Manhattan Blows Past the Market Bottom as Contract Activity Explodes

The second quarter of 2021 was a blockbuster quarter, proving everyone wrong that city living was dead. Manhattan has rebounded to the best spring selling season in 6 years and has had the highest sales activity since 2007.

Pent-up demand, reasonable pricing, low-interest rates, a desire to upgrade to large spaces (or those with outdoor space), increased personal wealth, and a larger pool of buyers have driven up sales volume. In sum, the city is booming, thanks to science and, in turn, a renewed optimism.

Note: for this update, I compare Q2 2021 to Q2 2019, which is much more appropriate that Q2 2020, when NYC was locked down. 

Contracts Signed Skyrocket

Contracts signed in the quarter surged 60% over the same quarter in 2019. Many of these deals won’t close until Q3 2021, at which time we expect to see some positive price action, given the volume and mix of the apartments that went into contract in the quarter. 

Larger Apartments Back in Vogue

The super-prime market (>$10M) had the best first half on record, fueled by double digit discounts from their original pricing. In addition, there has been a notable increase in larger apartments selling, which has been great for the >$5M market. 

The sales mix which included a significant shift to the sale of larger apartments, skewed price trends, bringing the , While the median sales price rose to $1,130,000, the highest since reaching $1,215,000 in Q2 2019, price trends were skewed because of the mix of sales.

Covid Discount Dissipating

Compared to the same quarter last year, the average price per square foot declined 3.6%. This has been heralded as the “Covid discount”. The first quarter saw this spread at 9%, which shows that the covid discount is quickly compressing.  We expect the covid discount to dissipate in Q3 and be gone by Q4, as employers discontinue or limit “working from home.”

Current Pricing in the Quarter: 

Other Interesting Stats:

• Condo sales activity rose to the highest rate in 30 years. 
• New Development sales above $3 million were the greatest in three years. 
• Sales activity rose faster than new inventory coming on the market, which resulted in the months of supply dipping to 6.9 months, the fastest pace in 4 years. 
• Overall listing discount was 6.4% 

If you missed the Bottom, Don’t miss the recovery! 

April 2021 Contracts Top

March 14-Year Record

Manhattan contract activity continued to rise to a new record in April 2021 of 1,607 contracts signed beating out March’s 14-year record of 1,500 contracts in a single month. The first week of May continues the trend and so far May is on track to match April.

At 1,607 contracts signed, that is 50% higher than April 2019, a pre-covid comparable month. April 2020 had only 213 contracts signed (presumably initiated pre-covid. As a reminder, New York City was shut down with showings prohibited, from the end of March through the end of June 2020.

On the luxury front, according to the Real Deal, there have been 652 luxury contracts signed year-to-date thru the end of April, which is more than all of the luxury contracts signed in the entire year 2020.

On the new development front, April saw 235 contracts signed up from 165 in March. It was Manhattan’s highest level of activity in the new development segment in three years.

Manhattan Rises From the Ashes

After an extremely disappointing 2020, when the island of Manhattan was plagued by a “Covid exodus” and physically shut down for 90 days, the Manhattan residential sales market rose from the ashes in the first quarter of 2021. While the market had been creeping up in November and December 2020, the First Quarter 2021 and, in particular, March 2021 saw stunning sales activity. 

Sales Activity Way Up in Q1 2021

Manhattan sales grew at a blistering pace in March 2021, with sales volume topping 1,500 contracts signed, the best single month in 14 years. Even January and February 2021 saw sales volume beat prior year months for at least the last three years, as shown below:

Buyers have been taking advantage of the combination of record low mortgage rates and lower prices. They are also encouraged by the new administration, which NYC is already benefiting from, in contrast to the last administration which was determined to punish New York City for overwhelmingly rejecting Trump.  

Prices Down, But Not in Free Fall

While prices are down, they haven’t plummeted like some people may have assumed they would. The price per square foot for a condo in Manhattan was 8.8% lower in Q1 2021 over Q1 2020. This on top of lower pricing since the SALT cap was enacted in 2018, which had the effect of lowering prices in NYC on average by 11% according to economist Robert Schiller. Therefore, prices are way off their peak from just a few years ago and are ready to turn around. With a “blue” administration, the SALT cap, which punishes blue states, has a good chance of disappearing in 2021. This will benefit property prices and temper the exodus to low-tax states. 

New Development Deals Remain

There are still New Development bargains to be had, as prices have been reduced significantly for projects introduced 3 years ago. Recently launched projects, however, have been priced to current market, so not a lot of discounts there. While some of the discounts are showing up in lower prices, many of the discounts are concealed in closing cost concessions. These don’t show up in the price per square figures. The magnitude of discounts on new development vary widely, as they are dependent on factors such as when the project was launched, sale velocity to-date, the number of remaining units available in a particular line, the equity partners in the capital stack, and most importantly lenders' minimum release prices (the banks really control the price, not the developer). 

To get the best deal in New Development, you need to have an open mind and not get set on something that isn't going to garner the highest discounts. For instance, developers are neither offering large discounts on apartments with outdoor space nor on lines that are almost sold out.

This chart below shows how new development pricing has regained some of its footing from its lows a few months ago. 

Vaccines Instill Confidence

We expect property prices to start inching up in the Spring/Summer and throughout the remainder of the year as NYC becomes vaccinated. To-date, 44% of Manhattanites have already received their first dose of the vaccine and 27% are fully vaccinated. As we reach 70% of the population being fully vaccinated, activities will revert back to normal including the full opening of restaurants and movie theaters (partially open now), Broadway Shows, and Sports venues, etc. Then, we do expect additional dramatic shifts in the market. Once the country re-opens to foreigners later this year, we expect this Manhattan real estate recovery to go into overdrive!

Signs Lead to Continued Rising Market

The potential SALT cap removal, the dearth of new building permits (since new development has been put on hold over the last year), and the full reopening of the city will bode well for Manhattan property prices over the next 4-5 years, as we saw after the Lehman crisis.  

If you are thinking of buying, do it now to get the best prices. Inventory is down from a record 9,600 units for sale in October 2020 to 7,000 units at the end of March 2021, which is still a bit high. But, if sales continue at the same clip as the first quarter, we will be in a sellers market by the beginning of summer. As the economy heats up, so will interest rates, making it more expensive to own the same home.

The Manhattan Market's moving...now it's YOUR MOVE! 

Manhattan Market Off to a Good Start in 2021 with Increased Sales Activity

While the Manhattan real estate market is still struggling due to the effects of Covid, the fourth quarter 2020, and even the month of January 2021, has seen a marked improvement fueled by:

• Positive vaccine news and rollout that increased buyer confidence,
• Historically low interest rates,
• Sellers (and developers) offering discounts (the average Covid discount was 10%, much less for lower priced units and much more for higher priced units)
• Pent up demand from the 3 month lockdown
• A new administration favorable to NYC, and
• Potential repeal of the SALT cap, which depressed prices in NYC by 11% (per Zandi) 

Contracts signed in Q4 were up approx. 8% over the same quarter in 2019. January 2021 saw condo sales rise a 50% and coop sales rise 167% over the same month a year earlier. All good news!  However, the current high supply of inventory for sale is a headwind for the market that will benefit buyers in 2021. 

The rental market has seen a pickup in the last few months as well. But, until companies ask their employees to return to their offices, the rental market will remain sluggish. We expect a quick turnaround in leasing in a few months. 

Takeaways:

• It’s a buyers market, but the window of opportunity for the greatest deals is closing,
• Prices fell but didn’t crash,
• Luxury buyers are back in the market - they were absent for much of the year, 
• Inventory is way down from its dramatic peak in October, but still at a high level,
• It’s a great time to buy a large apartment from a developer - new developments saw some of the highest discounts and concessions we have ever seen. 

Manhattan Market Bounces Back in Q4 2020

With headline news talking about people fleeing big cities, it’s no wonder why my clients are surprised to hear that signed contract activity in Manhattan has been robust over the last couple of months.  Signed contracts per month in October and November 2020 averaged 855, with December 2020 on track to exceed December 2019 signed contracts of 717. Signed contract activity for the quarter thru mid-December has already surpassed the same quarter last year. 

Confidence in the vaccine and the capitulation by seller’s to price discounts have brought buyers back into the market. Most of this contract activity has been in the $3 Million-and-under segment, with the luxury sector still lackluster, but improving. 

As you can see below, the number of contracts signed above $5 million continues to grow and this is the segment where we are seeing the largest discounts. 

Inventory Sharply Down From Peak, but Still High

Activity and confidence has brought the supply of Manhattan properties for sale down from approximately 9,600 in October 2020 to 8,000 today. 

While inventory is up by 20% compared to last year-end, when inventory levels were at 6,600, we are happy to see that inventory levels have fallen 17% from its peak. This very sharp turnaround in inventory in October was likely a result of the stellar vaccine news out of Pfizer and Moderns. We hope this doesn’t embolden sellers too much.

Until the vaccine is fully rolled out, we expect deals to be had in NYC. Although as time goes on and activity picks up, we don’t expect Sellers to discount like they have been. It feels as though we are already passed the bottom of the market, but still in a period where a buyer can get, heretofore, significant discounts in NYC. 

Where are all the Discounts now?

The average "Covid discount" has been around 10%, although higher in the over $4 million segment. Urban Digs analyzed closed sales in the 4th Quarter 2020, and found that 

• Under $2 million - an average of 5% discount
• $2 to $4 million - an average of 10.4% discount
• Over $4 million - an average of 13.5% discount

Of course, these are averages and only account for prices, not other giveaways that developers are offering to get deals done, such as closings cost credits, etc.  It is important to note that the Manhattan real estate market already took a hit after the SALT tax change occurred in late 2017, with the market bottoming in Q3 2019. Therefore, prices had already taken a significant hit before Covid kicked in. The additional Covid discount is just icing on the cake to buyers. 

New Development 

Discounts really depend on the many factors of the building itself, such as where it is located, how many units have sold, any particular issues with the developer, lender, etc.. Also, which line of the building are you buying? If the developer sold 50% of the units of the best line in the building and 0% of another line, you shouldn't expect the same discount on both lines. 

Currently, new development discounts run the gamut and it really depends on the many factors affecting the building itself. Developers are beholden to their banks, who dictate minimum release prices, so they are more prone to offer generous closing credits than outright discounts. However, we have seen a combination of price discounts and closing credits. 

The average discount is 10% in new development plus closing credits, although there are some developments that are offering that on top of already reduced prices. It is not unheard of to see 20-30% off Schedule A pricing, which is the original price filed with the NY State Attorney General. 

Developers have been covering at least a portion of the buyer's closing costs, including some portion of these costs:

• Transfer Taxes (approx 2%)
• Mansion Tax (graduated scale starting at 1% and going up to 4% if over $25 million)
• Parking - can get it included depending upon the unit
• Storage - can get it included 
• Common Charges - might pay 1 year of common charges. 

Some developers aren’t negotiating at all or maybe they will cover just the transfer taxes if they have something very special with their buildings. For instance, Park Loggia has terraces with views of Central Park that are trading at asking prices. The Benson only has only a few units on Madison Avenue in the UES that that are trading at asking prices too. Other buildings that are self financed and, therefore, not beholden to others are not negotiating either. But, these are few and far between. 

Macro Takeaways:

• This is probably the single greatest new development buyers market NYC has ever seen in the past 20+ years. 
• We are not in a financial crisis; we are in a health crisis that likely has been solved.
• We are not in the same situation as the Great Recession of 2008/2009, 2000 Tech Bubble, or 9/11 when there was fear and no money on the Street.
• Banks and white collar workers are flush with cash and the DJIA is over 30,000 (not 6,000 like 2009).
• The fear is in the sellers. Buyers have a short window to take advantage of this fear.
• For those sitting on the sidelines, remember, you need to make an offer to get a discount. You need to play to win!

As we close out the year, we want to wish everyone a Happy Holiday. We pray that 2021 will be better than 2020. 

Manhattan Real Estate Market

Bounces Back In October 2020

To understand in real time what is happening in the New York City real estate market, the first metric we look at is the number of signed contracts during a particular month.  October signed contracts significantly rebounded, topping out at 874 signed contracts, up by 30% from September 2020 and up by 4% from October 2019. This is clear evidence that the Manhattan real estate market has bounced back from the depths of the Covid crisis. In addition, signed contracts in October were higher than any other month during 2020, even before Covid, which is quite evident in the chart below.

Big ticket Manhattan buyers are back

Most of the sale activity was for properties under $3 million, however, several more contracts were signed in the >$25 million segment, hinting that big-ticket buyers were coming back to the market.  While we won’t know what prices these traded at for a few weeks, we noted many, but not all, properties in the >$25 million segment traded at significant discounts. While all sellers are now negotiating, significant discounts haven’t been the case in the <$3 million market. 

Manhattan Inventory seems to have peaked

Inventory, or supply, topped out in mid October at a record 9,628 properties for sale and now looks like it is fading. Monthly new supply was down 21% from September 2020 and down 1.2% from October 2019. This indicates that the growth in inventory has slowed, however, the build up of inventory levels will take a while to get back to normal levels. This is why we think the opportunity for buyers hasn’t yet faded, although we are past peak uncertainty caused by the virus. In the last couple weeks, inventory levels have declined and, as of Friday, November 6th, are down to 9,255 properties for sale. That is a very large number of properties for sale, considering inventory last year at this time was approximately 7,700. 

Home sales in New York City suburbs are past the peak 

While sales remain at a high level in Westchester, Greenwich, Long Island, the Hamptons, sales activity has come down from its peak that hit the New York suburbs this past summer. 

Now that the election is over - well, almost - and Pfizer announced a vaccine that is 90% effective, we believe the market will continue to pick up in Manhattan. 

The Best Time to Buy in NYC

in Over 10 Years

We are now three months into the reopening of the NYC real estate market. While there have been many challenges, the city is rebounding. We are starting to see signs of life in terms of increased signed contracts and pending sales. But, we still have a long way to go, which means there is a huge opportunity for smart money.

With restaurants, gyms, offices and museums reopening, NYC has taken on a much busier feel. New Yorkers are social distancing and wearing masks religiously, which has suppressed the virus in the city.

Taking a step back and looking at the big picture of the real estate market from 30,000 feet, we know it is the right time to buy in Manhattan. If you bought in 2001 or 2009, you already know that NYC will rebound stronger than ever. Therefore, I ask you take a moment and think about where you will be in 18 months. For sure, buyers sitting on the sidelines will be regretting that they didn't make a move to buy NYC sooner.

Here are our main takeaways for what's going on pn the market right now:

1. Covid has created a temporary opportunity to buy in Manhattan at low prices. 
2. The Market pulse chart above takes into account pending sales and inventory. It clearly shows that NYC has been in a buyers market and is starting to recover. 
3. Serious sellers are listing their properties at reasonable prices or are discounting. Especially developers, who are offering price discounts and concessions - unheard of just a couple of years ago...and will be unheard of in a few years time.
4. While the average discount has been 8%, we are seeing much higher discounts (2x - 3x) on the most expensive properties.
5. The window of opportunity is now...when will this window close? It will probably close before Q2 2021, with the best deals happening in Q4 2020, followed by good deals in Q1 2021. Once a vaccine is announced as being effective and ready for distribution, sellers will have more confidence - so we suggest striking now!  By the time you close, we’ll be in 2021 and a new market.
6. $7 trillion of government stimulus (14x more than in 2008) means that the risks are low. This is not 2008. Banks are healthy and Fed support has never ever been greater.
7. Record high stock market valuations (a by-product of the government stimulus) demonstrates that the Federal Reserve is doing everything it can to stimulate the economy. It also demonstrates that investors have confidence in the US economy, and that Covid will be under control and then history in short order.
8. NYC has been in suppressing the virus since June, much more effective in its governing than the Federal Government. Residents have been doing their part by social distancing, avoiding large events, and wearing masks to protect their fellow New Yorkers. While a lot of press lumps all of NYC into one lot, the most Covid infections have occurred in Queens and Brooklyn, not Manhattan. We haven't seen this mentioned anywhere in the news.
9. The sales market is no longer in freefall created by the lockdown. Pending sales have turned a corner, growing substantially in September, as the market has passed the real bottom.

Courtesy charts from Urbardigs

Our Current Best Picks:

 

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20 West 53 Street - Unit 22A
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Live at the Baccarat Hotel and Residences, one of the best hotels in New York City. The original owner paid $5.7 million for this apartment, so they are very motivated at a $1 million discount. Learn  more.

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This studio at +Art in West Chelsea is priced really well at $885K. Finally, sellers are listing apartments priced to sell, not the aspirational prices of a few years ago. Close to Hudson Yards and the High Line! Learn more.

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

Schedule a Call

A Different NYC Summer 

Around this time of year, I usually give an update of the Q2 Manhattan Market Reports. However, Q2 2020 is a completely different animal, as the Manhattan real estate market was shut down for 12 of the 13 weeks that make up the 2nd quarter. 

For those who are not aware of what went on in NYC, on March 23, 2020, NYC went into lockdown mode and reemerged 90 days later on June 22, 2020. No physical showings were allowed during this time. Inventory dropped significantly during the crisis, as sellers withdrew properties on the market or delayed listing. Now, however, properties are back on the market, with inventory up 8% from the same time last year.  

The market over the last month is slowly coming back, but not necessarily to normal levels just yet. Since reopening 5 weeks ago, we have seen:

• 84% of signed contracts were under $3 million segment.
• A surprising urgency in some of these buyers, as they know NYC will go back to some semblance of normalcy soon. 

• Not much happening on the high end of the market, as many people are still in their summer homes and travel restrictions are still in place.
• Mortgage interest rates hitting record lows (under 3%), as the Fed reduced the funds rate to zero.
• Overall indicators suggest pricing 8-10% below pre-Covid levels, but not at all price points. 
• For new development, combined closing costs and price reductions around 8-12% depending upon the project. 
• The largest discounts have been in the high-end market, where some developers have repriced their listings and are picking up most of the buyer’s closing costs, offering very attractive incentives to transact now.  
• Resales at $5 million and above receive no requests to show week after week. Therefore, serious sellers of a larger property must be prepared to discount at least 10%, and probably more, from pre-COVID pricing. 
• Discounts decline as prices descend, with few discounts, if any, below the $1 million mark.

Rentals:

• Although rental inventory is high, the market is also seeing a steady stream of signed leases, especially at $10,000 per month and under. Albeit at discounts! 

What’s next?

We are still in the early stages of a new reality, however, in terms of COVID, New York City is now a safer bet than 80% of the country!  

If New York can maintain its safety protocols and keep viral infections low, and there continues to be very positive news on vaccination trials and therapeutic drugs (like Remdesivir), history suggests NYC real estate will recover quickly.  

Right now, we are past peak-uncertainty, which for NYC was the April / May timeframe, so maybe the best of the best deals are behind us. But, we believe that buyers will have the next 4 -5 months to get great deals as well. Once there is a vaccine that is known to work, and odds are we will see one in the fall, New York City will be back better than ever. 

Questions? Schedule a time to chat with me. 

Enjoy your summer! 

Anthony

The Coronavirus' Effect on Manhattan Real Estate Prices

In the midst of this unprecendented global crisis, we have received several questions regarding the impact of COVID-19 on Manhattan real estate market prices. I hope everyone is staying safe and healthy during this tumultuous time. While the jury’s out on what happens next, here’s the latest information on the NYC real estate market.

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 of Manhattan condos, apartments and homes 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 Manhattan 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 was 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. So, what has been the effect on Manhattan real estate prices?

While it is premature to draw inferences from the virus’ impact on the Manhattan real estate prices, 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 silver lining in all of this is that NYC 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 Manhattan 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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6 Things You Should Know About the NYC Real Estate 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. 

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.

New Developments Properties for Sale

Latest Apartments for Sale in Manhattan

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. 

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.

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.

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.

Manhattan House Prices 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...

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.

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. 

www,belamorenastore.com

Upper East Side 

Upper West Side

Chelsea

Tribeca

Charts courtesy of UrbanDigs

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 4^th 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 57^th 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.

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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”.