Sales Market Update: A Tale of Two Cities
2015 was a year of different stories based upon price point, but the primary drivers of the sales market were local residents. This was reflected in the strength of the $2.5 million and under marketplace. At this level many properties still received multiple bids as demand outstripped supply, and as long as it has a strong price-per-square relationship to other listings, it sold quickly. The listing supply* for these units is around 2 to 3 months throughout the city. This should continue throughout 2016 as the needs of the ever-increasing professional class are not being addressed by super costly new construction, and as interest rates remain very low.
The equilibrium of the market is between $2.5 and $5 million. This segment of the market is still very active, but the pace of sales has slowed while inventory has increased.
The super luxury market will continue to grow with new inventory, but this inventory will linger on the market without price cuts or realistic developers. There is currently a listing supply of more than 40 months for condos priced over $10 million, and this number is expected to grow with the diminishing worldwide buyer pool.
Days on the market and the volatility index shows the divide between these different asset classes. The higher the volatility index number the more power the buyer has in this market.
Overall, buyers will have more leverage in 2016 than they had last year, and sellers will need to be more careful about pricing. The reality is the market hit a peak around 6 months ago. Last summer, I mentioned the best indicator of major disruption in the NYC residential market would be the fall of pending sales. This is what has happened as pending sales are almost back to levels that haven’t been seen in 5 years. I expect the gap between realistic and unrealistic sellers to grow as realistic and motivated sellers adapt to the new pricing dynamics quickly. More buyers will ask for contingencies and they will take longer to make decisions.
*Listing supply is defined as the number of listings absorbed within a marketplace in a particular period of time. So a listing supply of 6 months means that there is enough property available on the market to satisfy 6 months of normal demand. Most experts agree that a listing supply of 6-8 months is healthy.
Rental Market Update
The January 2016 Manhattan rental market was the softest in years as the amount of concessions (1-Month Free or No Broker Fee) reached a 5-year high. The latest data from Jonathan Miller, President and CEO of real estate appraisal and consulting firm Miller Samuel Inc., showed that concessions nearly doubled to 16% when compared to 8.5% a year earlier. Additionally, the vacancy rate rose to nearly 3% versus %2.4 in January 2015. Inventory jumping 11% from the year before also contributed to the upward pressure in the amount of concessions, and I expect this number to continue rising before rents begin to drop.
New York also seems to be maintaining it’s second place ranking as the most expensive US city for rents behind San Francisco.
