New market studies have shown buyers are eating into the New York apartment inventory, setting the scene for a tight summer housing market.
Last week, Streeteasy released an April 2017 report that said inventory has shrunk by 11 percent in Manhattan and 10 percent in Brooklyn year-over-year.
The analysts attributed the decrease in inventory to increased job growth and more confidence among first-time home buyers, who have fueled demand for homes, especially in more affordable areas of the city.
“Having gone through a period of strong economic growth, demand for housing is going up, particularly for more affordable sales units in areas popular among first time buyers such as Prospect Park and Upper Manhattan,” said Grant Long, senior economist at Streeteasy. “Construction in these areas and at relatively affordable price points across the city has not kept pace with demand, and has lowered inventory heading into the busy summer months.
“Expect to see heightened competition among buyers and prices rising at a faster pace this summer. New Yorkers looking to buy this summer should do their research before heading into the market and be prepared to move quickly when they find a home fitting their needs and budget.”
The report noted that Manhattan resale prices hit another record high, with the median resale price of an apartment in Manhattan rising 1.3 percent year-over-year to $993,592, while in Brooklyn, resale prices also hit another record high, with the median resale price rising 6.3 percent year-over-year to $584,121.
Citi Habitats president Gary Malin said he sees certain segments of the sales market in New York City doing well, with people looking at both sides of transactions to see what makes sense for them.
“I certainly know there’s definitely activity, but when you get above $5 million, people are getting more deliberate in their approach,” said Malin.
“Things are not moving. The average time on the market is high. I think there’s plenty of demand, and plenty of people who would like to transact, but plenty of construction is coming online and people feel that they have options.”
Malin said apartments in good locations do better, and while some apartments may take longer to move than others, most people feel strongly that prices need to come down to some degree.
“The under $3 million market is still very strong, there’s still a lot of activity and a lot of interest because they have a long-term prognosis for staying here and living here,” said Malin. “I just think the more expensive the market is these days, the more options there are, so people don’t feel rushed.”
Level Group salesperson Jeremy Swillinger has been working in the New York market for a decade, and has experienced the inevitable cycles of the real estate business.
While he echoed Malin’s thoughts on the ultra-luxury market, he said there is an uncertainty in the middle market that is causing deals to take much longer, as buyers take more caution during the purchasing process.
“I think on a macro level, people, generally speaking, want assurances in all aspects of life, including job security and the overall financial market,” said Swillinger. “Knowing things are on an upward trend makes people want to spend money. I believe consumers’ confidence in the market has dwindled.”
Swillinger feels that the residential market is not where it used to be, and buyers that were once motivated to purchase a property in order to get into the New York market have “simply disappeared.”
“While the demand is still here in New York City, we’re less with buyers purchasing on a ‘must’ basis,” he said. “They’re not just buying something to buy something in New York, they are wise about it.”
Swillinger said the volume of transactions picked up in the last couple months, during the height of the Spring selling season, but he’s not sure the momentum will last through the summer months.
“There are still some investors, some foreign buyers, but instead of looking at five properties and making a decision, they’re seeing 25 properties and making a decision, and when they do, they’re not pulling the trigger and getting the asking price, they’re taking their time and making sure the comps make sense, and making offers at a lower price,” he said.
“It all boils down to people wanting assurances, and there’s uncertainty with the financial market. Yes, it’s at an all time high, but overall there’s uncertainty that it will continue,” he said, adding that other factors like President Trump’s “unconventional” policy decisions have contibuted to buyer jitters.
However, in one specific segment of the market, properties in the $500,000 to $1 million price range are “selling like hotcakes,” according to Swillinger, who has experienced multiple bidding wars for clients looking to buy in that range on the Upper West Side recently.
“Those that are priced well and in good condition are getting multiple offers,” he said. “Anything above $3 million struggles. They don’t struggle like the $8 million and up market, that market has crashed. But developers are giving more incentives. They’re still being tough on asking price, but they would rather throw in a $100,000 parking spot or pay for closing costs.”
With interest rates continuing to rise, Swillinger sees those who purchase with the help of a mortgage entering the market more and more, while those who are cash-only buyers “sitting and waiting.”
“There’s nothing pushing them to go and buy something,” he said. “What’s the motivation if you keep seeing the market going down, especially in the higher brackets?”
Swillinger said his volume of business has stayed about the same over the two years, but what’s changed is how he gets his deals done.
A couple years ago, Swillinger could show a client five properties and they’d make a decision and the deal would get done “incredibly” easily. Now, he has to “go to bat” for a client and negotiate “every hat trick” to get the deal done, including throwing in incentives, being flexible and making sure the terms are best for both buyer and seller.
“My clients are making offers, but there’s a disparity, from where my clients as buyers are and where sellers are, the gap is slowly narrowing,” he said. “I think sellers now realize the market’s not where is used to be and are decreasing prices.”
With the price of land so high, there’s a struggle for developers, who have to reconsider how to deliver a product for the middle market versus the ultra luxury market, while still being able to turn a profit.
“I think that’s key going forward for developers,” said Swillinger, who is still positive about the future. “Everything’s cyclical. I’ve seen this twice since I’ve been in New York since the early 2000s. We’re still an attractive market and a safe haven for money. The odds of the money staying in their apartment are much greater than putting it in a bank account in a foreign market.”