Tight Real Estate Market Emerging
The Manhattan residential market had quite the comeback in 2021 after reaching pandemic lows in the summer/early fall of 2020. Declining inventory and high demand drove the 2021 market. According to UrbanDigs, supply in the Manhattan market ended up down around 30% year over year, while pending deals, those in contract, ended up 150% over the same time period. The amount of contracts signed in 2021 reached a 14-year high. Last year 2000- 2300 apartments were listed per month during the peak-listing season. This number was so high as there were a lot of sellers who wanted to put their apartment up for sale but would not list during 2020.An incredibly busy spring market peaked by summer with a small dip in the fall. However, supply of apartments on the market recently broke below 5000 which is a low not seen since January 2018. The trends show that each listing season in 2021 hit its peak with inventory pretty fast and then reversed course lower towards this sustained lower inventory market.
Looking ahead to the rest of 2022, normalcy will return to the market with seasonality. However, the big issue facing the market for buyers is this supply problem. It is also highly likely that prices will rise with a lower spring market inventory environment than past years and eager buyers with still historically low interest rates. Tighter supply conditions will mean a tougher market with low negotiability and price pressure upwards for buyers. For buyers, if you come across an apartment you like and the comps indicate it’s well priced; it’s best to act swiftly.
For sellers that have been on the market, reduce your price now to get ahead of the spring listing season surge. If something is not selling then might be a price issue. Many of the apartments that remain on the market are those that are unrenovated. Construction time and costs are up with supply chain effects and labor shortages. As such, the pricing spread between renovated and unrenovated apartments has increased in the current market.
While the supply/demand undercurrents are similar to the market of 2015, the market remains about 10 to 15% off its peak during 2014 to 2016. While buyers are eager, there are sellers who are looking for these peak prices and the market is not there yet as prices have only recovered back to 2019 levels. While the market quickly recovered its covid discount, it has not experienced a pricing boom similar to other markets around the country. The macros of the market are different here with no to little tourism, lack of foreign students and buyers, a badly hurt commercial office sector, a retail sector that is still rebounding and an incredibly hot rental market. It will be some time until foreign buyers make a dent in the market.
While the sales market had a robust year, the rental market became historically tight in the summer and into the fall and winter as available apartments became increasingly competitive and it was common to see bidding wars. A tight market remains in place throughout the winter, which means price increases when rental spring and summer rental season hits the market.
