For me, the marathon metaphor never gets old, perhaps because I’m always thinking about running them.
After April’s Boston Marathon and the bombing, I’m excited to run a flat Chicago Marathon in two weeks.
The biggest mistake that runners make in marathons is running too fast in the first half.
I keep thinking about the NYC market right now, is whether the market can keep up the pace it’s running, or if it will fall apart.
Not the perfect analogy- I mean, when did the race start?
But I met with our firm’s chief economist, Greg Heym,who will be widely quoted next week, and Sofia Song, who is the chief numbers person at Streeteasy, the top NYC site just acquired by Zillow.
They agreed on a few key data points:
- Since 2009, the market has improved 8-10% per year.
let’s call that the beginning of this run.
- Inventory is down nearly 40% year over year
- Despite low activity, sales volume is at its highest per
For Streeteasy, 4200 transactions is the highest in the history of their tracking, even thought inventory was down 20% from Q1.
- The market is mostly at new highs, and when combined with one-bedrooms units and studios, it is down 2% from the peak of 2008.
- Inventory should be at 7000-8000 to have a solid and healthy market.
Currently we are in a serious seller’s market.
- The $3-5mm price point volume has gone up 40% in the last 24 months
- Despite media outlet news, the rental market has softened somewhat due to buyer activity
- Trends which seem to bear out the continued strength would be declines in price cuts for units on the market, along with “Time On Market” reduced 40% to only 69 days.
This number was over 120 days not even 3 years ago
So what will the Q3 reports show?
Neither expected any relief in site for inventory.
Greg felt that an additional 10% of price appreciation could lead to a loosening of the inventory flow.
This, coupled with some tempered demand as rates creep up, should keep properties on the market for a bit longer, and should pushing rents up as well.
Given that sales are already slowing across the US as rates go up, it’s not hard to predict that we’ll see some slowing.
But for now, 40% of the deals here are all cash.
Unaffected by mortgage rates in a direct way.
What we’ll likely see as results of Q3 are massive number of closings at all price points.
Even with the seasonal adjustments for volume, the report will show massive price appreciation.
Further, BHS is expecting to have its second best year in its history this year.
While that is a testament to the strength of its brokers, and the quality of the clientele we serve, it also shows the flurry of buyer interest.
At present, buying is less expensive than renting, assuming a 25% downpayment.
Foreign investment will not necessarily show up in the 3rd quarter data, but it is driving the condo side.
We’ll see major appreciation in Harlem.
We’re going to see a decrease in volume in Brooklyn due to utter lack of inventory.
In fact, we’re hearing about buyers fleeing Brooklyn for Manhattan because the pricing in some places is equivalent.
And we’ll see incredible price appreciation in large condominiums.
The demand in two-bedroom, one-bath properties which I’ve been tracking for 18 months is here.
Pricing has pushed up over $1mm for many well-located two beds, on the Upper West Side, for instance.
I’ll wrap up by just saying that there is some concern in the Real Estate community and from clients about the presumed winner of the mayoral race, Bill DeBlasio (aka DBD).
Fears about tax increases and how that will impact the housing market, etc.
Per Steven Spinola, who runs the Real Estate Board of New York,
the main lobbying organization for the RE industry here, real estate taxes are the steadiest part of the budget for the city.
If they go up too much, it could really impact purchaser ability to buy.
However, some of these fears of massive tax increases should be tempered by the fact that the construction industry provides a significant chunk of jobs and is
the largest number of union jobs after the city itself.
So…while it doesn’t necessarily make me feel warm and fuzzy inside, at the very least there’s some comfort to the statement “New York lives on real estate.”
Of course, I don’t think anyone could possibly believe that 10% year over year appreciation is sustainable.
Four years is a pretty long run.
At some point things have to slow down.
But this quarterly report won’t show it.
We’ll follow up with the actual numbers next week.