The question that many people will ask each other is “How’s business?”
Certainly anyone I speak to will want to know, “How’s the market?”
If I often deflect the question about a couple of thoughts or paragraphs, it’s just to be able to listen to others.
Where the real estate market falls into the general scheme of the economy seems to bear out as follows:
- Business Growth
is a leading indicator of things
– Generally, if things are getting better, that’s a good sign
- Attorneys and service firms begin hiring as businesses need them
- Stock Market begins to show signs of the growth in business etc
- Buyers feel confidence to make purchases
- Mortgage brokers get pulled in pretty quickly thereafter, as are RE attorneys
- Private bankers are asked to make things happen during this process
- Architects, designers, contractors, etc are pulled in once closings happen
This Could Have Been NYC's Mayor
So, depending on who I’m talking to, I try to get a sense of where they fit into this order, at least as it pertains to my business.
Are they a leading indicator?
Are they a lagging indicator?
My conversations with bankers and private equity indicate that it’s a very busy time for them.
I am hearing about business hiring from various law firms and financial services businesses, even as some job cuts are taking place.
The stock market, while perhaps due a correction, is showing more steady footing- even if some banks show bad quarterly results.
My mortgage brokers are extremely busy, as are RE attorneys.
And I’m heaing how slow things are for architects, designers, contractors.
This fits pretty squarely with my experience right now.
While some articles may be spinning a lack of massive growth in the first quarter as some stall-out of the RE market, I do not see it that way.
Closings in the first quarter would generally have gone into contract in the 4th quarter, and with the lending standards (I’ll do a separate post about this) becoming hilariously difficult, perhaps contracts were signed even during the 3rd quarter!
So, in essence, this is old news.
What I’m actually seeing in Manhattan is that the market has been slowly strengthening over the last few months, and I can give you a few indicators that it will continue to strengthen through the Spring into Summer:
- One Bedroom apartments are seeing 7-10 buyers per open house, and time on the market has dropped.
Time of the market has been an average of 123 days in 4th quarter.
My listings are seeing an average time of less than
80 days before a signed contract, including one property which had been on the market for a year prior to a bidding war.
Many of my listings have sold in the first weekend since January 2012.
- Apartment rental prices are near or at their highs.
My conversations with my buyers reveals that there are three different groups of 1-2 bedroom buyers who are affected by rents: (1) Renters who moved into the city, preferring to rent first and now buy, (2) Renters who feel “The rent is too damn high,” and (3) Long-time renters who simply don’t feel mortgage rates are ever going to be this low again.
- There are fewer than 30 new 2bed/2bath new apartment listings that are still available on the Upper West Side since March 1st, under $1.5mm.
If you’re looking under $1.25mm, the total number available is still only 40 (many with maintenance over $2250/month), and if you lower your budget to $1mm, the available number of units drops to 18.
That’s total.
- There are twelve (12) 2bed-1bath apartments on the market on the Upper West Side under $1.25mm.
We can take the same logic and pull it out over many different areas.
The main point is that demand has significantly increased, and prices, from 1-bedrooms up are seeing pricing pressure.
The buyers who thought they could do 2-bedrooms are starting to settle for smaller units again, and squeezing into smaller apartments.
So I’ll keep the wrap-up fairly short and sweet this month.
Provided the job market keeps adding jobs, which it
has, and the stock market continues to show
some consistency, we should see continued strength in this market.
I would argue that New York City continues to be a leading indicator of the economic rebound, but a lagging indicator when the economy sours.
It’s a good place to do business.
I will write another post about renting vs. buying and tie is to mortage rates.