Looking back over the first quarter of 2013, the real estate recession seems a distant memory. Prices have escalated to near, at, and even above their 2007/2008 highs, and demand relentlessly outstrips supply all over town. It is hard to imagine that, only four years ago, buyers were sitting on the sidelines, agents could not move the inventory we had on the books unless we aggressively reduced prices (usually anywhere from 25% to 40% below the high only a year earlier) and extraordinary deals were available to those with the fortitude to act. Ironically, many of those buyers who for years had claimed they were awaiting a drop in prices were themselves too apprehensive about the future to act when the opportunity DID present itself. It compelled many buyers to re-assess their willingness to really BE contrarian rather than simply claiming to be so. For most of us, doing what others are doing feels a lot more comfortable, even when we have to pay for the privilege.
There are few such opportunities in 2013. Nonetheless, today everyone with money wants to participate in our real estate market. Foreigners, be they from Russia, South America, or the Euro zone, continue to be drawn to the relative stability of New York and our bargain pricing compared to other international cities. They particularly like the luxurious Midtown condos: old favorites like 15 CPW and the Plaza now vying with newer additions such as One FiftySeven, 452 Park Avenue, and the Carleton House. Further uptown, the elegant new building at 135 East 79th, an updated version of the glamorous prewar buildings which surround it, sold out – with the exception of the penthouse – in a matter of months. And at the Macklowe conversions at 737 Park Avenue and 150 East 72nd, trading is brisk.
In the high end co-op market pricing remains the key. Since the post-2009 fade-out of the investment banker as our primary customer, a diverse group of careful, value-driven purchasers have inhabited this marketplace. They do their homework, and being mostly local people (as co-op buyers usually are) they are highly conscious of recent prices and how they vary from building to building. And often those willing to overpay are not acceptable to these highly demanding Boards.
The weakest marketplace in Manhattan remains smaller apartments east of Third between 96th and 23rd Streets. There is no inventory shortage in the studio and one bedroom marketplace, and prices remain somewhat depressed in response to the excess. But move into the two bedroom arena and suddenly everything is different. Two bedroom open houses have been mobbed with 40, 50, 60 visitors on a Sunday afternoon, followed within 24 hours by multiple offers and competitive bidding. The same remains true with reasonably priced larger apartments: one of my agents told me today that her mint condition, but small, seven room duplex exclusive received 100 visitors at this past Sunday’s open house. When buyers sense value, especially in desirable areas, they descend like locusts.
Only a few years ago the Harlem market looked to be oversaturated with new condos, many of which were converted to rental by developers eager to generate some income from these empty, seemingly unsalable properties. In the last 18 months West Harlem has done a complete about face. All those condominium units, and more besides, have been snapped up, leaving a shortage of inventory and escalating prices where buyers could still take their pick in 2010 and 2011.
Brooklyn seems the most frantic market of all. In Williamsburg, Park Slope, Prospect Heights, Fort Greene and Windsor Terrace, virtually everything with a somewhat reasonable price tag receives bids from a minimum of five people within days of appearing on the market. It is not uncommon to speak to buyers who have been outbid five or six times in their search for property, leading them to either drop out and rent or aggressively offer 10 or 15% over the asking price after one quick visit. These are the realities of today’s marketplace.
Barring unforeseen events, I predict that the balance of 2013 will offer more of the same. There are few signs of abatement in either buyer interest or inventory shortage. Depending on how much the rental market eases (and there has been a bit of easing in the first quarter), the small apartment market will either limp along (if the vacancy rate does not drop again) or firm up if buying once again becomes a better alternative than renting for younger people. Throughout the market the interest rate environment will continue to motivate buyers who know that these historic lows will likely soon disappear as the economy continues to improve. And asking price increases, which have been modest during the last three months even as competitive bidding has driven sales prices up, are becoming commonplace. A property which receives a Board turndown at price A will now come back to the market at A plus 10%, and often obtain that new price, or more! It’s a brave new world, again.