The Spring Market is typically our strongest in NYC, and as I’ve gathered from most housing markets, the strongest everywhere. People want to buy so that they can move in during the summer months, do small renovation work, and get settled before the school year.
So here we are. Our latest report on how fast inventory is selling would indicate that we have a lot of inventory to burn through. The pace of sales is about 30% slower than this time last year.
Our chief economist put it pretty well. The first quarter did “Better than Expected” if you include everything.
The median price hit a record, with middle-to-low end demand at an all-time high.
The worst product, if you think about the housing market as a department store, is the Upper East Side 3bedroom inventory. Buyer are having to negotiate, with the widest gap between asking price and sales price in 4 years- AND the slowest sales pace in 4 years.
Time on market has increased 14% year over year, and the typically rosy Gregory Heym, our economist, also sees New York City growth slowing. Even the rest of the country is seeing an end to rising prices.
Capital controls continue to make foreign investment a challenge, though there are a growing number of programs to assist foreign buyers finance their purchases. That is to say that it’s harder these days for Chinese investors to get their money here, but certainly enough to execute on smaller purchases. Brazil seems to be coming back. India seems to be in good shape. I hear that Turkish buyers are getting their money here.
We’re seeing a flood of Chinese buyers under the $1mm price point for condominium, which seems to be mostly in Upper Manhattan or Brooklyn. And it’s a big wave. I had nearly 80% of my open house attendees last week speaking Chinese. I’ve never seen that in Harlem before. I’m seeing it for the Upper West Side as well.
Some banks seem to have exited the residential mortgage space; Citibank and Sterling Bank are disinterested in buyers. Chase doesn’t seem to be want to be competitive with lower rates, while banks like Bank of America, Citizens, Wells Fargo, Everbank and Capital One want the business and are duking it out on rate. It’s an interesting time to be a buyer, with a lot of good options for financing, even if you’re not a domestic buyer. There are plenty of programs (including one offered by Guardhill Mortgage) that don’t require a foreign buyer to keep large deposits in that bank. This has helped buyers move forward. And so, if you’re tied to interest rates, you’ll see this:
Lots of bidding wars still at the sub-$1.5mm market. Upper Manhattan and Upper West Side remain strong. Upper East Side is much slower. My sense is that for this price point, it is not “The Year of the Buyer,” as one real estate blogger put it in Miami. Rather, what we’re seeing is that it’s become nearly impossible to underprice an apartment, with aggressive buyers pushing up the pricing when appropriate. Instead, it’s easy to overprice an apartment, and that’s mostly what we’re seeing when things are lingering.
Why is this? Rates remain low, some of the same reasons why buyers stay in the city- now including a terrible lack of inventory in the suburbs. Probably a more property -constrained market than NYC. So buyers are staying here.
Yes over certain prices points and sizes ,sellers just don’t want to acknowledge that the market has moved against them over $2mm. Notice how that number keeps creeping down. Recently it was $3mm and up. And yet, well-priced properties at nearly all price points are moving, while properties aspirationally priced are sitting.
This is the reason for the inventory overhang at the high end. Not because the values have come down. It’s because sellers are still too unrealistic. We’ve seen a 20% decrease in rents in many cases. We’re not seeing that drastic a shift, but buyers are certainly starting to eyeball any warts on a property, and discounting for it. Prices have been flat for a couple of years.
This is the same as it’s been for about 18 months. It’s not oversupply that’s causing the issues. It’s overpricing.
What to be done about this? When will we see a stabilization of High End pricing?
If there is any tax reform and cuts to any tax rates, I would see a bit more inventory come to market. This may actually put more downward pressure on sales prices, but the savings on the part of a seller would/could largely outweigh any lower sales prices, I’d guess.
There’s an inventory overhang, due to overpricing, not oversupply
If you cut your price, you will likely see buyers come out of the woodwork.
The only issue is then psychological. It’s going to take a lot of change for buyers to reconsider cooperative units. I keep yelling about what a value co-ops are. Let’s see if that changes soon. I doubt it!