Since we committed, many years ago, to sending out our newsletter mid-month rather than on the 1st
of the month, it will sometimes go out the same day that taxes are due, or the day of the Boston Marathon bombing, or, in this case, about a month since the most recent stock market peak.
If only volatility were this delicious
Let’s assume that most people believe the stock market and the real estate market are correlated pretty highly.
Insofar as the stock market impacts the psychology of buyers and sellers, and the strength or weakness of the stock market impacts their wallets, I would agree, of course.
I might argue that psychology plays an outsized role in pushing buyers into the market.
That, with the fact that even in NYC, buying is currently cheaper than renting (but not by much here).
But
in the New York
housing market, we are starting to see a few things that are potentially concerning, given
the stock market pullback.
Will the pullback, or volatility in general, impact housing in NYC?
I’ve already commented on the 3rd Quarter Report here and here, which offers a lot of rosy numbers to show the strength of the market.
Lest things get too “boring” or “dull”….
First, we have
seen inventory creep up in the last few weeks.
Still, we
are seeing aggressive pricing in many sections of the market.
When units are not flying off the shelves, many sellers seem to be
adjusting prices pretty quickly.
I don’t know that the market is any more efficient than it’s ever been, but with an average of 70 days on the market before properties go into contract, I have to think that the market is speaking more loudly than usual these days.
As I’m writing this, we’re seeing the stock market heading upward, but for all I know, news could send it back down again today or next week.
I certainly am
not going to make any predictions.
Because of the pace of price appreciation over the last 12 months, the potential for mispricing is relatively high.
My advice on pricing has been, in most cases, to price cooperatives very close to or slightly below where I see market value.
The more buyers who see a property as well priced, the more buyers who will submit offers.
This has resulted in deals at asking price or higher.
Proper pricing seems to be a working strategy, then, though not always followed by sellers.
As the buyer pool thins – as the price point increases – buyers may be inclined to push back a bit on what has been perceived as unrealistic pricing.
Even though mortgage rates are at 16-month lows, thereby helping purchasing power a bit, inventory that needs any work whatsoever has been sitting a little bit, and this
explains some portion of the price cuts we’re seeing, too.
With condominiums, the pricing strategy, by definition, can be more aggressive, both because buyers expect to haggle, to a degree (especially foreign buyers) and because the demand has not dissipated, especially for 1- and 2-bedroom condominiums, many of which are being purchased strictly as investments.
Even in this environment, there can be the tendency to overshoot on pricing.
And here, too, we’re seeing some condominiums sitting.
In 2007, $2000 per square foot was incredibly rare.
Now, we’re seeing
apartments all over selling in the $1700-1800/square foot range
– pretty remarkable.
Yet, those numbers have not reached everywhere.
Where do I come out on this?
Does stock market volatility do anything to the Real Estate Market?
Does a market dip serve as fodder in an apartment negotiation, especially with properties seeming to
stay on the market a bit longer
than in recent months?
Unfortunately, I think not.
Overconfident pricing will impact the housing market far more intensely than the current stock market volatility, given continued low rates, low inventory, and strength of the job market for high earners.
Sorry to disappoint anyone who is hoping for a major impact on the prices they are seeing in the real estate market right now.
Unless we see a much more far-reaching correction, or some broad game-changing impact from Ebola, any impact will be muted.