As mentioned during my Winter 2016 report, the pendulum has moved towards the buyers. The spring market kept shifting towards buyers, creating a leveled playing field, with the return of buyer empowerment in a softening market. The excitement that the market experienced the last few years is evaporating. The slowdown is attributed to turmoil in the financial markets, disconnect with what sellers hope to receive and buyers want to pay, and the forecast for mortgage rates to remain steady. Signs that the market has turned more favorable to buyers include fewer bidding wars, more listings hitting the market, more contracts being signed below asking price, and an Urban Digs report that shows contracts signed dropped 20% in the second quarter, compared to the same period last year.
Prices have lowered across the board at virtually all price points and neighborhoods except for entry level studios and one-bedrooms. Many of the current bidding wars are still happening in this part of the market.
Now that summer has arrived, many listings have been taken off the market as owners reassess or wait for September to repost. Active inventory has declined sharply in the past month with 790 less listings at the beginning of July compared to one month earlier.
For all the stabilizing of the market, NYC still remains a great place to invest and rent out your property as a nearly 70% rental city with a solid job market, and housing demand far outpacing supply. While the fundamentals of our market are very strong, the city suffers from a housing storage.
According to StreetEasy the average days on the market increased from 21 to 24 days in Manhattan in May compared to a year earlier, and increased in Brooklyn from 19 to 22 days over the same period. TriBeCa had a huge jump of 64 days on the market compared to 31 this time last year. This can be attributed to new construction condos hitting the market within the last 12 months. On the other end, Gowanus had a city wide low of an average of 9 days on the market. This summer will overall be slightly easier for renters as price increases slow down. Manhattan is experiencing a rental price growth of 2.3% compared to a 6.1% increase from 2014 to 2015.
Although this summer will be a better environment for renters, there is a tale of two markets that has emerged between non-luxury and luxury rentals. Rents in the luxury segment (top 10% of the market which is approximately $6,500 and up) have leveled off and begun to slide, shown in the non-luxury vs. luxury chart below. A softening of the high-end market is due to numerous new luxury rental buildings and the completion of luxury condos that are now available for rent.
Q: When buying or renting, why is square footage frequently available for condos but not listed for co-ops?
A: Most co-ops were built or converted from rentals before square footage was required to be in offering plans. Also, in a condo, one owns real property and the exact size of the property is used to calculate taxes. In a co-op, the shareholder owns shares in the corporation which pays the taxes.
Q: How is square footage calculated?
A: There is no general law or rule for calculating square footage. Some developers include hallways, unusable floor space and foyers, and some don’t. Some also measure to the outside of the walls while others just measure to the inside.
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In some places, for some households, the decision to rent or buy a home may be too close to call