Perception vs. Reality
Every January stories abound which review the preceding year in real estate. With the press reporting that during the fourth quarter of 2015 the average sales price of apartments hit $1,950,000 and the median price hit $1,150,000, the news confirms most people’s belief that New York is only for the wealthiest few. But these statistics, while accurate as far as they go, fail to present a full picture of the reality of our marketplace.
Most significantly, both the median and average prices are skewed by condominium sales which were, in many instances, signed several years ago. Since pre-construction sales now account for a substantial percentage of units sold in new condos, and since these sales typically take place between six months and two years before the building is ready for occupancy, the closing prices tend to tell us more about the activity a year or two ago than they do about what is happening today. A few sales for $75 or $80 million, signed in early 2014, inflate these statistics. If we remove these new construction sales from the equation, a far more complex picture emerges.
It remains true that prices for smaller units all over town continue to rise in both co-op and condominium buildings. Almost anything with a price point under $2,500,000 and a reasonable price-per-square-foot relationship to other recent sales is in high demand and sells quickly, whether in Manhattan, Brooklyn, or Long Island City. As long as rents remain high and mortgage rates low this probably won’t change much. That said, lots of one bedrooms and even some small two bedrooms still sell in Manhattan for under $1 million. In fact, sales of apartments for under a million represent the largest transactional segment of the sales marketplace.
As the price points rise a different story begins to emerge. While the market for properties from $2.5 million to $5 million is still active, the pace has slowed over the second half of 2015, and inventory, while still thin, has increased. The market between $5 million and $10 million also shows more available inventory and a considerably greater average time on the market than during the previous year. The same story, only more so, applies for properties between $10 million and $20 million. And so on…
Most experts agree that a listing supply* of six to eight months is healthy; the $2.5 million to $5 million market segment has supply close to this equilibrium point. The market for less expensive units continues to be undersupplied, with a supply of two or three months throughout the city overall. And at the other end of the supply/demand chain, there currently exists a supply of over forty months (!) for condominiums priced over $10 million.
Statistics can deceive us unless we understand the full story behind them. Not every property in New York costs a fortune. For sure it’s an expensive place to hang your hat. That said, you don’t have to spend the average or even the median price quoted above to find a comfortable and lovely place to call home.
*Listing supply is defined as the number of listings absorbed within a particular marketplace in a particular period of time. So a listing supply of six months means that there is enough property available on the market to satisfy six months of normal demand.