As Real Estate Agents, I have been looking for reasons to justify why 2016 was a slower year for sales volume.
We can blame Trump for it- It seems like a popular move these days.
But looking at other reasons, I was featured in a recent Bloomberg article where I discussed the notion of
This article got picked up and Jonathan Miller ran with it (see below):
It’s always nice to be quoted and even nicer to be re-tweeted by Jonathan Miller, guru of appraising.
Here is my sum-up of what happened in 2016,
if we look back rather than look forward for a second:
- Sellers saw prices Rising
- Sellers saw quarterly statistics that show Year-over-Year Strength
- Sellers overpriced their listings
- Sellers continue to see closing prices in the NY Times or elsewhere for New Developments that actually went into contract in 2013 or 2014.
- Sellers continue to overprice their listings (Hence my “Offensively Overpriced” comment)
- Buyers realized that pricing couldn’t continue to outpace inflation, low mortgage rates, or interest levels.
- Buyers began to question the pricing strategies of sellers
- Successful sellers took the strategy of “Price Low, let the market be efficient”
- Continued low rates decreased buyer urgency
- Sellers continue to believe that they would find a buyer to pay that higher price
- Trump’s candidacy and the election in general got VERY distracting to people, especially in NYC
- Buyers used any excuse not to buy this year
- World events started to put dampers on investor interest in condominiums- Brexit, capital controls in China, a horrible Brazilian Economy, awful commodities news affecting Russia, low oil prices affecting Middle East Buyers
- New rental inventory came online in a massive way
- Rental prices dropped, and rentals look pretty great compared with overpriced condominiums
- Investors a bit perplexed on how to price condominiums, and don’t want to catch a falling knife (that is, they don’t want to buy into a market that may have room to go lower).
- Rates jumped in the week after Trump’s Election, and haven’t come back down
- News that rates will rise based on the Fed Decision (yesterday), and will rise at least three more times next year.
So None of This Was Very Good News, right?
My view: It’s not that things are so dire, actually.
It’s just that things are so messy that it’s going to take a while for buyers to figure out that it’s starting to look like a Great Time To Buy.
I’m looking at a roughly six-month period when buyers can try and perhaps be successful with various tactics to get deals at lowered prices, such as:
- Show grave concern about mortgage rates rising (“My mortgage costs have gone up 15%.
So your price should come down significantly”)
- Show grave concern about rental prices going down when looking at investment properties
- Look for listings that have been on the market for more than six months
- Look for new listings at strikingly lower prices
- THEN- Start making lower or lowball offers and see what sellers bite (asking the right questions first)
The market’s hasn’t even been “Mostly Dead.” It’s been looking for a new level.
Sellers (and agents like me) will need to watch carefully as the new comparables – things that have actually sold in the last three (3) months- start to show up in public data.
Once this information is “out,” it is inevitable that the pushback begins not only with scare tactics, but with actual numbers.
At that point, and this will be happening in January-March, it seems like sellers will have to get realistic if they want to sell today.
This will hopefully mean that we see publicly re-calibrated pricing, not just deals made with a large % off the asking price.
There will be sellers who need to sell.
And yet there will be a whole group of buyers who are still reluctant to buy.
Those buyers (not you of course) will miss out on a very nice opportunity to pick up properties at decent prices.
Mortgage rates are going to creep up all year, and we may never see them this low ever again.
Those buyers who can lock down a low price before rates go up, and before people get accustomed to the new rate environment- they will win.
Yes, there will be a huge temptation for renters to stay in their rentals.
Waiting for that better time to buy while rental prices stay low.
The pendulum will probably swing too far to the left at first, until the market finds a new equilibrium, and the window will have closed.
Better to hop in before that happens.
Does this make sense?
It does to me.
What we are seeing now are interesting signs, possibly of a market looking for a bottom given what we saw all year:
- Auctions handled by agents and reputable auction companies.
- An empowered buyer pool who is unafraid to make lower offers
- A seller pool who is beat up a bit and a lot more open to lower offers
- A savvy buyer pool who is expecting 2016 bonuses to be lower, but
who is seeing the stock market go up in a big way, (“Big league” or “Bigly”?)
- Jobs in NYC have continued to be added all year
- We’re going into a Mayoral election year when real estate taxes will probably not go up at all
- We’re already starting to see some sales happen at prices that are surprisingly low.
Low Prices: Happening at the low end, and the high end.
As silly as it sounds, the stock market going up also has buyers in a much better mood.
Having the election a month in the rearview mirror doesn’t hurt, either.
And really, most of this work requires to get some perspective from an agent (like me)….
What’s happening right now is that condominiums are reverting to the mean. That is, that they are selling a increased prices comparable to the appreciation of cooperatives, rather than the outpacing we’ve seen for the last 3 years.
Townhouses are also selling at lower prices, certainly in emerging areas, though not much luck yet in Brooklyn (though there is a slowdown above $4mm).
Bigger apartments are moving back into the realm of the affordable at a wide price range.
Downtown deals are starting to happen.