Muted Expectations
Where does New York real estate stand today on the boom/bust continuum? Several recent articles in major publications have addressed the issue of “inventory overhang,” that phenomenon by which supply begins to outstrip demand and a backlog of unsold inventory accumulates in our New York marketplace. As I read, I think about the many buyers we represent who are searching in vain for a nice 7 room apartment in Carnegie Hill or a good 2-bedroom on the Upper West Side. One of our recent open houses for a newly listed 5 room in the West 80s hosted almost 100 people over a two-hour period. They were lined up on the sidewalk! I don’t think they would describe themselves as benefiting from inventory overhang!
In New York today it is impossible to write about THE market. The submarkets behave so differently that there is no one-size-fits-all description which encompasses all their disparate realities. The fate of the Billionaire’s Row condos along 57th Street do not reflect the reality of co-ops in the West 100s, or townhouses in Bed-Stuy. As many other writers have noted, we have reached a saturation point in the hyper-extensive midtown and downtown condominium markets. The number of these $30 million plus condos reflects an expectation of interest from both domestic and foreign buyers, but the velocity at which the latter are buying here in New York has slowed dramatically amid economic issues in China and Russia, a huge drop in worldwide oil prices, and a strong dollar. More affordable, neighborhood specific homes for full-time New Yorkers continue to experience strong demand. But even there, the market is changing.
In rising markets, buyers tend to adjust fast: they must if they hope to succeed in purchasing a property. Once they lose one or two to higher bids, they understand what they have to do to win. When the market plateaus or dips, however, sellers adjust much more slowly. Every day this month has brought hundreds of price drops among our existing inventory; these reductions highlight nothing so much as the unrealistic nature of the original prices. As a seller, it is hard not to feel attracted to the agent who gives you an inflated price, but beware! All an inflated price brings a seller is a slower sale and fewer dollars down the road. The New York markets are NOT rising. Most have plateaued, some are in decline. While demand remains strong, there is little overbidding or overpaying anywhere since the beginning of 2016. Those properties priced above the last similar sale just gather dust on the market. While comparable sales still provide the best guide to pricing, the wise seller does not seek to exceed the price per foot of the last similar sale. In the markets for property priced at $4 million or more, it is actually better to price slightly below the last sale for maximum exposure and efficiency.
2016 will not be year of record-setting prices. It looks to be a year of reduced volume and price consolidation. Assuming no additional global economic disasters, the New York marketplaces should be orderly, with demand and supply more in balance than in previous years. There will still be too much inventory at the upper end of the condo market, and too little in the lower third of the co-op market. Attractive, well valued inventory will sell at any price, but at the wrong price it will neither sell nor receive offers. That is today’s reality!