This spring season is shaping up to be a big test for the market.

Let’s call it a Pop-Quiz.

Generally, lots of inventory hits the market this time of year, just as we are back to historic lows.

The Test
Sellers will continue to see if they can achieve new pricing levels, and the latest quarterly market report (Q1) and March

absorption report

may give them

ammunition to do so.
Before we dive in too deep, though, let’s revisit what “absorption rate” is:

• We take the number of sales each month
• We then take the average number of sales over a rolling 6-month period – creating an average monthly rate of sales. We divide current inventory level

  by the market by this average.

• We then get a “number of months of inventory,” or Absorption Rate.

The Twilight Zone
Were no new inventory to come to market at all, it would take this amount of time to sell everything off.

I think back to reruns of The Twilight Zone, when someone had the power to stop time with a stopwatch (you can watch the episode here).

With that in mind, what do you think a healthy amount of inventory would be, to satisfy demand?
The general thought is that 9 months of inventory is a healthy level, at which point pricing would likely remain flat.
Across the entire city, currently, inventory levels only approach that level for three-bedrooms or larger units on the East Side, where we find the most strict coop approval process, and the most expensive cooperative units, generally.
Otherwise, inventory levels are shockingly low.
Across the city:

• The 1-bedroom absorption rate is 3.0 months
• There are 3.4 months of 2-bedroom inventory
• There

  are 6.7 months of 3 bedrooms+

Breaking into neighborhoods, there

are only 4.7 months of condominium inventory on the East Side, and similar averages to the broader market.
On the West Side, conversely, there is more condominium inventory at the high end than coops, with a lot of new inventory hitting the market in buildings like 210 West 77th (which put in lovely new Smallbone kitchens and are seeing rekindled interest).
Currently, there are

2.6 months of 1-beds, 2.8 months of 2-beds, 6.7 months of 3-beds.
Coops have even less inventory: 2.7 months of 1-bedrooms, 2.3 months of 2-beds, 4.3 months of 3-bedrooms.
Overall, there

are only 3.0 months of inventory on the West Side!

Downtown isn’t too far behind in terms of low inventory, and Upper Manhattan in a similar spot, while Midtown has only slightly more to offer buyers.
Sellers and Pricing
Now that we’ve painted the market with broad strokes, is it any surprise that sellers want to see very high asking prices?
Given that I work in the resale market and in new development, what I’m seeing on a day-to-day basis is a split between the behavior in each market, both of buyers and in seller pricing.
With New Development, we’re seeing Sponsors trying aggressive pricing, with success.

The broad audience for condominiums, with low rates, and ease of purchase, along with the lack of inventory, has kept demand high.
Meanwhile, this situation in New Development seems to be distorting the perception of sellers of resale apartments, both condo and cooperative.

My challenge, then, with sellers of apartments of all sizes, is to look in a more detailed way at what has sold recently and to do a terrific job of explaining how these rising sale prices are being achieved.
The number of qualified buyers in the market, purchasing for their own use, making terrific offers – seems to be driving up closing prices, but often above the asking price.

That is, bidding wars.

Price-sensitive buyers of 1- and 2-bedrooms apartments need to see very accurate pricing.

Otherwise, properties will sit.

And larger units that come out at ridiculous prices really sit.
BUT….accurate prices mean that apartments will sell almost immediately, usually over asking price.
So it’s a matter of convincing sellers to price lower than they want to, most of the time.

When the market report shows that we continue to be at nearly historic highs of average sale price, and an improved median price, this can be tough sledding.
So What Else?

• We are seeing really amazing closed sale prices at the high end, and

  a gap between the high end and everything else.

  Some of these closings have been in contract for many months, or even years – so it may take a little time to see how strong sales from new projects like 220 Central Park South will be, and thus, how strong the market at the very high is right now.

Those sellers who have “the” apartment should definitely test new pricing levels, but otherwise should

look strongly at recent closing prices for guidance.

• Rates remain SO low, there feels a bit of a panicked energy at open houses – buyers are legitimately concerned about their purchasing power in the coming 12-18 months.

  If rates go up 1% in the next year, that means essentially 20% higher monthly costs for buyers – I understand much of the rush to purchase right now.

• I’m loving seeing the announcements of new CitiBike locations – and really hope that Upper East Side and Upper West Side will get to benefit from this amazing program.
• I’m starting to see more and more “apartment flipping” informercials appearing on TV.

  It makes me very concerned.

  I want to put a placeholder on it.

  NYC tends to be a bit immune from some of that nonsense, because transaction costs are very high here – but still.

Wrapping Up
We’re tracking sales very carefully right now, and we’re quite happy at the sales numbers we’re achieving for our sellers.

Advising buyers and sellers right now has been a lot of fun and also quite challenging!

Navigating this market is not for the weak-willed.
Have a great month!