Too many metaphors seem apt at the moment to describe this property market.
I wouldn’t need to look back on previous posts, as I am fairly certain I have not seen the market like this before, even having experienced 2006 and 2007 a broker.
There has been a frenzy as I have not seen it.
What comes to mind?
Let’s see – Hungry Hungry Hippos, sharks feeding in the Bahamas in August, Black Friday at Wal Mart, those memorable scenes in the original (and much better) Willy Wonka and the Chocolate Factor.
I would be repeating myself, however, if I went on again about the purchasing power buyers feel with mortgage rates where they are currently.
I would also be repeating myself to go on and on about the luxury end of the marketplace, where we are seeing the $2000-3000 per square foot
numbers become more and more commonplace.
Bloomberg has a good article summing up much of what I’ve been saying for months.
Enter the New York Times, who to some degree hits the nail on the head this past Sunday.
This article, whether simply capturing the zeitgeist, or actually adding something new to consider, has not been helpful, however, inasmuch as it comes to our getting sellers to either sell or give enough weight to prior sales numbers.
In 2009, buyers had the upper hand, and through 2010-2011 we saw a choppy market.
2012 then shifted into a strengthening Seller’s Market, with inventory shrinking over 30% year over year.
Sellers in 2013 want to price properties not just aggressively, but to a place where they can break records.
Sellers are now “testing” the market, telling us that if they “get their price,” they will sell.
Otherwise, they will simply stay where they are.
Given the lack of 6-room, 7-room, and larger apartments, this attitude has to be treated without much disdain.
I cannot blame a seller for acting like former jailed Illinois Governor Rod Blagojevich.
Not sure if you remember this quote.
“I’ve got this thing and it’s **-in golden.”
Seems appropriate to recall here.
But I’d like to shift the discussion into areas which I’ve covered before, which is pricing and demand for 1- and 2-bedroom units.
As I expected, these units have begun to sell as quickly as their larger counterparts.
Some quick anecdotes:
- I managed a bidding war for a 1-bedroom on the Upper West Side that went 10% above the asking price.
This unit needed renovation, I might add.
- My customer lost a property that didn’t even go to a bidding war, with a competing buyer paying 15% above the asking price for an 1100-sf condominium in the West Village, at a number which takes it to $1750 per square foot.
- I managed a separate bidding war for a condominium in Chelsea which until December had been on the market for about 6 months, and suddenly found an all-cash buyer above the asking price.
- We are seeing 30-40 people regularly at 1- and 2- bedroom open houses.
New inventory simply hasn’t enough competing with it.
These might shed some light on sellers’ overconfidence.
No one would begrudge this attitude at the moment.
Buyers have become rightly desperate as a result of the inventory shortage, and competition.
I’ll continue discussion about smaller units, cover some new thoughts about what may be causing this, JOBS, and some thoughts about what may happen going forward, and make some recommendations.