Forward into Fall

Although the beginning of fall is officially a month away, today it feels like fall. There are a few leaves changing color (early, but still…) and I am thinking about what a tumultuous summer it has been for Americans. Economists and politicians were united in predicting recovery in 2011, but instead we have gotten a debt ceiling crisis, a bond downgrade, persistent high unemployment, slow growth, and the threat of inflation.  The E.U. is worse off than we are, with violent rioting in London and economic unrest throughout the continent. But New York has so far been a haven of stability.

I think there are a number of reasons for this. We are an English speaking international city which ISN’T having riots. Although the financial sector is shedding jobs again, the firms seem both stable and profitable. And while consumers nationwide seem to be stuck, the high end markets in New York, including real estate, continue to enjoy activity. We have seen deals done in August throughout the spectrum of prices, with a tilt towards the more expensive properties. But the two weeks before Labor Day are always a little slow and provide some time for reflection.

Inventory remains low for co-ops priced above $1.5 million in Manhattan, and for townhouses of all prices in Brooklyn. No one to whom I talk believes that is going to change much in September. The famed “shadow inventory” which was supposed to bedevil the condo market for years to come is being absorbed, with many foreigners purchasing units. We are finding traffic brisk at our new developments in Chelsea, in Harlem, and in the Financial District, although our buyers in both Chelsea and Harlem are locals – New Yorkers who appreciate the quality of today’s buildings and are excited to buy the newest thing. There is very little under construction so as these properties sell out nothing is replacing them.

Why is inventory still tight here when the opposite is true elsewhere in the U.S.? For one thing, the market I am discussing is highly geographically contained, and cannot spread. For another, there has been minimal foreclosure, which is one of the primary sources of oversupply in the rest of the country. And for a third, even as the job situation drives people from New York to other parts of the country, the exodus to the suburbs has slowed. Commuting is hard. The schools are no longer so great. And teenagers seem to be getting into at least as much trouble in Chappaqua or Greenwich as they could in New York. The cultural richness, ease, diversity, and excitement of New York continue to be a magnet. Private schools are oversubscribed, as are many public schools like  PS 6 on the Upper East Side and PS 234 in Tribeca.

That said, most people feel cautious as we head into September. The wild gyrations of the stock market, added to everything else, have made many real estate buyers step back, at least for the couple of weeks until after the holiday. Those I speak to still want to buy, and they will act if they see the right thing, but they do not feel urgency. As I have said before, the hyped up pace which characterized the more expensive market in April and May has dissipated, leaving buyers focused on value, condition, and location. My guess is that these “Big Three” items will continue to dominate discussions as the fall progresses.