As I write this, the stock market is in a bit of freefall.

We’re on the other side of a surprising result in the UK (not sure how United it will remain, however), which seems,

in my view, to be an excuse for markets to sell off.

Global weakness did not just appear on Friday.

Poor numbers worldwide have been in place for a while now.

Will the spigot of global dollars investing in New York City turn off? Or will weakness everywhere else make NYC look better?

Will this turn of events in Europe really make for a more substantial downturn in NYC real estate? Not the most fun questions to address in what generally is a positive newsletter.

So, this segment of the market will continue to be soft.

The question may be more about the rest of the market.

As I’ll argue in a separate post, the growing gap between condominium and cooperative pricing will start to shrink.

This likely will happen by seeing more realistic pricing in condominiums, followed by more realistic pricing for larger cooperatives.

talks about the combination of positive factors that may help weigh against the bad news.

Lower mortgage rates, back to 2013 levels or below.

Increased employment in NYC.

Large rental landlords already have warned about it, revising their forecasts of profits being lowered.

This, and lower rents, puts continued pressure on landlords both big and small.

We already had seen investors accepting returns in the low 2% range.

If rents are dropping precipitously, this will put downward pressure on purchase prices.

We’ve seen fewer investors who are buying one-off apartments to convert into rentals.

Some research has confirmed this trend as well.

However, I am still seeing increased activity by Chinese investors who are piling money into NYC.

But, they are in limited company.

Yes, the Waldorf will convert some of its units to condo (Chinese developer) and yes, some buildings will still get built that surprise everyone- but the most successful projects will likely be the blue-chip projects.

Prime downtown, prime uptown, with a lot of overpriced projects seeing tough road ahead- or they won’t get financing and will not get built.

Some Southeast Asian buyers have been in the market, while most South American buyers are exploring opportunities in Florida.

The market here will depend on China or US interest for some time to come.

Hasn’t fallen over yet

On the flip side, a strong dollar does not help New York City real estate, except that the returns also are denominated in dollars – so the question is when the investor put his or her money into USD.

And the exchange rate does not address whether NYC still feels like a safe haven.

At the very least, Wall Street as a center of commerce does not have to worry too much about being unseated by London, for the time being.

And while the beaches of Southern Spain, Greece, Italy all look like they could be bargain buys, the shores of the Hudson, to my eye, look more attractive, if an investor wants to preserve his property values.

We predicted a flattening this year, with pockets of down pricing.

This appears to be the case.

We can see it with the most current Absorption Report.

Inventory has increased, as a result mostly of overpricing, in my view, and the addition of too much new development skewed to the high end.

But overpricing has not been limited to the condo market, with 14% more inventory than this time last year.

Overpricing of cooperative apartments, along with a pickier buyer who feels less urgency, has created what some might term a “liquidity problem.”

The gap between buyer and seller in terms of pricing has grown too big, and unless sellers reduce pricing, we will see this freeze continue through the summer.

I do think that this will probably precipitate a more active repricing in the market: as sellers will have a more ready excuse to lower their prices, and they can feel smarter in doing so.

This should help lubricate the market a bit.

Beyond that, historically low inventory with cooperative units will benefit from repricing, low rates, and still-strong macro demand.

All of that said, buyers considering a primary home purchase should have great options for financing, and less pressure to make quick decisions.

This shakeout should have good medium-term effects on the market here, if causing some short-term discomfort.