In years past, we have seen a very active “Spring” market starting as early as February. I’ve seen a busy buying season that didn’t miss a beat all the way through the summer, when it felt like no matter when a unit hit the market, that there was a flood of buyers through an open house. The seasonality that we sometimes claim to be quite predictable, in other words, isn’t exactly so.
Add to this that New York City studios and one-bedroom apartments are somewhat immune from the busy/slow cycles of the year. That is, they have a built-in buyer base nearly any time of year. The only times of year when we almost never see much activity is August and December, when people are fully distracted by holidays or the heat.
It’s Hard to Tell What Season This is
All of this said, May is nearly done and we are already at the unofficial start to Summer. Usually, with it we see about three more weeks until the “official” Spring buying/selling season is over, before school is done, and families scatter for vacations, summer camp, and singles head to beach home shares and the like.
What did we see this Spring? I expected to see more inventory come to market, more deals to happen at slightly lower prices at the high end. Instead, we saw a Spring season didn’t really develop, and it’s already over. I’m having trouble figuring out what season it is. I’m not the only one who doesn’t know what to expect, apparently.
Additional inventory piling up at the high end. That is, very few active buyers out in the “busiest” season.
A slowdown in the sales pace overall, even in the busiest neighborhoods.
Very little inventory coming to market for smaller apartments (yet more inventory nevertheless)
Longer time on the market to get to contract
Slightly higher prices on sales at the low end
Let’s compare this with the national trend lately of a new low for time on the market for houses. What to make of this information? And what to do with it?
What to Make of It
First, it seems to me that the biggest issue isn’t overpricing, which we’ve been decrying for months. It’s the deadly combination of overpricing and unwillingness on sellers’ part to negotiate enough.
While buyers seem eager and willing to make low offers when they felt the listing price demands it. However, sellers are still often unwilling to engage. And those units are sitting on the market. We’re actually seeing a lot of offers being made, just not enough deals. Condos are the biggest culprits here. Some great stuff has been written recently about the price stability of cooperatives, which I certainly think holds true. The corollary to this is the condo market- I just saw a great quote in the Real Deal- the notion there seems to be a “magic wand” that “pushed pause on the condo market.” It’s a pretty apt image.
The condo inventory has grown the most quickly- it’s usually the most volatile in terms of price gains and losses, and that’s true here. There are no knights in shining armor coming in from South America, India, China, or Mars to overpay for condominiums, I’m sorry to report. Buyers are savvy, rents are in flux, and sellers MUST respond.
I’m here to buy all of your condos.
Second, lack of urgency. Anyone I speak to in the financial markets corroborates what I’m hearing from retail mortgage brokers, which is that no one expects mortgage rates to rise anytime soon. We’re also seeing lots and lots of buyers at even well-priced apartments, but often, and shockingly, very few offers on these apartments. It seems to boil down to buyers who have shifted into a lower gear in many cases. Given lower inventory at the low end, and massive inventory at the high end (often more than a year’s worth), there are multiple situations when buyers need to see more inventory, either by wading through or waiting for it.
Third, the type of inventory. There isn’t enough inventory in good condition. So a lot of what’s on the market requires renovation, and buyers with stretched budgets simply don’t have the wherewithal, the stomach, or the time/energy to go through a renovation, even if an apartment was very well-priced.
Fourth, rents are cheap. Buyers simply don’t feel compelled to move on a purchase given how cheap rentals are.
Lastly, the disconnect between income and pricing. It seems that income and ability to save has not kept up with pricing, and while this is of course tied to the first item above, it’s a slightly different take. Buyers don’t seem as willing to be house poor- that is, saddled with housing costs that don’t allow them to afford much else. Cooperative boards haven’t loosened up their standards very much, and therefore buyers are shy about purchasing in these buildings.
What To Do With This Info
Often I struggle with this less-than-rosy information and how to share it with you. But I think that I can sum it up for you. Some of these seem obvious, but herd mentality may be getting the best of you. Here are a few thoughts:
When the market seems slower, it’s a good time to get a deal. Like now.
Don’t be afraid to do the work alongside a terrific broker (like me).
Look at lots of properties
Fight through the tedium of seeing a lot of overpriced units, make lower offers when that’s appropriate.
Cooperatives are definitely even better opportunities right now, if you’re willing to do the work.
Don’t be afraid to get no for an answer. In fact, expect to get a few no’s, and you’ll be much happier if you don’t!
Stretch to buy something over $2mm, which is where the better and best deals are.