Warburg Realty First Quarter 2014 Market Review
During the first quarter of 2014 real estate inventory in New York City remained at historic lows. In spite of a small (and quickly absorbed) inventory spike in January, there remains little for sale in almost every price category. And the good properties move fast. Only last week a beautiful big pre-war 4.5 room co-op came available on the second floor at a top Upper West Side co-op. We had a buyer who loved it; we encouraged her to offer 10% over the asking price (her own property on the East Side had just sold for 17% over ask). The winning bid came in at 16% over ask. The same scenario is being played out every day in neighborhood after neighborhood, in apartments and houses of different sizes and price ranges, all over the city. Only the very top of the market sees an excess of supply, because these apartments typically appeal to a much smaller audience, and the pricing is often so ambitious.
That said, most buyers are neither heedless nor exuberant. They analyze. They weigh. They lose sought after properties because they bid too low. They can’t find what they want, and when they do they can’t be certain of obtaining it. If 2006 was a market of buyer excess, this is a market of buyer angst. The word “overpay”, rarely heard during the pre-crash boom years, lingers on many New York buyers’ lips today. So they will bid aggressively on a property they perceive as well priced, while not bidding at all on a property they perceive as overpriced. Post-recession, no one believes any more that real estate values only travel in one direction.
Foreign buyers remain the exception, and in many ways that exception drives the market. As newly built (and not yet built) condominiums continue to trade in excess of $4000 and $5000 per foot, especially on the now uber-glamorous 57th Street corridor, prices all across Manhattan and northern Brooklyn are impacted up. At the same time, the price gap between the new condominiums and co-ops has never been greater. Co-ops thus increasingly attract foreigners as well as local buyers; they are drawn not only to the grandeur and location which have for many generations appealed to New Yorkers, but perhaps even more to the prices. In real estate offices all around the city, the phrases “money in this country” and “green card” are being uttered with growing frequency as Asian, Russian, South American and European nationals see co-ops as the new value play.
In the co-op market pricing is still key. Outside the proper pricing zone properties sit, while inside it they receive multiple offers in a matter of days, especially if they are in great condition. This holds as much for a one bedroom in the East Village as for a four bedroom on Park Avenue. And in this market in which first impressions count more than ever, staging has become a key component for success. I like to tell sellers that buyers don’t know if they will buy your property within the first thirty seconds after coming in the door, but they know if they will NOT buy it. With immediate impact so important, clean light colored walls, minimal clutter, and neutral furniture can make the difference between multiple offers within a matter of days and weeks or months without a sale.
The Brooklyn boom continues at breakneck pace, moving ever south and eastwards. The beautiful landmarked townhouse blocks in Prospect-Lefferts Gardens are increasingly sought after, as are the spectacular Victorian frame houses, with a garage and front and back gardens, in Ditmas Park. Floor throughs in Park Slope, co-ops in Prospect Heights – all sell in a matter of days at ever-increasing prices. In Bed-Stuy even brownstones on the iffy blocks cost $1,000,000 or more. Long Island City recently broke the $2,000,000 single family house barrier, while in the Mt. Morris Park area or Hamilton Heights in Harlem house prices hover between $2,500,000 and $3,000,000. High quality housing stock, whether in Manhattan, Brooklyn, or Queens, is in demand everywhere, breaking down neighborhood barriers at an unprecedented clip.
People ask when the supply/demand equation will even out again; honestly we don’t know. But I think demand will outstrip supply for the foreseeable future. The city is still cheap and secure by global standards, drawing safe haven capital from all over the world, while its dynamism and openness to all cultures and lifestyles make it a magnet which draws from all over the country. The new construction now underway will not be enough to slake the thirst of so many people from so many places, whether they are seeking a home or an investment (or both). So barring a cataclysm it’s going to be a (sensibly priced) seller’s market through the second quarter and beyond.