Month: July 2018

The second quarter of 2018 saw a wave of new inventory hitting the market that we have not seen anytime this decade. May saw over 2,300 apartments hit the market in Manhattan, which was the third consecutive month that the amount of new monthly supply hit a record this decade. The chart below shows how much of an inventory surge we’ve had this second quarter when compared to previous years. A very high accretion of apartments is accumulating on the market without demand to match it.

Most co-op price points had more inventory on the market when compared to any other point this decade. Most neighborhoods continue to show big inventory gains. A focal point in the inventory is the amount of co-op listings available at the less than $1 million price point compared to one year ago in many neighborhoods.

The only price point that had a favorable spring in Manhattan when compared to one year ago is the condo $10 million plus market. Twenty-two contracts were signed in this group, which is the highest amount since May of 2016. The December 2017 tax law has been reported to give a big tax break to owners and investors in many types of businesses.

While supply has increased at a steep incline, the amount of demand in the marketplace has decreased. Demand has fallen with approximately one in five Manhattan listings showing consistent zero open house attendance during the spring market. Brooklyn units though continue to attract sizable open house crowds than their Manhattan counterparts.

The charts below show just how challenging this market is for condo and co-op owners in Manhattan. Now, just one in every ten condo listings is going into contract. That is the lowest for any March, April, May or June this decade and is far cry from the spring of 2013 when three out of ten condos were going into contract.

While the co-op market had held up better than its condo counterpart throughout 2016 and 2017, the weakness in the market has clearly affected co-op’s as June showed approximately 16% of co-op listings going into contract. It was only back in April 2015 that approximately 35% of co-op listings were going into contract.

Per the Wall Street Journal, apartment sales in Manhattan dipped 10.8% year-over-year in the second quarter. This is yet another sign that the residential market is still in the midst of a correction. In addition, industry market reports show the sales volume dropping to its lowest level in almost nine years. It’s clear that the federal tax law limiting deductions to $10,000 for state and local property taxes has been a major contributor to the decline in demand along with daily economic and political news that has created anxiousness among buyers.

Buyers have plenty of options in the marketplace and only a conservatively priced apartment will sell. The pendulum has had a clear shift towards buyers and sellers should be very careful of brokers who are basing pricing on prices from a year to eighteen months ago. Furthermore, with interest rates expected to rise in the second half of the year and an unclear direction of the national economy, demand that is shown in contracts signed risks further year over year declines.

Seasonality Back in Play

After a slow first quarter, seasonality came into play during the second quarter. The amount of concessions being offered in May is less than half of what was being offered in February. By timing seasonality, landlords and investors can be looking at a couple hundred dollars more per month. The rental market is showing signs of a slight and maybe temporary upward momentum in pricing. While seasonality is big part of this improvement, it is also likely due to buyer uncertainty in the sales market.

With another 10,000 rental units under construction and 27,000 more in the planning stages, the rental market will continue to have a high amount of concessions during the non-peak months.

Condo investors continue to add residential real estate to their portfolios in NYC on a stake that the property’s value plus rent has nowhere to go but up as the percentage of condos listed for rent within six months of purchase has more than doubled since the beginning of the decade. Even with recent lagging in the sales and rental market, NYC properties still make a great long-term investment.