The 2nd quarter numbers came out July 1st.
Yet there continues to be discussion about them, causes, etc.
I hope you had a chance to look at the 2nd Quarter Heym Report.
I’ll sum up:
High End Apartments are selling briskly, so much so that they may have even distorted statistics.
That is, lower-end properties are selling in a completely different gear.
Before I answer “why,” let’s cover the last 18 months:
First, it’s safe to say that
2010 numbers on the low end
were skewed by the government stimulus credit to home buyers- those buyers able to take advantage of
the stimulus were buying less expensive homes (of course, in our market $500k is the low end).
Therefore the average home price in 2010 was distorted lower, making it harder to compare previous years numbers.
The REBNY Reportseems to corroborate this.
Brown Harris Stevens’ average sale price was $2.3mm in 2010, in the midst of my company’s very best year in 140 years.
Not only was my team selling a number of properties to first time buyers, but also this high-end buyer.
Our average sale price was lower than the company’s average by about $1mm, but nevertheless, we saw a real gap growing, with units trading below $750k and above $2.5mm.
Sunny Skies in Manhattan
Fast forward to 2011 -a very different story.
The low end sales almost entirely disappeared, and the 2-bedroom buyers emerged.
I was quoted in the NYTimes about it.
The change in Jumbo Loan rates might cause another minor spike of sales around that price range before it is lowered, as we get towards that deadline (October).
I expect to see lots of calls after people return from vacations.
I covered that pretty thoroughly last month- but we’re seeing a seasonal slowdown even in those sales at the moment.
But right now, what we are now seeing are two big trends.
(1) High End is raging, and (2) Foreign Money is coming in.
Why Now?
As we see European defaults in Italy, Greece, and downgrades in credit ratings, there seems to be
real risk in equities markets, keeping money on the stock market sidelines.
Foreign buyers have hit New York in
a BIG way over the last 4-6 months, snapping up condos from 1BR’s and up.
New York City Real Estate continues to look far more stable than other places to park money.
Inflationary concerns will make it look even stronger.
I’ve met with buyers from Australia, France, Israel, Asia, India, Brazil.
Very interesting variety.
If I try to look over the horizon a bit, I believe
a continued growth in the income gap will continue to drive high end sales here and throughout the world in top locations.
Easy to look back and find a reasonable example of how this plays out-
After the Great Recession, companies, families, and individuals learned how to operate more efficiently.
With a more efficient society, technology is increasing at a record pace.
Companies can operate with less employees and increase their profits.
And until new job areas emerge,
jobless rates will continue to rise and the wealthy will get wealthier.
Technology will continue to drive job creation, but new businesses, new models- and training in a new service economy needs to happen.
As the wealthy get wealthier, New York City is a great case study.
I believe it will correlate to an increase in high end housing and for those who can’t afford lower end housing, an increase in those who will rent, willing to pay good numbers to do so.
All of these reasons would point to the value of investing in rental housing here in Manhattan, one of the strongest rental markets in the US.
In addition, pied-a-terre/vacation purchases
here in Manhattan drive the coop market with US and Foreign buyers piling investment money into real estate.
Signs do point to market improvement.
That said,
we may very well see the government lower restrictions for borrowers which will cause more lower- to middle-priced sales.
Even if they don’t, my mortgage brokers (see my post shortly) expect to see lending open up further anyway.
Frankly, I expect some kind of tipping point to take place in the next 6-9 months, as rental prices have made 1-br purchases look pretty attractive.
Many will opt to buy, depending on their financial strength.
And lastly, the political component- once budget talks are in our rear view mirror in DC, we could see more a more stable national outlook emerge- that, and a 2012 election year, will see a push to find this elusive housing recovery nationally.
Any steps to help the US Housing Market overall will undoubtedly help New York City.
Have a great month! -Scott