According to Miller Samuel Inc., Manhattan sales in the first quarter of 2018 dropped 24.6% from a year earlier, which represents the lowest number of sales for a quarter in over six years.
Courtesy of Miller Samuel Inc.
The primary driver of this drop can be attributed to the nation’s new tax law, which contains the loss of state and local income tax (SALT) deductions. February and March continued to feature newsworthy events consumed with questions about Cyber Security, effect of Russian hacking on our presidential election and volatility in the stock market. All of these factors added up to uncertainty in the marketplace, which was reflected in hesitant buyers. One additional factor that may have led to decreased contracts signed in March is the impact of four business days being lost to Nor’easters.
A strong bonus season in the financial services industry is usually reflected in increasing contracts signed. The New York State comptroller’s office stated in March that investment banks handed out $31.4 billion in bonuses, which is a jump of 17% from a year earlier. However, an increasingly willingness on banks to give bonuses in the form of deferred payments and stock with a vesting period represents illiquid compensation that cannot be presently used to purchase a residence.
Courtesy of Miller Samuel Inc.
While economic fundamentals are still strong, there will be downward pressure on prices as inventory continues to increase. There is an accretion of apartments on the market due to the price discrepancy between buyers and sellers. Many sellers are reducing prices as price discounts are very common these days but a price discount cannot generate the same amount of interest as if it were a new listing. Prices have stopped going up except for parts of Brooklyn that are further south and east and parts of Queens that are further east.
For buyers this is a very favorable market. In time, sellers will become more realistic with pricing and a new equilibrium will hit the market. NYC real estate still represents a great long-term investment.
The rental market across Manhattan, Brooklyn and northwest Queens is still inundated with near level records of concessions. Rental concessions in the marketplace continue to show a soft market. Rental inventory in Brooklyn showed that a new record level of concessions took place in February as 47.5% of listings had a concession. This is way up from February 2017 when roughly 18% of listings contained a concession.
Courtesy of Miller Samuel Inc.
With roughly 6,100 units this year and about 9,600 units rental units next year expected to hit the market in Brooklyn, there is no upcoming end for this high concession rental market. Meanwhile, Williamsburg and Greenpoint are clearly showing the affects of the looming L train shutdown as rents dropped for the seventh consecutive month.
Seasonality continues to play a major part in the New York City market as NYC has high variance in rental prices depending upon the month. Renters are advised to look for an apartment in the winter while it is recommended that landlords and condo owners contain leases that expire in the summer months to get the most favorable terms.
Courtesy of RENTHOP