On a recent Spring Sunday, a French architect seeking to buy a townhouse in Harlem, attended a breakfast and Open House Tour hosted by the Real Estate Board of New York (REBNY).
After meeting and speaking to several brokers however, he abruptly left, with his family in tow, convinced that what he was hearing from brokers was a “conspiracy”
Surely the stories about bidding wars, the shortage of available homes and rising prices were untrue, he said. He just needed to find one agent there representing the City’s top firms, who would back him up to prove it.
Reality is, the market has shifted so dramatically since the start of the year that agents all over New York City are reporting that they are engaging with multiple buyers and in bidding wars on the first day of marketing their newly listed properties — and the sellers are accepting offers following their first Open House.
The reasons for this are substantial, numerous, and a convergence of multiple factors and pressures affecting apartment sales.
The population of New York City has grown every year but one for the past two decades.
Seventy percent of the housing stock in New York are rentals (of the remaining 30%, 55% are coops). Manhattan is small, about 23 miles long and three miles wide.
Due to low interest rates, it is cheaper to own than to rent; so there is a huge pool of local renters looking to purchase.
International buyers are looking to park fortunes in the safe haven of New York City real estate.
The uptick in employment in New York City has caused the City to recover “faster than expected,” says Gregory Heym, chief economist, Halstead Property. This has been fueled by the diversity of employment in health, education, tourism, and the rapidly growing technology sector, as well as a faster than expected recovery on Wall Street.
Lack of development over the last five years: While there were 33,911 permits issued for new residential development in 2008, the number dropped to 6,057 in 2009, 6,727 in 2010, 8,936 in 2011 and only rose to 10,334 in 2012.
Distressed sellers and banks holding foreclosed inventory are hanging onto homes in hopes of rising prices stemming losses.
Low equity — prices have not risen enough yet for owners to sell and trade up to larger more expensive homes, even if they want to, so fewer properties are being sold.
Sales volume is up 15% year over year, according to StreetEasy.
There are fewer than 5,200 apartments for sale in Manhattan – a 30% decline year over year. At an average of five months of inventory, it’s a true seller’s market.
“This market began at the end of last year and the spring home market came early. There is so much demand my properties have been selling above ask,” says Brian Phillips, Senior VP/Associate Broker at Prudential Douglas Elliman.
Among many example,s he cites a townhouse he listed in January 2013 that was only 12 ft. wide at the same asking price — $999,000 — as an 18-foot-wide house he listed the year before. At the first Open House, there were three dozen buyers and five offers. And this was for the “classic” Harlem house needing at least a half million dollars in upgrades and renovations. The seller accepted an all-cash offer at the asking price with ideal terms.
These same dynamics are being repeated in every other neighborhood from the East Village to the Upper East Side.
When the Spring market sales close and the sale prices are publicly posted, brokers are estimating that the year-over-year increases in sale prices will be anywhere from 10% to 20%.
With solid neighborhood and building sales comparisons sellers will at last be inspired to sell, and buyers will get the opportunity to comparison shop – they might even get one whole “New York minute.”