January 1st 2014
Mann Report Residential
(1) Housing stock shrinks further.
An overriding and ongoing lack of inventory defines the 2013 market. All analytics point to the lowest level of supply in more than a decade. The shortage has heightened competition among buyers and driven up price levels. Demand has remained consistently strong and is expected to be sustained.
(2) Absorption is hastening.
Properties in all price ranges are being absorbed at a faster rate than new properties are coming to market. Absorption rate, calculated by taking the total number of active listings and dividing by the average number of closed sales over a six month period, is significantly low, confirming a seller’s market. According to a report by Michael Vargas, President of Vanderbilt Appraisal Company, the Manhattan market overall was at 4.1 months absorption rate in October. A balanced market historically hovers at six months. All neighborhoods and price ranges experienced supply shortages, but the Upper West Side showed the lowest with less than 600 listings, or an absorption of 2.9 months.
(3) Prices and transaction numbers continue to rise.
In the 3rd quarter, sales reached a 6 year high in dollar volume. REBNY’s NYC Residential Sales Report which analyzed data from all 5 boroughs reported that the total consideration for all residential sales in New York City during the third quarter of 2013 was $11.3 billion, up 31.63% from the third quarter of last year and 38.06% from 2013 Q2. The total volume of transactions in the third quarter was 14,073, up 28% from the third quarter of 2012 and 33% from the 2013Q2.
(4) Competitive bidding has become commonplace.
When a well priced offering comes to market, inventory starved buyers and their agents rush to view. Within days, sellers’ agents’ are collecting multiple bids, reviewing terms and evaluating financial profiles of prospective purchasers. The environment is particularly challenging for buyers who are new to the market and for those who require financing. Often it takes losing a property to understand the market’s speed and strength. For buyers who require financing when competing with cash buyers, it’s essential to consider waiving a financing contingency, securing an advance appraisal or financing post closing.
(5) The ultra luxury market is booming.
Developers are building larger spaces at higher prices for this uber category driven only partly by foreign money. Purchasing apartments from plans for units that won’t be ready for another 12-24 months, these buyers are rushing to be “first in” before developers raise prices with new amendments to the Attorney General’s Office.
• It’s tough to even get an appointment at Greenwich Lane, the Rudin family St. Vincent’s Hospital condo conversion which will feature 5 buildings and 5 single family homes along West 11th and 12th Streets between 6th and 7th Avenues where prices average $3,500 psf for mostly two bedrooms from $2-20M.
• A new crop of skyscrapers so tall they need approval from the Federal Aviation Administration has been emerging. The one that’s gotten the most press is Extell’s One57 which will have the 5 star Park Hyatt Hotel on its first 30 floors. Called the “Billionaire’s Club” by the NY Times, One57 reports that 70% of its 90 residences have sold at $11,000 psf. Standing 1,004’ tall, this glass curtained tower will be the highest residential building until its southeastern neighbor 432 Park Avenue is completed in April 2015. Macklowe’s 1,400’ tower is rising 90 stories high above a retail and office complex and offers ten full floor 8,000 sf homes starting at $64M and smaller 1,400 sf units at $6,894 psf.
• 18 Gramercy Park holds the downtown record so far for a $42M sale but that will soon be topped by Tribeca’s 56 Leonard Street when the 60th floor Penthouse closes at $47M.
(6) Chinese developers are competing with NY based rivals for high profile properties.
As China lifts its sanctions against overseas investments, we are seeing more new developments from Chinese investors. According to a recent Crain’s article, Xinyuan Real Estate has broken ground in Williamsburg on a 216 unit condo. Other Chinese developers include Greenland Holdings who invested $3B for a 70% stake in Brooklyn’s Atlantic Yards 6,430 unit project; Fosun Group is paying $725M for the landmarked 1 Chase Manhattan Plaza; Zhang Xin paid an estimated $700M for The General Motors Building in May.
In 2014, New York will welcome a new mayor, and there’ll be a new Chairman at the Fed. The imbalance between residential supply and buyer demand will likely continue, especially in the Big Apple, shaping the way buyers, sellers and their agents transact the business of real estate. Here’s to more of the same in 2014. Cheers!