I have received updates from many of my agents about their current experience of the real estate market. Here is what they are telling me:
* The rental market is unusually hot. With a vacancy rate under 1%, there is almost no inventory. Rents are therefore high and opportunities scarce. There is a big backlog of rental customers waiting for appropriate properties.
* As is often the case, sales are the yin to rentals’ yang. The sales market is especially slow for smaller units, with substantial inventory build up in the studio, one, and two bedroom markets. Many of my agents reported negligible or no traffic at their week-end Open Houses for these properties, especially in midtown, Murray Hill, Kips Bay, and along the Second Avenue corridor on the Upper East Side.
* Over all, the agents continue to report that condition is a vital factor to making quick deals. Buyers throughout the market really want mint condition. And a well priced mint apartment is the only one likely to receive several bids today. Urgency has pretty much vanished from the buyer lexicon; they take their time. And nothing goes smoothly. It takes attorneys weeks to hammer out contract details. Deals still founder because of low appraisals. There have been many Board turndowns. As one of my agents put it, referring to colleagues, buyers and sellers, banks, closing department personnel: “Everyone is difficult and cranky.”
* There is little new inventory in the higher price points. Many buyers are waiting for the fall in the hopes that a number of new units will come to market. While no doubt some will, the last few seasons have NOT produced a big uptick in listings, and I doubt that we will see the market flooded with new properties come September. When new things DO come on, buyers are in no hurry to see them unless they perceive them to be priced right. But a large, well priced, well located apartment will attract a flurry of activity.
* If a new listing does not sell in the first month, it needs a price reduction. And generally a price reduction must be 5% or more to be impactful. Sellers reluctant to lower their prices ask “Why don’t they just make offers?” Well, they don’t! All my agents agree that buyers want to see a reasonable asking price before they will make an offer or even schedule an appointment.
* Condos are performing better than co-ops. There is still substantial demand from foreign investors, although some are holding back because of apprehension about the Eurozone crisis. Condos tend to sell faster and for more money than co-ops on a price per square foot basis, even when the common charges and taxes are high, because the buyer pool is so much deeper.
* In Brooklyn, everyone wants a townhouse for a million dollars or less. Houses needing renovation come onto the market below a million in Windsor Terrace, in Prospect-Lefferts Gardens or Prospect Heights, even in Midwood and they get snapped up. There are always multiple offers on these properties. This part of the market is hot.
The market continues to behave very differently in different segments. The ultra luxury market remains strong, with a number of deals being signed in the last six weeks in excess of $20 million. The small co-op market is awash in inventory. The condo market, dependent on foreign investors, remains brisk for units of all sizes, even in the less gentrified sections of Harlem and Greenpoint. Inventory is thin for the six to ten room co-op market, or the 2,000 to 3,000 square foot loft market, but the buyers in this segment are still cautious and price sensitive. In fact, buyer price and condition sensitivity, a slow pace of negotiation and contract signings, and ongoing intense deal scrutiny on the part of Boards and banks are the trifecta of dominant realities in today’s New York real estate marketplace.