As I discussed in my new development post
– 2014 was a year in which the divergence between new development and the resale market was wide enough
that breaking
apart their sales numbers makes sense.
When three bedroom and larger condominium sales appear to be up 31% year over year
vs. 7% for coops, there’s too much disparity to lump them together.
Not only are new development sales skewing the average pricing too much overall, but new development is not tracking that closely with condominium resales, either.
The apocalypse isn’t nigh, but prices have been diverging
Three bedroom and larger condos only rose 15% on the Upper West Side by comparison.
Downtown, in the meantime, showed a 20% gain in this category, leading specific neighborhoods in cooperative gains, but still far from the gains of new development.
In resales, there seems to be a sweet spot for resales of $1700-2300 per square foot – a far cry from the average $3500-6500 per square foot
in large new development pricing (meaning a 30-40% discount on resales).
And while the average condominium sale has rocketed skyward,
there still were 17% fewer closings in the 4th quarter generally, and a drop in coop sales over $10mm.
The divergence really becomes obvious when average pricing for coops generally has
risen only 2% year over year, with one-bedrooms leading price gains, as their average price rose 7% compared to the 4th quarter of 2013.
The appreciation at the very high end of the market has left other properties in the dust.
For all buyers and owners, mortgage rates again have dipped back to lovely historic lows.
We have seen a boatload of refinancing applications, along with hordes of buyers braving awful winter weather to see properties at open houses.
Well-priced units continue to sell VERY quickly. There are still only 4100 total units on the market, about half of what needs to be in place to satisfy normal demand.
Once we pull new development out, we’re tracking incredible demand
from small one-bedrooms on
up.
With smaller apartments, first-time buyers seem a bit more prepared than they’ve been in the past, willing to engage the “bank of mom and dad” in order to win bidding wars (i.e., borrowing from parents) and take advantage of current low rates (in the range of 3-4%).
Borrow the gilt cheaply, the guilt at higher rates
Further, the units that sell
most quickly are priced just below expected selling price, encouraging bidding wars.
While this is frustrating to buyers, ultimately it is generating the most interest.
I’ll cover the final numbers on 2014 from a company perspective, but as a quick overview, we continue to see strong demand on the resale side, with extremely limited inventory.
Unless inventory can increase substantially, well-priced units in buildings without major qualification hurdles will sell almost immediately, and it is likely that in 2015 we should see some tightening in the pricing gap, as smaller units play a bit of catch-up, and prices flatten in the $3-7mm range.
But new development will likely remain its own animal.