The
report which I
find most enlightening
and which I give the most weight when discussing the strength/weakness of NYC’s housing market is the Absorption Report, which shows how quickly apartments are selling, and
overall how much inventory is on the market.
In recent months I’ve spoken about the market being in crisis.
Despite rates creeping up over the last few weeks, there is still an utter desert of properties out there.
Where is the Inventory?
You may click here to read July’s Absorption Report.
The highlights:
- July’s absorption rate of 4.3 was 11% lower than the previous month, and 38% lower than a year ago.
- It is also significantly lower than the 6-month threshold used to indicate a seller’s market.
- With just a 3.2-month supply of apartments for sale, the West Side remains Manhattan’s tightest market.
- Midtown West posted the biggest decline in its absorption rate, falling from 7.7 months a year ago to 3.9 months.
The lower the absorption rate, the faster apartments are selling.
More specifically, a decline in the absorption rate was due to a combination of fewer listings and an increase in closings.
I realized that it was a year ago that I went into detail about what is keeping sellers from selling, or what is pushing them into the market.
It is worth revisiting the reasons I spoke about one year ago- what’s still true? :
1) Sellers are afraid to lose money.
– Not really true anymore.
Sellers, perhaps, are concerned that what they walk away with won’t buy them what they want, whether upsizing or downsizing.
That is still the case.
in 2013
2) Sellers can’t find anything to buy – Likely still the biggest reason.
3) Sellers are worried that they cannot pass the scrutiny of a cooperative board process.
– An ancillary concern.
Not any larger or smaller than before.
4) Sellers are caught where what they want to buy has appreciated faster than what they are selling – a take on #2, in that they can’t find anything they can AFFORD to buy.
5) Sellers are afraid of being caught in a cash position after they sell, when inflation hits.
– I don’t think this is as large as #2.
This is what I was thinking about last year in terms of motivators for sellers to list their units
1) Sellers want to make their next purchase before inflation hits – I think that inflation concerns are outweighed right now by lack of inventory.
By a wide margin.
2) Sellers are upset about maintenance – In 2013, many buildings, due to lender requirements, are being more transparent about expenses.
Some sellers may be fed up, but costs of selling definitely loom larger than the monthly outlay, for most sellers considering downsizing.
3) Sellers don’t want to leave NYC, but have to upsize – This is still true.
Again, lack of inventory is making this a major challenge.
4) Rates are historically low – still true- where sellers who want to buy feel that it’s still an excellent time to sell and upsize.
5) The market is improving – 12 months later, I would argue that the market has fully returned in New York
to “par” for almost all apartments, except perhaps for small one bedrooms.
And yet, large apartments were at par 12-24 months ago.
Not enough of a motivator yet to drive major, major inventory to hit the market.
In 2012, the positives of selling hadn’t outweighed the negatives.
In 2013, that hasn’t changed.
I thought last year’s election would be a tipping point, but it would appear that we need to keep an eye more on mortgage rates more than anything.
I don’t see the inventory exploding anytime soon- we’re waiting for some item to emerge which changes the game somewhat.