Month: September 2018

Welcome to my 2018 preview of the fall season for buying and selling real estate in NYC! Market reports and the media tend to be reactive, so I want to express some thoughts that are more predictive. Although apartments are bought and sold year round, the main buying and selling seasons in NYC are the fall and spring months. These two time periods give us the best indication of the market. As such, here are some thoughts about the fall market 2018:

Highest Amount of Inventory Available in Fall Market Since 2010

Manhattan inventory continued to go up rapidly during the spring months. The peak of the spring market was on June 24 with 7,326 apartments on the market. In most spring seasons, the peak of inventory takes place in May. The peak on June 24 represents a later than normal peak which speaks of the high amount of apartments languishing on the market. Inventory always decreases over the summer as there are fewer newer listings and many apartments are taken off the market until September.

At the end of August, inventory fell back down to 5,600. Last September and October featured a 22 percent increase in inventory. With a high number of apartments being taken off the market and listings moving onto a second, third or fourth broker there’s no reason to expect that the fall peak in inventory will closely resemble the spring peak that reached in June.

Based upon looking at historical data combined with the current economic environment, my projections for Manhattan inventory at the end of the following months are below:

Buyer’s Market Advantage Increasing

Year over year contracts signed was down slightly for the spring market compared to this same period for 2017. The amount of contracts signed is always lower in the fall months compared to the spring months. There are always buyers who want to buy in the spring in order to be settled for the fall school season so fall consistently has better contract signed numbers.

This past spring featured a buyer’s market across all price points in all neighborhoods. We have not seen since the beginning of the decade. With a number of listings similar to what’s typically seen in the spring market—but lower demand with contracts signed—this fall has the opportunity to be an even better market for buyers. Of the open houses held this spring, 20 percent consistently featured no attendees. Do any buyers who disappeared from the market come back into the market or do they continue to stay on the sidelines? If so, this open house attendance number will provide a good indication if buyers are tired of staying on the sidelines.

Increasing Days on the Market – Higher Discrepancy Between Buyers and Sellers

One of the signs of higher discrepancy between buyers and sellers is increasing days on the market. This translates to more unsold listings which translates to more leverage for buyers when making offers. This past August shows the trend of increasing days on the market:

As such, based upon data of past trajectories of days on the market, I’m predicting the following:

Trading Up Opportunities

The following types of apartments in neighborhoods below are experiencing lower inventory than one year ago. In addition, the next product size up is experiencing higher inventory than one year ago. Therefore, there are favorable conditions to sell and then buy a bigger apartment!

• East Village – Sell Two Bedroom Condo and Buy Three Bedroom Condo
• Greenwich Village – Sell One Bedroom Condo and Buy Two Bedroom Condo
• Hells Kitchen – Sell One Bedroom Co-op and Buy Two Bedroom Co-op
• Hudson Heights – Sell One Bedroom Co-op and Buy Two Bedroom Co-op
• Kips Bay – Sell One Bedroom Condo and Buy Two Bedroom Condo
• Morningside Heights – Sell Two Bedroom Co-op and Buy Three Bedroom Co-op
• Tribeca – Sell Two Bedroom Co-op and Buy Three Bedroom Co-op
• Turtle Bay – Sell One Bedroom Condo and Buy Two Bedroom Condo
• Turtle Bay – Sell Two Bedroom Co-op and Buy Three Bedroom Co-op
• Upper West Side – Sell Studio Condo and Buy One Bedroom Condo
• Washington Heights – Sell Two Bedroom Co-op and Buy Three Bedroom Co-op

*This post was originally published on September 17 in RIS Media’s HouseCall

2017 was a languishing year for the residential real estate market in Manhattan. While the stock market showed almost a 25 percent gain, the average sales price for Manhattan was flat. 2017 was a very rare time in the New York City residential real estate market amid a strong U.S. equities market and low unemployment.

2018 has exhibited further weakness that can be attributed to the nation’s new tax law, which contains the loss of state and local income tax (SALT) deductions and newsworthy political and trade news that makes buyers jittery. In fact, apartment sales in Manhattan dropped slightly over 10 percent year-over-year per the Wall Street Journal during the second quarter. This follows a first quarter that saw approximately a 24 percent decline in sales compared to 2017, according to appraisal firm Miller Samuel. Demand has fallen with approximately one in five Manhattan listings showing consistent zero open house attendance during the spring market. This season has consistently been the best indication of the market, with many New Yorkers buying and selling this time of the year to get their families situated before schools open in the fall. In addition, inventory is rapidly on the rise. The amount of monthly new supply that was placed on the market during the months of March, April, and May all broke the previous monthly decade record. The amount of supply hitting the market is affecting all Manhattan neighborhoods and price points. Many Manhattan neighborhoods are exhibiting a 50 percent year-over-year increase in inventory below the $1 million price point. This is a far cry from the low inventory years of 2013 to 2015 when bidding years were quite common.

However, Manhattan residential real estate is still a great long-term investment amid whatever the current trends say. In fact, the increase in average sales price starting at the beginning of 2001 until the present outpaces the stock market by a sizable percentage. If you purchased an apartment early in 2008 before the last recession and want to sell now, which includes the current market correction, the average sales price still represents a 21 percent gain. While it cannot be easily sold like a mutual fund or other publicly traded investment, investing in real estate can be very rewarding and a great way to diversify your portfolio. Manhattan has had historically a low vacancy rate, as there are always people moving here for jobs and school. An investor can still find a healthy cash flow with the long-term appreciation that is greater than the stock market.

When a negative economic event trigger occurs and liquid markets sell off, Manhattan real estate is thought of as a safe haven. When the subprime crisis was happening, every other housing market across the country was suffering worse than Manhattan. The reason is that Manhattan is all about co-ops and condos plus luxury townhouses, where only those with very good financial security are able to purchase. Most co-ops have a 25 percent debt-to-income ratio and require 24 months of mortgage and maintenance in reserves post-closing. Co-op standards are stricter than most banks. These stringent policies helped to make Manhattan one of the first markets to recover after the last recession, as the borough has very few foreclosures. The economic fundamentals of the real estate market are still very strong. Manhattan is the nation’s leading center of banking, finance, and communications. It is still arguably the preeminent global financial center, unquestionably the global media capital—and there is still only one Broadway. Technological companies want a presence in Manhattan and are not going anywhere. Take security in Manhattan real estate as a safe haven.

*This post was originally published in the August 2018 issue of The Mann Report