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?
- 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.
- Lack of Demand– Buyers are becoming unwilling to pay sky high prices
- 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