Chief Executive Officer, Warburg Realty
Our New York City real estate market faced (and overcame) many challenges during 2017. Although we spent the entire year managing downward price pressure in both the sales and rental markets, the market was active and saw a number of high profile sales. Those included big co-ops and major condos, especially at 432 Park and some of the marquee buildings in the Financial District. Overall, it has been a year for both buyers and sellers to adjust their expectation.
The year started out strong. After a slow fourth quarter in 2016, buyers stepped up in many price categories during the early part of the year. Although rentals were already slowing down as inventory from the many investor purchases saturated that market, we saw steady activity throughout the sales markets below $6 or $7 million. Activity remained strongest in the market below $2 million, but the mid-sized co-ops of 6, 7 and 8 rooms also enjoyed market strength and good prices, although typically without a plethora of showings. The buyers out there were both reasonable and serious!
During these first few months of the year, ultra-high-end condo sponsors began quietly negotiating bigger discounts with promising buyers. The market for properties above $10 million seemed flooded with inventory, with another ultra-expensive penthouse seeming to appear on a different corner in NoHo or Nolita every week.
Even with negotiability, sales for the top new condos slowed considerably from their pace of the same quarter during the previous year. And as winter morphed into spring, the price malaise became more generalized.
Our spring market was uncharacteristically slow. No big influx of exciting new properties arrived on the market, but inventory continued to rise as properties remained for sale for increasingly lengthy periods of time. There were fewer big ticket sales, and the e-mail boxes of agents were crammed, day after day, with price reduction notifications coming from neighborhoods all over town. As we moved into summer it began to seem that sellers had heard the voice of the market: optimistic pricing does not sell property in 2017. Homes sold only when prices tied tightly to value, and when staging guaranteed that the property present the best possible appearance. And as more and more prices moved into the appropriate range, more apartments and houses which had lingered on the market were sold to buyers with realistic expectations. Those buyers who bid too low, like sellers who aimed too high, failed to secure their desired properties.
The pace of sales remained lackluster throughout the summer, with numerous co-op properties returned to the market by mysterious Board rejections. Then, after Labor Day, activity picked up. Even the high-end market was busier through September and October. As Thanksgiving approached, and debate about the Trump tax plan with its elimination of the deductibility of state and local taxes came to the fore, buyers began stepping to the sidelines. While we closed a number of large deals during the last weeks of the year, we also saw buyers backing away and a few even discussing dropping their deposits (although none of them did) as the full impact of the new laws on high tax states like New York became clear.
The most reliable markets throughout 2017 occurred in boroughs other than Manhattan. Brooklyn (except in the Heights and some parts of Park Slope where prices are now so high that market behavior parallels that in Manhattan) has seen steady demand and continued multiple bidding throughout the year. As the Long Island City market remains very strong, buyers are looking for value in Astoria, another waterfront neighborhood with easy access to the city center. And the beautiful Art Deco apartment buildings along the Grand Concourse in the Bronx are being brought back to life; rehabilitation and renewal are also sweeping the South Bronx.
Brooklyn | Queens
Luckily the tax changes are no longer a mystery. There will be both burdens and benefits for most of the constituencies we deal with. But with a strong stock market AND lower prices (2017 was one of those interesting years in which these two markets traversed opposite paths), opportunities for serious buyers abound. With high employment and a big Wall Street bonus season on the horizon, I am optimistic about the market for 2018.
Data Source: Perchwell