Manhattan Market Analysis

Table of Contents

May 2020

The Corona Virus Effect on New York Real Estate

 

I hope everyone is staying safe and healthy during this tumultuous time. Many of you have reached out with questions regarding the impact the COVID-19 virus is having on the real estate market. While the jury’s out on what happens next, here’s the latest. 

In late March, New York City was put into a “medically-induced coma” so it could get ahead of the public health crisis. As a result, the New York real estate market has been totally frozen in time with minimal new contract activity over the last two months. Physical showings have been banned by New York State. And, New York City has been pretty much on lockdown since mid March. However, those deals that have been in the works before the pandemic hit have been able to close virtually and banks have continued to fund mortgages

It’s now mid-May and New York is one month past the crisis peak and has awoken from its self-induced coma. Thanks to the leadership of New York Governor Andrew Cuomo, New York has successfully flattened the curve and is managing its way out of this crisis. While we are not 100% out of the woods yet, a staged reopening is being planned over the next few weeks and months. Many condo buildings will be lifting their moratorium on move-ins and move-outs as of May 15th and we expect the moratorium on showings to be lifted sometime in June. 

Looking in the rear view mirror to January and February 2020, contract activity had up 15% over the same periods last year, promising Spring 2020 to be a very solid selling season. Unfortunately, this is no longer the case! Currently, condo and coop inventory for sale contracted dramatically, with only 5,000 units listed for sale, 50% lower than usual Spring selling season inventory levels. Even the days on the market calculation, which counts the number of days a property has been listed for sale, has been frozen by the listing portals, as that calculation became meaningless once the moratorium on property showings was implemented.

While it is premature to draw inferences from the virus’ impact on the property market, former Federal Reserve Bank Chairman, Ben Bernanke, noted that this economic halt is more like a natural disaster than an economic depression. This is not a result of a breakdown in a financial system like in 2008 or the Great Depression. Banks are strong and well capitalized.  Thankfully, the Fed moved quickly on monetary stimulus and the administration moved quickly on fiscal stimulus. 

The only silver lining in all of this is that real estate prices will significantly benefit from record low interest rates and record quantitative easing. Asset price inflation is the intended purpose of quantitative easing, although it may take some time for the opportunity to present itself. Regardless of the level of real estate price inflation from this record QE stimulus, ultimately, NYC is still one of the top cities worldwide and people still need housing to either buy or rent. 

Ultimately, this is a health issue that can be solved, especially now that everyone is focused on the problem of Covid 19. 

If you would like to have a zoom call to discuss the market in more detail, just pick a time slot with me below:

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February 2020

6 Things You Should Know About the NYC Market this February

 

1. Significant Increase in Sales Activity over Last Year

  • Pending sales up 17% - Overall market
  • Pending sales up 25% - $600K - $1 Million  
  • Pending sales up 21% - $1 million to $2 million 

This demonstrates that the sales activity is up significantly over last year, which was the bottom of the market in terms of activity. Properties in the lower price points under $2 million are seeing the biggest rebound. We are finally seeing that demand is outpacing supply, something we haven’t seen in a while in NYC. Contracts signed in Manhattan have been up double digits in November 2019, December 2019, January 2020, and February 2020. A leading indicator, a prolonged bump in contract signed activity usually precedes price action. An unusually slow month, January saw an impressive number of contract signs, which is not common for the coldest month of the year. 

Anecdotally, we have noticed when calling other brokers to set appointments, at least 25% of the time these units already have Accepted Offers. Nothing like 12 months ago. The units that are going into contract either have been on the market for a while and went through several price cuts, or new ones that were correctly priced from the get go. Also, in the last case, we are seeing packed open houses & a few bidding wars (a remnant of a different era).

2. Luxury Market Activity Strengthens on Discounts

Discounts across New York are getting deals closed and in January we saw a median listing discount of 6.4% (a high rate for New York) which shows sellers have capitulated and deals are not getting done. While the highest increase in sales activity has been for units below $3 million, we have seen some improvement on the high end as well. 

For instance, the Olshan report noted: "Twenty contracts were signed last week at $4 million and above, the third straight week of 20 or more sales. The average price-drop from the original asking price was 18%, a total that was skewed by the top 2 sales."

"The average days on market was 803, a total that was elevated because half of the properties were sold by developers and had been on the market for years. That was the highest total this report has ever recorded since we began tracking this particular stat in 2012."

Central Park Buyers: If you’ve been watching the Billionaire's Row and Central Park market, opportunities are out there. Now may be the time to jump in before the market turns around. For example, for someone willing to live at Trump International Hotel and Tower in Columbus Circle, one can pick up a great direct Central Park view 3 bedroom for $3,300 per square foot (below). DJT won’t be president forever and this building will bounce back at some point. In addition, we have seen strong discounts at One57 and Time Warner Building as well, although the price floor for direct Central Park view in these and other ultra luxury buildings is hovering around $4,500 per square foot. 

1 central park west-2

Note that we keep hearing from buyers in this segment that they hear more inventory is coming on the market. While that may be the case for other neighborhoods, there are no new buildings coming into Billionaire’s Row. Furthermore, the inventory level below $20 million with an unobstructed Central Park view is limited, as most of these buildings have an average sale price of $30+ million. 

3. New Developments Vs Resales

New Developments priced 2-3 years ago are lagging on the market and the reason for that is that there’s a disconnect between developers and their banks and investors. 

What we are telling our buyers: there are tons of opportunities in the resale market with properties priced anywhere between $1,100 per sq. ft. to $1,800 per sq. ft. 

Of course, there are opportunities in the new development segment and have seen discounts of 15% in some buildings. Many of those buildings where you are seeing double digit discounts, however, were launched years ago. In contrast, we have seen buildings launched in 2019 with pricing that reflects the current market, offering few discounts from low asking prices, but still picking up many of the buyers closing costs.

The market is very price sensitive and dollar motivated. Is well known that a shadow inventory exists. These are units that were taken off the market from unrealistic sellers, or new development projects in fringe neighborhoods.  Buyers are very savvy these days and know how to spot a good value. If you purchased it in the last 5 years and are trying to sell it now, you are probably under water or at break even. Therefore, prepare for a bumpy ride. Gimmicks and tricks - there are many - won’t make an overpriced property sell.

4. Rents are Up 

After some softness over the last couple of years, rental rates are up significantly year-over-year. From the Real Deal - As apartment hunters try to figure out what on earth is going on with broker fees, they now have other news to give them pause: Rents were 5 percent to 6 percent higher last month than a year earlier in all three boroughs covered by the Douglas Elliman market report.

5. Mortgage Rates

Mortgage interest rates have plummeted since the same time last year and are resting near record lows. The 30-year fixed mortgage rate clocked in at 3.65%, while the stock market was close to a record high of over 26,900. In comparison, over the last 30 years, the same mortgage rate has averaged about 6.25%. In the last 10 years, the only 2 times that the rate has been lower was in September 2016, with a low of 3.42%, and in November 2012, with a low of 3.32%.

It is unlikely rates can go much lower, as we are already near historic lows. We are, therefore recommending that our clients refinance now or finance their new property purchases to take advantage of this artificially low mortgage rate phenomenon before it's too late. 

5. Coronavirus and Foreign Buyers 

While it is too soon to determine what the impact of the health scare may have on the real estate market, it should be noted that the New York real estate market has been anchored by domestic buyers and foreigners have been all but absent. Mainland Chinese buyers have been absent in the NYC market since 2016, Europeans have been absent as their currency has been low for an extended number of years. Latins and Brazilians have been largely missing as their currencies have depreciated.

Therefore, we don’t expect this to negatively affect the NYC market in the near term. Should the dollar fall and the health scare abate, the market might take off. Finally, certain Asian countries may see limited investment opportunities while authorities try to stem the spread leading to more investment in New York City, a risk free locale. 

January 2020

A Video Update from Urbandigs

A lot of clients have been asking what is going on in the NYC market, so I wanted to send you a quick update via a video from Noah at Urbandigs.com. He has done a a great job of distilling what is going on in the Manhattan real estate market.

 
The video main takeaways are:

 

  • Policy driven reset for the Manhattan Market in 2019
    • Federal TJCA tax law change beginning in 2018 that limited SALT deductions to $10,000 made it more expensive for primary homeowners (not investors).
    • Mansion Tax increased as of July 1, 2019 to a sliding scale affected timing of purchases throughout 2019.
  • Market has been stabilizing: sales moderated, signed contract improved, and supply growth slowed.
  • Pending sales up 7%
  • Bottom of the market happened in Q4 2018
  • "The hit already happened", so it may be a good time to buy now.
 
 
Are you in the market to buy in NYC in 2020?  If so, let me know what size property you are considering and I will send you a small selection of the best buys we are seeing for sale right now. The 4th quarter has seen some pricing at 2014 / 2015 levels. We don’t expect the market to deteriorate further, especially now that the tax changes have been baked into the new market.
 

For a while now, we have been telling our clients that the bottom of the market, in terms of activity, was around Nov & Dec of 2018. The numbers in November and December 2019 confirmed our view, as contracts signed increased in the double digits compared to the same month last year. Due to the weather in NYC, we have some distinct selling seasons, so we always need to look to the prior year month or quarter to see how we are doing. [Toward the end of the Urban Digs video, he confirms what we have been telling our clients by comparing Pending Sales].

The numbers for 2019 were confusing because a hike in mansion taxes were announced in April for purchases after June 30, 2019. This brought forward a significant number of high dollar sales into Q2 that would have naturally closed in Q3. This made Q3 2019 look terrible, in comparison, but when comparing a combined Q3 and Q4 in 2019 to the same period in 2018, sales volume was down only 4%.

The bad press from a disastrous Q3 2019, however, resulted in sellers (including developers) offering higher discounts. This, in turn, has resulted in an increase in transactions, both in the resale market and the new development market.

We firmly believe that the market correction in Manhattan is purely a policy driven reset in pricing caused by the $10K SALT cap. Robert Schiller estimated that NYC properties lost 11% in value because of this new tax law. The press discusses a supply issue too, but we don't necessarily see excess supply in the most prime neighborhoods. Of course, there is excess supply "C" neighborhoods like Financial District and Lower East Side, but prime UWS, UES, Greenwich Village, Tribeca, there just isn't. That being said, developers and sellers are offering some good discounts to move the product knowing the people tend to real the headlines and not focus on the details.

Contract activity is a leading indicator of pricing. If we continue to see double digit increases in contracts signed, we expect that pricing will rise and these discounts will shrink.

Request a Selection of NYC Properties

December 2019

Bright signs for NYC Condos in November

On average, buyers received a discount of 5.7% from the Last Asking Price to Final Selling Price in November 2019. That discount was the greatest in more than 8 years!  That's a pretty big spread for NYC and a great opportunity for buyers. 

Smart buyers have taken notice of the discounts available in the market and, as a result, contract activity of condos rose by 15% versus November 2018. A bright sign after a tumultuous year for NYC real estate (i.e., SALT caps, Mansion Tax changes and WeWork).

 

Opportunities at 35 Hudson Yards - up to 30% Discount on a handful of Units

The Related Group needs another 5-7 units for the Offering Plan of 35 Hudson Yards to be effective (they need 15% sold before people can move in), so they are offering some steep discounts on a few units for a short time. 

With the discount applied, the price per square foot for these units, which start on the 57th floor, is between $2,250 and $2,400 per square foot! Quite inexpensive for what they are delivering. 35 Hudson Yards has Four Season-style finishes that are some of the best we have seen in Manhattan.

Foreigner friendly with hotel services (a la carte) from the Flagship Equinox Hotel in the base of the building, residents of 35 Hudson Yards will experience true five-star living.  

35 Hudson Yards apartments

If you are not interested, do you know anyone who might be? You don't see this every day in NYC, and especially with the Related Group.

Let us know if you would like to learn more about this price incentive at Hudson Yards. We would be happy to share the images and video tours of each of these units. 

 

The Park Loggia at 15 West 61 Street

As predicted by us, 15 West 61 Street continues to be the best selling new development in Manhattan. In only 6 months Park Loggia sold over 65 units as off December 1st.

And why? Location, Location, Location!

The Park Loggia Columbus Circle

  • At the corner of Broadway and West 61st Street, just one block north of Columbus Circle, this 32-story tower will bring 172 apartments to the Upper West Side.
  • This is the first reasonably priced new development condo building built in the Columbus Circle area in over 15+ years
  • Priced for today's market, not the peak of the market 3 years ago. 
  • There is a constant lack of existing & new development options in this particular gem of a neighborhood in the UWS

 

Lantern House Launched Sales in West Chelsea

After 3 weeks on the market, The Lantern House is signing lots of contracts. No doubt the pricing and location have intrigued buyers.  Meatpacking District and the West Village are only 4 blocks south. The Hudson Yards is 10 blocks north, a straight shot up Tenth Avenue or along the High Line. The area around the High Line is now fully built, so we won't see any more buildings here. It is what it is....and West Chelsea is now one of the most expensive neighborhoods in Manhattan.

That's why it is refreshing to see such good entry level prices at Lantern House. It is the only new development on the High Line that has 1 bedrooms under $2 million (with very few as low as $1.45 million and 2 bedrooms under $3 million (with very few as low as $2.4 million). Of course, if you want River views, prices are higher, but still not at crazy levels like its neighbor XI. 

Lantern House West Chelsea

Related needs to sell 15% or 28 units before they can declare the Offering Plan effective and start closings. Closings are anticipated for September 2020. Developers are always the most motivated when selling the first 15% of the units, so they can move to closings quicker. It is the best time to get the best deal. After the offering plan is effective, developers will raise prices. 
 
 
 

New York City Tech Sector is on Fire

In the last few weeks, NYC has solidified its position as the second most important tech hubs in the world with massive leases signed in and around the Hudson Yards neighborhood. Tech companies are scrambling for prime Manhattan real estate to attract the city’s large and well-educated talent pool. The synergy with related industries makes NYC the right choice for these Tech giants. 

Read More

October 2019

Don't Believe Everything You Read

Manhattan Condo Market Slowdown

These sensational headlines sell a lot of newspapers and clicks, but don’t serve their readers in telling them what really is going on in the Manhattan real estate market. 

Yes, the 3rd quarter sales activity and prices were way down, but that was really because buyers rushed to bring sales forward to the 2nd quarter to avoid an increase in the mansion tax. Plain and simple. 

What is this tax about? On July 1, 2019, the mansion tax, a NY tax paid by the buyer at closing, rose from a flat 1% for properties $1 million and over to a sliding scale percentage ranging from 1.25% to 3.9% for the most expensive properties.  

While not booming, the Manhattan real estate market isn’t as described in these headlines. 

  • A leading indicator, Contracts Signed, declined only 2% in the quarter compared to last year. Far from a bloodbath! 
  • The most prime neighborhoods don’t have excess new development, although there has been overbuilding in some segments - the super and ultra-luxury segments. As we have noted before, there has been overbuilding in fringe neighborhoods like the Financial District, Lower East Side, and the Far Upper West Side, for example. Read more about this.

In addition to Record Low Mortgage Rates and Trump's détente with China (as of today), as the NY Post notes, there is “reason to cheer” if you are a buyer.

Knowing that these headlines will stick around in buyers minds for the quarter or longer, some developers of newly released projects have significantly dropped prices just in the past week. Notably, two of our favorite UES new developments (Hayworth and Beckford) dropped pricing 8-11% on in the last few days. See more info about them below:

It is clear that the Manhattan real estate market has gone through a reset. This was brought on by the 2018 tax law which made owning a primary home in New York more expensive. Now that the market has reset, we feel that there are opportunities for long term investors.

Interest rates are artificially low and it appears that positive steps are being made toward Trump's trade war, as we had predicted. It is impossible to time the bottom of a market, but we think we are past the worst of it.

 

New Developments' Price Cuts

The Beckford House and Tower, just received a significant price adjustment 2+ weeks after its soft launch. Thanks to the media, I’m sure! 

As we noted in our September 21st newsletter, we consider this project one of the best new developments in New York. Now, with a discount of 8-11% from their initial launch prices, it’s even a better deal now. The quality of the building and its finishes are comparable to 135 East 79 Street & 20 East End Avenue. And, we expect similar rental rates for Beckford, over $100 per square foot per year when delivered (in Spring 2020 for Beckford House and in Spring 2021 for Beckford Tower). 

Beckford House UES

Request Prices & Floorplans for The Beckford House & Tower

 

The Hayworth, another UES project that launched during the Summer, just reduced their prices today. For example, apartment 8A just got a price cut of 11%. With this reduction, 8A is priced at $2,101 per sq.ft., an outstanding price for this caliber of product. The Hayworth is a boutique building with only 61 units is situated at the corner of Lexington and 86 Street and across The Lucida. It will be one of the best condo buildings in the UES when completed in Spring 2020. 

The Hayworth

Request Prices & Floorplans for The Hayworth

 

Resale Market

Many seller's have finally come to terms with the market resulting in significant price cuts. In some cases, we are seeing a return to 2014/2015 pricing for resale units. Not in all cases, but certainly for some. Those properties that are not priced to the current market, however, will languish on the market. Those that are well priced have been selling. 

With a strengthening rental market and declining prices, yields are quite good, considering yields worldwide are compressing because of negative rates.

May 2019

Manhattan Condo Market Update

Those trying to time the absolute bottom of any market (real estate or stock market) will find it next to impossible, but sometimes there are clear signs...

A significant uptick in sales activity in April suggests the bottom may have passed!

What's Really Happening

April signed contracts in Manhattan rose by double digits compared to last March (up 15.6%) and same time last year (up 11.6%), according to Urban Digs. Signed contracts are a leading indicator in any real estate market. A significant increase in the number of signed contracts usually precedes positive price movement. We will be keeping an eye on this number as we move forward in 2019, but these green shoots are a very good sign that the market is stabilizing and even starting to turn around. Very welcome news after a disappointing first quarter.

The new tax law that was passed in December 2017 really sucked the life out of the Manhattan market over the last year. But, now that people have a better understanding of its affects after filing their 2018 taxes (due April 15th) some of that uncertainty has dissipated. If you recall, the law capped at $10K the amount of state income and local taxes (i.e., property taxes) (SALT) that a primary homeowner could deduct from their federal tax return, a miniscule amount for a New York primary homeowner.  This was a total surprise to most New Yorkers and caught many off guard. But, while the SALT cap did suck the life out of the market due to uncertainty, it had less of an impact on the high end of the market because of offsets in the form of lower tax rates, a higher AMT threshold and other loopholes.

With the tax change behind us and a tick up in sales activity, we think 2019 is the right time to buy a condo in Manhattan.  Consider the following on this report from Douglas Elliman:

 

  • Slow sales in 2018 have led sellers to adjust their expectations to a lower level. Numbers provided by Jonathan Miller Samuel.
  • Buyers now have more options to choose from, as inventory has built up from slower sales volume. This also puts downward pressure on prices.
  • Mortgage interest rates have declined 40 basis points (almost ½ point) since last May, making the financing environment very appealing.
  • GDP of 3.2% in Q1 2019 and killer job growth (lowest unemployment rates since 1969), all while inflation data is muted, keeping interest rates at reasonable levels to help fuel the recovery.

With lower prices, adjusted seller expectations, recently cut rates, certainty about the tax change’s impact and latest sign of a booming NYC and US economy, buying now is very attractive.  We expect to look back on Q1 2019 as the absolute bottom of this market cycle.

February 2019

It's a Buyers' Market in New York City

Today, we feel that the current Manhattan housing market is a once-in-a-decade or possibly a once-in-a-generation investment opportunity. In Q4 2018, Manhattan evolved into a pronounced buyers market, as inventory rose, sales slowed and median asking prices declined. There is significant new supply coming online this year at a time when there are still unsold new development units from the past 2 years. The market has been weak and sellers are highly negotiable. At the same time, New York City's economy is robust. We believe the combination of these factors make it a great time to make a long-term investment - setting up 2019 as the perfect time to buy.

This is a very rare occasion. Over the last 20+ years, Manhattan has been in a buyers market only two other times: in 2001 right after 9/11, which lasted just six months, and in 2008-2009 after Lehman Brothers collapsed triggering a credit crisis that lasted one year. The current buyers’ market began in late 2015, but only in the ultra-luxury segment, a small sliver of the market. Since then, however, the buyers’ market has widened. First to the luxury segment in 2016 and 2017 and now to all inventory segments, especially in 2018 after the new unfavorable federal tax law was enacted (discussed at length in our previous updates) which pushed many buyers to the sidelines.

As you can see from the chart below from Compound, if you buy Manhattan real estate at the right time (i.e. during a buyers market), the rewards can be plentiful:

 

Manhattan Condo Market News

As for details on how the 4th Quarter of 2018 performed:

  • Q4 2018 contracts signed were down 3% over the same quarter last year, the lowest level since 2012. The 3% decline, however, is attributed to a huge 19% decline in contracts signed for condos, offset by a large increase in contracts signed for coops.
  • Contract prices were down across all inventory types. Contract activity is more representative of the health of the current market than closed sales data, which often include legacy contracts entered at a time not necessarily representative of today’s market conditions.
  • In terms of closed sales, the median condo sales price has fallen by 8.1% to $1.48 million, the lowest it’s been in several years.
  • The number of condos sold in the fourth quarter fell from the third quarter by 22.7% and by 13.0% year-over-year, which means that sales volumes are slower than they’ve been in a very long time.
  • The median sales price per square foot rose, but the increase was skewed by very large dollar closings at two ultra-luxury buildings that started closings, 520 Park Avenue and 220 Central Park South.

Well, what does all of this mean? 

  • There is a window of opportunity to buy now.
  • Buyers have more spending power than before.
  • Buyers also have many more options from which to choose.
  • Developers have gotten more creative by offering new incentives, while individual sellers are significantly negotiating on price.
  • Buyers have leverage in demanding things that two years ago were a deal breaker for a seller, such as allowing mortgage contingencies or covering transfer tax and common charges.

Keep in mind that this rare occasion is happening at the same time the NYC economy is booming and in a position to keep growing and growing in years to come (i.e Google West Soho expansion, Hudson Yards opening in March 2019, etc.).

While deals are happening, a lot of potential buyers are sitting on the sidelines in a wait-and-see mode. Our caution to them is that it is impossible to time the bottom of any market. Often, a buyer will wait too long, miss the dip and lose their leverage. Interest rates have come off their 2018 highs, making it a good time to enter or renter the market, before they start ascending again. 

October 2018

Why Now is The Right Time to Invest in The Manhattan Condo Market

Warren Buffett said it best, "Price is what you pay, value is what you get . . . It is wise to be fearful when others are greedy and greedy when others are fearful."

Some recent reports on real estate in New York City have made some people fearful. When we look at the broad picture and the overall statistics in those reports it is fairly clear as to why those people are fearful, however, one must dig deeper to understand the whole story.

Manhattan condo buyers remained cautious in the 3rd quarter 2018 due to concerns over the new tax law (FN1) implemented at the end of 2017, despite a very strong economy, record breaking stock market, and still relatively low, although rapidly increasing, interest rates.

Manhattan real estate is seldom in a buyers market, so if you are interested in a safe long term investment, now may be the time to buy. This is not going to be a prolonged event or repeated any time soon. In fact, during Q3, the high end of the market (>$5M), which began a correction in 2016, started to bounce back somewhat, as discussed below.

 

Headlines Don’t Tell the Whole Story

While headlines regarding the quarter have been concerning, they don't tell the entire story. We need to look at what is happening today in the market and not 1, 2 or 8 quarters ago, which is what the quarterly market reports usually focus on. If you look at the number of Contracts Signed in the quarter, a leading indicator, this quarter was roughly the same as the same quarter last year.

  • Signed contracts in Manhattan showed a slight 1% decrease over the number signed in Q3 2017.

  • The best performing segment in terms of contracts signed was $5M - $10M (which saw a 30% increase in contracts signed primarily driven by sales at two new development, The Belnord and 100 E 53rd).

  • The second best segment was for homes price at $10M+, which saw a 10% increase in activity.

  • While we won’t know what units are under contract for, prices these units will be ultimately traded at until they close and are recorded, which could be many months from now, the bounce back in activity from a prolonged slumber is reassuring. For sure, discounting played a role in these sales.

Closed sales in the 3rd quarter 2018, however, show a different picture. When looking at closed sales, you are assessing only units that closed in the quarter, regardless of when the contract was signed. In the case of New Development, that could have been 3 years ago in some instances. Therefore, closed sales info can be somewhat dated, albeit still good information to capture trends.

  • Overall closings in Manhattan fell 8% (although up 5% over Q2 2018)
  • New development closed sales tanked, with a drop of 37%. This led some developers to significantly discount new development prices on those buildings that were overpriced to begin with or outside of the most prime in demand neighborhoods. Core Group reported the average new development discount at a near record 14% in the quarter, up from 8% last year.
  • Buyers driven away from the lofty prices of new development turned to resale condos, which increased 2%, while coop closed sales declined 8%.
  • Inventory in the quarter grew significantly, at 13%, which will result in longer future marketing times.
  • Resale coop inventory rose the most at 26%, while resale condo inventory rose 4%. New development inventory was down 5%.
  • The average price of a condo was $2.66 million, down 2.3%. The average price per square foot for resale condo units declined 5%.  
  • The average price of a new development was $4.33 million while new development price per square foot rose 4%.
  • The average price per square foot for the luxury market (top 10% of sales) rose 2.7% and the luxury entry threshold fell to $3.85 million.

 

NYC Real Estate News | Manhattan Market report
Photo credit: 111 Murray

The Macro Enviroment

  • The Dow and NASDAQ are riding high. Profit-taking may well make prices fall but, regardless of talks about international trade wars, stocks are high, and profit-taking looks very attractive.
  • Unemployment rate is down, and, statistically, the USA has full employment. Full employment encourages spending. Spending by consumers generates more profits for stockholders.
  • Deregulation is in full swing, so business development is very likely to continue on its upward drive.
  • There is no credit bubble, but the Chairman of the Fed says interest rates will go up incrementally through 2019. Higher interest rates encourage buyers to take out fixed-rate mortgages sooner rather than later.
  • High growth rates across the economy tend to make people wonder how long it will all last, so many hold back on major purchases. Economists, today, say there is no credit bubble on the horizon, so the consumer-driven economy looks sound.

 

Why We Are Confident in The NYC Market

To sum it up, we feel that this is a pretty good buyers’ market to be in, especially compared to 2008.

  • With sellers finally negotiating, buyers now have power
  • Interest are relatively low historically
  • The economy is booming
  • Deregulation is in full swing
  • Lowest unemployment in 69 years
  • New York City has the highest employment level in 50 years and NYC Industry is now well diversified outside of just finance
  • No Credit Bubble like 2008; Banks have tough requirements and do their due diligence
  • Company profits have never been higher, especially with the new low rate of 21%
  • Overbuilding in urban markets is generally absorbed quickly

Drilling down into the detailed numbers suggests New York City real estate market is strong. Most people will read the broad reports, but the astute buyer will listen to real estate specialists. To paraphrase Warren Buffett said when others are fearful this may just be the right time to buy in NYC.

May 2018

The New US Tax Law Effect in Manhattan 

The new US tax law, implemented on January 1, 2018, has created a lot of noise in the media. If you look at the fine print, however, the law will be a boon to corporations and real estate investors, including foreign buyers. For current homeowners, especially in Manhattan, it's a bit more complicated.

In Manhattan, uncertainty around the ultimate effects of the new law, which limits state and local tax deductions and reduces the amount of deductible interest on primary homes from $1 million to $750K, created a jittery market and is reflected in the latest Q1 market reports, which show Q1 activity down by 10%, according to Corcoran. The weakness in volume was found across price points, but, especially, was felt in the high end. Q2 sales activity appears to be recovering.

To mitigate the tax law’s negative effects, Governor Cuomo has made significant efforts to change state tax rules. We expect some uncertainty to remain in the market, which will put buyers in the driver's seat for the next few months, at least until the economy starts to heat up, an anticipated byproduct of tax reform.

It is worth noting, however, that many luxury buildings in prime Downtown Neighborhoods like NoHo, SoHo, Tribeca, West Village and Flatiron, and the core of the Upper West Side, for example, are faring quite well. Well-priced condos are still moving fast, pending sales are up over prior month and year, and we are still seeing 20% of deals being made above asking price, not an insignificant number.

March 2018

NYC Market Report 

The US Economy and New York City, in particular, have been experiencing strong economic performance in early 2018.  

  • New York City employment rose to an all-time high of 4.426 million people. NYC gained 702K jobs since 2009, an 18.9% increase, which is the highest increase since WWII and much higher than the nation, which added 11.5% new jobs. Technology, media, healthcare and tourism-related businesses were the industries that drove the most hiring over the last 10 years.
  • Dow Jones average has increased 25% since one year ago, clocking in at 25,000. With almost all companies reported for 2017, 75% of companies reported that their fourth-quarter profits beat expectations.
  • February jobs were up 313,000, exceeding expectations by 100,000, while the unemployment rate was a low 4.1%.

We expect to see more positive effects of the new tax reform later in the year and potential Phase II tax reform reducing capital gains taxes.  Stay tuned...

New York Property Management For Investors and Condo Owners

October 2017

Manhattan Market Report

There continues to be strength and activity in the core Manhattan market for condos. Record high equity markets, inexpensive and readily available financing, and clarity have helped propel the market. One year ago, there was great uncertainty regarding the US Election, interest rates were prematurely spiking and everyone was shocked by Brexit. Select statistics for Q3 2017:

  • Condo contracts signed between $1M - $3M increased 11% year-over-year
  • Condo contracts signed between $3M - $5M increased 8% year-over-year. 
  • The ultra-luxury condominium market ($10M+), however, continues to face headwinds, although this quarter saw 12% higher number of contracts signed >$10M.
  • Resales - $1,774 average price psf
  • New Developments - $2,320 average price psf
  • Luxury - $2,780 price psf, with an entry level price for Luxury (top 10% of sales) at $4.1 million.

February 2018

How Are Resale Inventory Levels in the Manhattan Real Estate Market?

"Buyers — A price correction already occurred, and over the last year or so the broader market has shown signs of stabilization and normalization. If you have a real need to buy and you find the right property, utilize this slow period for any leverage you can get in negotiations — you never know when a seller has had enough, and is ready to hit that bid."

Read the full article at: medium.com

We agree with Urban Digs. The Manhattan RE market has already corrected, especially in the luxury segment, and buyers have more leverage now than they did than from 2014 - 2016. We expect this leverage to continue in 2018, as confusion about new tax changes takes place.  We have found, however, that resale inventory supply is still low. 

We have looked at resale inventory supply levels in four prime neighborhoods that are popular with our primary home buyers and investors: Tribeca, Chelsea, Upper East Side and Upper West Side. We looked at the $5 - $10 million segment, $2 - $5 million segment and $1 - $2 million segment. 

Of all Manhattan real estate for sale in the $5 - 10 million segment, there were only 17 resale units for sale in Tribeca, 8 resale units for sale in Chelsea, 5 resale units for sale in the Upper East Side, and 4 resale units for sale in the Upper West Side. That's a total of 34 resale units in these four neighborhoods, which cover a lot of the island of Manhattan. 

Shifting down market, of all Manhattan real estate for sale in the $2 - 5 million segment, there were only 22 resale units for sale in Tribeca, 15 in Chelsea, 21 units in Upper East Side, and 32 units in the Upper West Side (including the Riverside). That's only 90 units available in the $2 - $5 million segment across these four neighborhoods.  

In the entry level market, of all Manhattan Real Estate for sale between $1 - $2 million, there were only 2 resale units available in Tribeca, 11 resale units in Chelsea, 15 resale units in the Upper East Side and 19 resale units in the Upper West Side. That's a total of 47 resale units available for sale in the $1 - $2 million segment across these four large neighborhoods. 

As Urban Digs noted, it is true that seller's are more receptive to negotiations these days, especially compared to 2014 - 2015, but the supply of good resale condos is still relatively low. And, new development is selling at a high premium. When we start narrowing down to the best Manhattan real estate available for sale, by particular building, exposure, those that are not overpriced, the number of good options drops significantly. Therefore, if you are a buyer that has housing needs or looking for investment, keep this short supply story in mind. 

Upper East Side 

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Upper West Side

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Chelsea

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Tribeca

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Charts courtesy of UrbanDigs

January 2018

Manhattan Market Update Q4|2017

The fourth quarter of the 2017 real estate market in Manhattan is one best described as stable, with the last three out of four quarters showing an increase in closed sales activity. 2017 was a much better year than 2016, although there has been a marked drop in the number of signed contracts in the quarter year-over-year that can be primarily attributed to non-market factors such as tax reform and political climate.

When looking more closely at the property types, however, we see significant variation. Resale co-ops segment was the most active with a third consecutive quarter of growth in sales. Signed contracts for resale condos, however, have been hurt by continuing high prices, and new development closed sales were faced with a 12% decrease due to the current cycle and timing of building developers. With all of this in mind, and uncertainty around the new tax reform, we can surmise that Manhattan real estate is slowly becoming a buyer’s market.

Resale Condos

  • The average price per square foot was $1,759, flat year over year.
  • The number of sales in this market fell 3% to 929, the lowest since Q4 of 2011.
  • Days on the market was 116 days, flat year over year.
  • The inventory declined 4% to 2,485 units for sale.

Uncertainty regarding tax reform effects played out in Q4 in the resale condo sector, causing a decline in sales activity and flat prices. For the second consecutive year, the market underperformed and saw the fewest sales since 2011. Inventory of available units fell correspondingly with a 3% decrease across the board. Many are pointing to a disconnect in pricing, as active inventory was saddled with a double-digit premium per square foot when compared to Q4 closed sales.

Resale Co-ops

  • The average price of a Co-op was $1.26 million
  • The average price per square foot was $1,167, representing a 1% increase over last year
  • The number of sales in this market rose by 4%, up to 1,733 properties.
  • Days on the market was 88 days, a 5% decrease over last year.
  • Inventory rose by 15% to 2,824 units for sale.

Resale Co-ops ended 2017 as the year’s best selling real estate product, continuing to outperform other options by increasing in sales for the third consecutive quarter. Additionally, the high demand for co-op resales found the average length of a property remaining on the market dropping by 5%. In so doing, the market responded by increasing the available inventory by 15%.

New Development

  • The average price of a new development condo was $3.92 million.
  • The average price per square foot was $2,253, which dropped 17% over last year, as the number of super-luxury and ultra-luxury closings declined.
  • The number of sales in this market fell 12%, from 527 to 463.
  • The inventory grew by 30%, with 1,074 units now listed for sale.

As one might expect, the new development condo market numbers tend to increase or decreased based on the progress of ongoing building construction. No new buildings commenced closings in the 4th quarter and a number of large developments, such as 125 Greenwich and 91 Leonard launched sales, causing inventory to soar by 30%.

Luxury

  • The average price of a luxury NYC apartment was $7.24 million in Q4.
  • The average price per square foot declined 12% to $2,625.
  • The luxury threshold was $3.882M.

The luxury segment is determined by the top 10% of closed sales based on price. The entry-level price, or “threshold”, fell by roughly $500,000, ending at $3.882 million. Additionally, the average price dropped by 10%, and price per square foot fell by 12%. These drops can be attributed to a shift in closings in the quarter from ultra-luxury and super-luxury closings, such as 432 Park, Greenwich Lane, and 56 Leonard, at the end of 2016, to more modest luxury buildings in outlying locations, such as One West End and 252 East 57th St. However, we have seen a more competitive market with an increased inventory, leaving sellers with little other option than to drop the prices to satisfy customer demand. This represents a real potential for investors in the luxury segment, as these luxury units are low and ready to move.

In conclusion, the Manhattan market remains stable and 2017 was healthier than 2016. That being said, the market continues to show trends skewing toward the side of the customer, or in other words, becoming a “buyer’s market”. An increase in available inventory, new development projects, and a lowering of the luxury threshold have created a market in which owners and developers are inclined to discount prices to keep up with dwindling sales. Because of uncertainty with the tax reform, 2018 will be a good year for the buyer, and not so good for the seller. For those standing on the sidelines, it might be a good time to enter the market, before the positive effects of Trump’s tax reform kick in.

November 2016

How will President Trump affect US Real Estate?

Never before has America had a New York City property developer and real estate broker (yes, he has a NYC broker’s license) sitting in the White House. While many of us may not agree with Trump’s behavior and policy positions, one thing for sure is that Trump will be pro-property and pro-real estate.

While some postulated that a Trump presidency would be a black swan event, rather than plunging, both the US dollar and stock market rose today!

If you are wondering how the policies of President Trump affect US Real Estate, here are insights as to how Trump will likely operate once in office.

Will he use real estate to kickstart the economy?

Trump is a property developer and real estate broker. He has used real estate himself as an investment all his life and has said that he’s interested in boosting homeownership. Given that his family business is real estate, either through his own company, the Trump Organization, or his son-in-law’s, Kushner Properties, we expect Trump to continue his love affair with property.

What will happen to mortgage rates?

Rates are poised to remain low for a while. “Mortgage rates are falling because investors are seeing safe yields in U.S. mortgage backed securities, reflecting their confidence in the relative safety of the U.S. housing market,” wrote Trulia chief economist Ralph McLaughlin in a statement the day after the election. “Furthermore, the Fed is likely to delay a December rate hike because of global economic turmoil. Both effects mean short term win for borrowers, and we’ll likely see an increase in mortgage refinancing if rates continue to plummet.”

Will he lower taxes for real estate investors?

Republicans retained control over the House and Senate. As a result, the republicans have unfettered control over the future of tax policy, meaning there will some big changes that will affect taxes for real estate investors. Trump has proposed to:

  • Lower tax rates, with capital gains tax at a top rate of 20%.
  • Eliminate the estate or death tax
  • Reduce corporate taxes from 35% to 15%

And while he may not get everything he wants in terms of tax reform, our tax law is ripe for change (both the Republicans and Democrats have called for this), and that change is likely to come before August 2017 before election season begins for 2018.

Could it become easier to borrow money?

Reduced regulation, one of the hallmarks of his campaign, would allow banks to step up lending, something that has been very subdued since 2008.  Another way that a Trump presidency could make it easier for consumers to own homes would be to lower premiums for FHA loans or cutting guarantee fees for Fannie Mae or Freddie Mac.

How will regulations be affected?

Much of Trump’s platform has centered around deregulating the financial market in order to more fully revive it, and that alone could also give a boost to real estate. This is something that Trump — and the Republican party as a whole — has been vocal about.

Trump has proposed to reduce both Banking regulations and Building regulations. Loosening regulation on lending could boost homeownership by making it easier for consumers to obtain loans. As for Building regulations, at a National Realtor Association meeting, Trump estimated that 25% of costs to build a house related to regulations. He would like to get that down to 2%. If construction is deregulated, this would mean more affordable homes for consumers.

Will the mortgage interest deduction go away?

No! Last year, a tax plan that Trump shared specifically and explicitly mentioned that he would preserve the mortgage interest deduction.

Will he continue the 1031 exchange program?

Trump, who came under immense criticism for aggressively using the tax code to reportedly not pay federal taxes, would likely preserve the controversial 1031 tax-free exchanges, which allow landlords to sell property without paying capital gains taxes if they plow the proceeds of a sale into other real estate investments.  This 1031 exchange program policy is one of the underlying bedrocks of the real estate industry and Trump will preserve this policy.

What about immigration?

Trump’s immigration policy has undergone many changes since he first announced his candidacy, and immigration reform won’t be an easy bill to push through Congress or the Senate, so it’s difficult to determine whether this will influence the NYC real estate market to any large degree.

Will Trump be able to implement all his campaign positions?

For those of you who are feeling emotional about Trump being president after some of his outrageous rhetoric and behavior, remember that the US President does not have unrestrained power. Our founders did not want power to be controlled by just one man or one group with the possibility of winding up under the rule of another dictator or tyrant. Accordingly, our government is divided into three branches: the executive branch, the legislative branch, and the judicial branch. This is why many of Trump’s more outrageous campaign policy positions will not be a reality – either they will be opposed in the legislative branch or overturned by the judicial branch.

No question that this election was very divisive. But, now that the election is over, the American people will come together as we have always done. As Obama said of Trump: “We are all rooting for his success”.

 

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