I’ve been in residential real estate for nearly 20 years, and have both perspective and opinion on everything going on right now- yet I don’t expect you to take my word for what I say. Yes, I hope you will, but it rarely happens. One of the main reasons we have a market at all is two opposing forces- a price at which people agree that a property should sell, and different reasons why that price makes sense. So clearly disagreement is not at the heart of a problem in a market, but likely the driving force.
Our November Inventory Report, as I hoped and expected, is showing a drop in inventory in many cases, and in most cases, an increase in transaction volume. Check it out here. Much detail, and I’ve gone through this many times in the past. In short- The number of apartments on the market has been up 20-40% depending on neighborhood and apartment size, from November 2019. However, as the pace of sales picks up- and see below that it has- the “inventory level” is dropping, and relatively quickly. Expect that to continue.
Now, having friends across the marketplace is key. Conversations with these colleagues enable me to find out information that you can’t find anywhere else- and share with you. Often, these conversations also corroborate what I’m sensing more intuitively- and thereby give the more analytical of you out the numbers you crave. Grist for your mill.
I am at my most optimistic about the Real Estate Market as I’ve been in YEARS. And I’ve taken great pains to make my point.
So let’s get going. I have been stating, with growing confidence, that we are past the bottom. Everything that I’m seeing in my day-to-day business points in that direction. Having some excellent charts to share with you from my friends at Urban Digs is a boon. Thanks, Noah!
I spoke at a recent REBNY broker meetings where all of these charts were shared, along with my enthusiasm to learn of them! Enjoy along with my comments interspersed.
This was the most compelling overview chart. It shows data from 2008 to today, showing the gap between overall inventory (in blue) and the number of transactions (in red). The gap has been widest when you expect it- during the worst parts of the 2008-2009 recession here, and during the March 2020-forward impact of the Pandemic. We’re seeing a peak in that gap. Data point 1.
Next, we can see what really is going on in the market. The really important takeaways- you can see that the number of deals plummeted in the past 6 months. And you can see the closing price discounts have been meaningful. Combine the first chart with the flexibility we’re seeing- it means that many sellers got the memo, and are doing deals. You can expect that as we see more and more deals, sellers are beginning to price apartments and townhouses more in line with this new reality.
Then, you can see the average price cut by price point SINCE the market reopened. This is a HUGE source of information. It shows that higher priced properties were likely already very overpriced and needed price cuts. It also showed that $2-3mm properties are seeing the least price reductions. This could be due to more accurate seller pricing, or buyer interest. We move on.
The picture really starts to come into focus. While $2-3mm properties were seeing the least discounts, the sub $1mm market is the most active. And $1-2mm price point is seeing a great deal of transaction volume. This lines up with what we’re seeing with our 25 listings on the market. The most interest, showings, and offers/deals is happening here, too. Below $2mm.
I’ll add that it’s interesting to note that only about 1/8 of all deals since June 22nd – again, when the market reopened- have been in New Development. This doesn’t bode well for developers, who have a lot to sell. It means more price flexibility in an area where there had not been enough reductions. So stay tuned here.
Adding more to the big picture. You can see that price discounts have been going up for a number of years, not just since March. TAKE NOTE! Yet we can already see that discounts are subsiding. And that jibes with what I’m seeing. Both more accurate pricing, and more demand from buyers.
Lastly, I’ll just say, anecdotally, and within my firm, that we’re seeing a pickup in open house activity (by appointment only), increases of roughly 15-20% over the past 2 months. This is another good sign. Pile on good news on the luxury front with my friend Donna Olshan continuing to point out solid deal volume north of $4mm every week. Each week shows evidence of a strengthening market.
In short, we seem to be finding a bottom.
So- buyers, if you’ve gotten here, take heart. Get educated, get confident, and start making offers. You may see more, or less, flexibility than you expect, depending on your purchase price range. And then you can make smart decisions from there. Have a great month! -S