The pace of sales further slowed in the third quarter while inventory continued to increase in most property categories, but the market is still quite price-sensitive. The market below $1.5 million continues to be healthy as well-priced apartments for families or entry level studios and one bedrooms continue to be quite popular. However, the other segments of the market are showing a major lack of urgency among buyers. If a listing is priced incorrectly, a seller can go weeks without a showing as there is still a disconnect between what buyers are willing to pay and what sellers are willing to sell. Sellers who do not price precisely risk being irrelevant in the market.
According to Miller Samuel, only 17.4% of residential sales in the third quarter of 2016 were above the listing price compared to 31% at the same time last year. Most of these bidding wars are taking place in the under $2 million market. Inventory rose 8.2% during this period while signed contracts fell 18.4%. All of these factors together point to a softened market.
Reasons for this lagging market range from a highly polarizing 2016 presidential election, an unsteady US stock market, the fallout from Brexit, turbulence in the Eurozone, a slower Chinese economy, lower oil prices softening demand from Russia and the Middle East, and Latin America recessions.
However, the current weakness does present a real opportunity for buyers as we very well could be in the floor of the current market and an opportunity does exist for a more active market in the first quarter of 2017.
There is remarkable weakness in the luxury rental market (top 10% of the market which is approximately $6,500 and up) as we are seeing rents dropping 10-20% from what they had received previously. There have been a lot of high quality new construction luxury rentals that have hit the market and there are fewer tenants for this type of rental than a few years ago. Less expensive units remain in high demand, but the rest of the fall and winter will feature a lot more owner pay rentals on the market compared to one year ago. On a national scale, New York City has maintained its status as second highest in the US with average rents.
Q: When buying a condo for an investment, what are some unseen factors that will affect its investment potential?
A: It’s important to take a look at the building’s sublet application. A building with high application, processing and move in fees will turn off renters. In addition, certain buildings can have different pet restrictions and amenity access to renters.
Q: When buying a home, why does a real estate appraisal matter?
A: If the appraised value of the home is lower than the purchase price, you will need to make up the difference in cash. This can affect your amount of liquidity post-closing which can make a difference in passing the co-op board.
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