Street, NY 38 becomes North Main Street; however, from this point north, most of the village is situated on the opposite bank of Owego Creek. As a result, NY 38 continues through the village limits but passes very few buildings before seamlessly exiting the community and entering another rural area.