I hate to be the bearer of bad news, but based on what I’m seeing,there is not going to be much relief in the way of new inventory in September.
I’ve covered much of the why in recent posts.
For those up-sizing, there is very little to move to.
Mortgage rates are creeping up, pushing more buyers off the sidelines, but with nothing to buy.
So we’re seeing suboptimal properties selling quickly, at high prices.
And we’re seeing prime properties selling even faster, at eye-popping prices.
Inventory continues to dwindle into uncharted territory, lower than for any time since it’s been tracked.
Down 34% year over year as I covered in
this Absorption Report post.
In speaking to as many brokers in my firm, and firm management to see what is coming to market- Obviously I get a read before things hit the airwaves, as it were- and there’s no there there.
That is, no one is bringing anything to market.
So this is incredibly troubling.
Our firm inventory for the Upper West Side at the moment, including everything in contract, is down 50% from where it normally is from an
average 125 to 75.
I can say with confidence that our firm is NOT losing market share!
In a market where equilibrium is 9 months of inventory, 3.2 months on the West Side just won’t cut it.
4.3 months on the East Side won’t either.
Some anecdotes for you:
*A building in which I do most of its business in Morningside Heights.
I sold a 5-room, two-bedroom
unit in March for $1.625mm.
The same unit on a higher floor, in original condition, is in contract over the asking price of $1.975mm.
Granted, some premium is given for the better views, but bear in mind that a unit one floor below sold in 2009 for $1,350,000.
*A Central Park West, low-floor
one-bedroom apartment we brought on the market
went into contract
in one week over the asking price of $1,275,000.
The same unit on a higher floor in better condition sold for $1.13mm less than a year ago.
And a unit with open Central Park Views on the 16th floor of this building sold for the same price two years ago.
Another unit just closed not too far above for $1.75mm!
*On the East Side, a three-bedroom wreck in the low 60’s where we have done business closed for $850k last year.
The same unit on a lower floor with no views in
similar condition closed last week for $1.060mm.
Granted the coop now owns its commercial space and incurred some cost to do so, but this reflects a premium of more than 25%.
*In Tribeca, we set a new record in a condominium getting over $1650 per square foot for a mid-building 3-bedroom, only to see a very low floor get over $1600 per square foot pricing two months later, and a unit on a high floor with more open views in contract in a week for over $2000 per square foot.
All records, mind you, for a building which had its sub-basement flooded during Sandy.
You get the point.
It’s mayhem out there.
I refuse to be pessimistic, so I’m offering some scenarios which could offer either to buyers or investors.
I don’t need to offer hope to sellers right now.
While we wait for something to give:
1) Inventory will come from People Trading Places.
Not literally, of course.
We will see a continuation of the baby boomer trend of downsizing into the city.
It plays out with the swapping that we’re seeing between nice homes in the suburbs and 2-3 bedroom apartments in nicer buildings.
Empty nesters selling out of the suburbs, and growing families selling out of their out-grown apartments.
This trend also plays out with
those downsizing within the city.
As an aside – Are you in that category?
Know someone who is?
is an amazing time to sell.
2) Investors- The rental market should turn red hot again
If buyers can’t find something, and soon, I don’t suspect that they’ll give up, but I do think we’ll see the rental market push through to some new barrier.
This will definitely happen in Brooklyn with sales inventory at a shadow of its former self.
Prime rentals in Manhattan will hit new highs, I suspect.
3) As the private market picks up some slack in borrowing, I can see smaller condominium projects getting easier to finance, and we’ll see buyers moving
towards those options across NYC.
I’m thinking about side street projects, well-done, not overly expensive, smaller cooperatives that Fannie Mae is putting through the wringer- all of these may get easier to purchase for buyers.
In essence, what I would consider some “B grade” coops will get absorbed- and sellers who want to get out of them, and who saw their valuations dwindle in 2009-2012, will sell them at good prices and move on.
4) Investor activity of building purchases will feed a bit of inventory over the next 2-3 years, as these projects have been in process in Manhattan over the last 12-18 months.
This is different the buy-and-hold of the general investors from out of the country.
These are real sellers, and it will be real inventory that fits many buyers’ bills.
Seller financing, sellers with deep pockets, private lenders will pick up these loans, too.
5) A push into really, really high prices in the short term (3-6 months),
but more than likely a flattening of prices as rates push up after the New Year (January, not the Jewish new year).
The effect of rates will be cancelled out by lack of inventory.
So it may give buyers a little time to look for that right house, or wait for it to hit the market, while prices flatten a bit.
Purchasing power will drop a bit over time, of course, but let’s hope the rallying stock market will make people feel better while it happens.
Some light at the end of the tunnel, maybe.
If Zillow feels that it’s worthwhile to spend $50mm on the most trafficked Real Estate website in New York City, www.streeteasy.com – I’m certain that some way, some how, some new inventory will hit the market.
Your optimistic broker,