The first quarter of 2019 ended with a surge of active listings, continuing the theme of a buyer’s market with 6852 apartments on the market in Manhattan, which is up 16% year-over-year. The year over year increase is attributed to a 22% increase in the supply of co-ops, which can be attributed to tax season, and the SALT (State and local tax) changes. In addition, for March 2019, there was a 9% decrease in contracts signed compared to March of 2018.
However, a promising sign for the market is that higher open house traffic was reported over the first quarter than occurred during the fourth quarter of 2018. In the first quarter of the year, only 10-15% of open houses reported no attendance, which is down from 20%+ reporting no attendance in the latter part of 2018. In addition, real estate agents reported a higher amount of inquiries for listings than the 4th quarter of 2018. The influx of new buyers onto the market can be partially attributed to lower interest rates since the beginning of the year. While buyers have more confidence in the market, the market is basically on sale by 10 to 15% from the market highs.
The 2018 residential market ended the year with a complete reset of conditions compared to a year earlier. The chart below shows the complete change in conditions with inventory increasing by 23% in 2018, while the number of contracts being signed had a 7.4% year over year decrease. Nowhere is the shifting dynamics more apparent than the average days on the market starting 2019 at 90 days when compared to 69 days one year earlier.
Although there are promising signs, pinpoint price is surely necessary to sell in this market with higher inventory and lower contracts signed then one year ago. There are many opportunities for buyers in the market especially among listings that are sitting on the market as the average days on the market reached 109 days at the end of the first quarter, which is up from 85 days one year ago.
Sellers should be reminded that incremental price markdowns is a much worse pricing strategy then pricing right from the beginning. The amount of online traffic and attention is at its peak in the first week after the listing is posted.
Moving onto the specifics of the market, listings asking below one million, continued to show substantial weakness in the first quarter of 2019. The chart below which measures contracts signed per inventory shows the softness in the market for condos. The lower the number, the more power that buyers have in the market.
Similarly, in the co-op market one million and under, there continues to be much softness. We enter April looking at the most favorable conditions for buyers under one million then we have seen in a long time.
The first quarter of 2019 also featured noteworthy news of Ken Griffin, CEO of Citadel, spending $240 million to purchase a 23,000-foot pied-a-terre at 220 Central Park South. This purchase by a non-resident caused a vast amount of backlash and has probably been directly responsible for the passage of an increase in the mansion tax. The increases in the mansion tax take effect at the two million dollar price point and will start on July 1 of this year.
This mansion tax will take some time to get integrated into the market. It will create downward price pressure on the higher end of the market. In time, the market will adjust to this new tax and pricing will be adjusted.
The other big news of the first quarter of 2019, is the opening of the Hudson Yards, which feels like a city within the city. The first residential building at the project, 15 Hudson Yards, opened earlier this year, and as of January was 60% sold, per Related. A second residential building at 35 Hudson Yards just opened for sales. Hudson Yards has created a unique experience amid a tough climate for luxury real estate.