Our office at Brown Harris Stevens is poised to have its best year ever, possibly, exceeding the really robust numbers of 2012.
The questions that loom behind the strong numbers of any quarter, or any market rally like one we’ve seen since the 4th quarter of 2009, are those that ask:
Don’t try flipping houses
How strong is the market now?
How long can this sustain?
Is there going to be a housing market correction?
How will rising rates impact sales?
Where can I find value in Manhattan and Brooklyn?
Let’s take these questions and try to tackle them as we look towards 2015.
How strong is the market?
Of the sales that closed this quarter by my team, the longest that any apartment remained on the market before getting a signed contract was about 60 days.
The Upper West Side remains incredibly strong, though a fair number of overpriced listings have come to market in the last 30-45 days.
Sellers: Please Be Realistic.
But that is hard to advise when cooperatives and condominiums everywhere are getting snapped up.
The sale of condominiums has not slowed much, except perhaps at the level of $5000 per square foot and above.
Condominiums offered under $7mm are getting incredibly attention.
The Upper East Side is seeing a growing inventory of one-bedroom apartments, which is interesting.
I’ll be curious to see how that shakes out through the winter.
Downtown remains very strong.
And more and more, many buyer searches start and end in Brooklyn, the desired place to settle in, though prices are pushing toward $2000 per square foot for the most special projects.
Looking over the horizon, the pace of Brooklyn’s commercial sales is up nearly 75% from 2013, driven by sales of retail space and development sites.
As land prices push up, the nearly 100% development to rental inventory will shift, though the current condominium inventory of large apartments, still priced below Downtown Manhattan prices, results in quick sellouts.
Buyers perceive value in that they still can have convenience in Brooklyn and get the large space they need.
However, we are seeing some pricing getting to the point in Williamsburg that some buyers are finding value in Manhattan neighborhoods, where there remain some pockets of value.
Stepping back from the simple question of market strength, what would be an indication of equity chasing returns might be the amount of consolidation and change within RE firms this year.
Massey Knakal was just acquired by Cushman Wakefield, Studley by Savills, many residential firms are in discussions to sell themselves, other firms have entered the market with splashes this year.
It’s a very interesting time and Real Estate remains a strong candidate for wealth creation.
How long can this sustain?
Are we in for some 2015 surprise?
How will rising rates impact sales?
Limited inventory continues, and rates appear to be in for a slow rise.
Nothing has changed in the last 30-45 days to indicate that we’re not in for a sustained stronger market through 2015.
Sellers generally are not testing the market, so there are deals to be made with buyers who have a longer hold time in mind for their purchases.
Lending has gotten the slightest bit easier, and rates have dropped over the quarter.
All good signs.
That said, the broader inflationary effects of a low-rate environment are everywhere.
As the economy strengthens here, we are seeing inequality effects enhanced by sustained low rates, so retirees and wage workers have lower and lower purchasing power.
It’s not healthy, so, really, a rise in rates is inevitable and probably better.
Let’s hope that the economy continues to improve, countering the effects of inflation, be it housing or otherwise.
I expect that sale prices will flatten as rates rise.
We’re looking for pockets of value
Where can I find these pockets of
value in Manhattan and Brooklyn?
Renovate the apartment yourself.
Or buy in a blue-chip neighborhood with good housing stock, such as the Upper West Side, that will maintain value even if it is expensive.
Murray Hill is undervalued.
Downtown Brooklyn is undervalued.
East Harlem is undervalued.
The Upper East near 2nd Avenue is undervalued.
____
As we wrap up 2014, I just want to thank you for reading these posts.
Please share them, forward them, comment on them, post them on your favorite social media spots, and email and call me.
I love hearing from you with any
and all feedback!
Happy Holidays!
Scott & The Harris Residential Team