Month: June 2017

Do Buyers Have Increased Power in the Residential Market During the Summer Months?

If buyers do have more power, then total signed contracts per inventory should dip from the spring season.

Looking at the average overall Manhattan numbers over the past four years, there was a decrease of approximately 3% of signed contracts per inventory for the summer months when compared to the spring months. Therefore, there is more buyer power in the market during the summer. (Buyer power means that buyers have more leverage over sellers when making offers and negotiating)

Was this increased buyer power apparent in all price points?

For the condo market under one million, the average numbers of condo contracts signed per inventory had a very minimal decrease. This segment of the market carries over more seller power than other segments from the spring.

However, the co-op under one million market features a more significant change as it decreased approximately 3% during July and August.

The one to two million condo market seemed to clearly be more affected by the summer market than its under one million counterpart.

Like its condo counterpart, the co-op market for one to two million market also showed more buyer power.

The two to five million market for condos also dropped approximately 2 to 3% during July and August.

For the co-op two to five million segment, more buyer power is apparent as the contracts signed per inventory fell approximately 5%.

Both condo and co-op markets for the five to ten million market also featured more buyer power with the average percentage of contracts signed per inventory dropping to less than 10% in August for both segments.

For the ten million plus market, while both condos and co-ops feature more buyer power there is more buyer power in co-ops than condos during July and August.

CONCLUSION: Looking at the past four years of the data there is certainly more buyer power to the market in the summer months than the spring. Therefore, for most price points it is favorable for sellers to list in the spring or the fall. The most favorable segment for sellers during July and August is the condo market under one million. This segment shows a negligible difference between listing the apartment in the spring or summer.

April and May are key months to see where the market is headed. While the trajectory for the market was very good approaching the spring season, there was softness in the spring numbers. While inventory slightly went up in April, contracts signed showed approximately a 14% decrease, which is an exceptionally deep decline for this period of the year. Therefore, contracts signed per inventory dropped below 20% for the first spring month in recent memory. (The lower the percentage for contracts signed per inventory the more buyer power there is in the market.) Overall, this spring market is showing slightly more buyer power than one year ago.

Data from UrbanDigs

However, upon further examination, the co-op market has been holding up very steady for sellers. The amount of contracts singed per inventory held firm from one year ago. While co-op inventory was up, the amount of contracts signed is basically level with one year ago.

Data from UrbanDigs

Therefore, this softness that we are seeing is predominantly coming from the condo market.  While condo inventory had approximately a 12% increase from the middle of March to middle of May, the amount of contracts signed in April fell 23% from March which represents an alarming number. However, the May numbers were much stronger than April for contracts signed so the condo market did end May with an overall uptick for sellers.

Nevertheless, the amount of contracts signed for condos in April and May was still down 20% from one year ago, while the average inventory for April and May was up 8% from last year. In addition, the contracts signed per inventory dropped below the 15% threshold for April and May. This is well below the low 20%’s to 30% during the low inventory years of 2013 to 2015. As such, buyers continue to have more overall power in the condo market when making offers compared to sellers.

Summary: If you are considering buying a condo, now maybe the perfect time to maximize your leverage with sellers due to increased supply and decreased demand. So while the co-op market is holding firm, there is a definite disturbance in the condo market.

 What is causing this disruption in the condo market?

1. New Development Inventory– Lots of inventory has been hitting the market in the past few years that has led to an oversupply at the 2 million plus price point. There was widespread construction after the last recession.
2. Lack of Demand– Buyers are becoming unwilling to pay sky high prices
3. Cooling of International Buyers– A large part of NYC condo market demand comes from other countries and there has been lackluster demand from the rest of the world.

Data from UrbanDigs

Next, I wanted to examine this buyer power by price point. I started with the under $1 million market and while there is more seller power than other price points, buyers are at a major advantage than one year ago with inventory up and contracts signed down.

Data from UrbanDigs

Starting with the $1 to $2 million is where we start seeing more of the softness plaguing the condo market. Contracts signed for this price point fell approximately 9% from March to May while the average inventory number climbed by close to 13% for this same period.

Data from UrbanDigs

The $2 to $5 million market is the lowest price point where we see increased new development inventory having an affect.  A figure of 9.6% of contracts signed per inventory is an entirely different market than 24.17% in April 2015. This is a market where buyers have a vast selection of inventory and have overall power when submitting offers. While April did feature a lot more buyer power than previous years, this segment of the market had a favorable May for sellers as it almost matched the amount of contracts signed as one year ago.

Data from UrbanDigs

Similar to the $2 to $5m market, the $5m to $10m market has increased inventory from new construction.  Inventory in this price range has increased approximately 33% from two years earlier while contracts signed has fallen by roughly 28% during this same period.

Data from UrbanDigs

Last but not least, the $10 million plus condo continues to show further weakness as contracts signed per inventory dropped for April and May 2017 when compared to a year earlier.

Data from UrbanDigs