While the real estate markets across the country appear to be stagnant, two articles have highlighted the fact that in New York, and certain other local markets across the country, the markets are doing quite well.
The first article appears today in the New York Times on the front page. It's titled "Can't Sell Your Home? Maybe It's Priced Too Low". When I saw the headling on the print edition of the paper, I thought it was going to be some kind of critique on various pricing strategies. Instead, it turned out to be a broadly-focused (if that's possible) article on how highly-priced homes are selling very well, and still selling above asking prices in some cases, in New York, San Francisco, Seattle, and other areas where there are high concentrations of affluent people. It notably excepted Washington DC and San Diego from this trend (much to my mother's dismay - she's a real estate agent in Washington DC).
The article offers little explanation for this trend except that people who were already doing well for themselves seem to be doing better. I'm not sure if this is true, but I can't think of a better explanation. It stands to reason that someone who had enough money to have a lot of investments is probably going to be doing pretty well right now. In addition, the article mentions foreigners coming in and buying homes in areas where they may travel or work often, such as New York or San Francisco. It's hard to believe that a $3 million condo would look like a bargain, but if you make allowances for the exchange rates, taxes in their native countries, and the fact that certain countries put restrictions on foreign ownership of property, it starts to make more sense.
The second article appears in this month's edition of The Real Deal, the New York City real estate trade publication, titled "Residential Market Weak In the Middle", discusses the same trend in Manhattan. It appears that in addition to the typical high-end buying that continues to push average and median prices up in New York, lots of first-timers are jumping in feet first as well. So, you have lots of activity under $600,000, and lots over $5 million. What's in the middle? Most of the new construction condo price points. The larger choice there seems to be causing a little slack in the sales prices and timelines, but one look at another article "New Condo Filings Fall Off" suggests that in a year, this might not be the case. Apparently, attorney general applications for new offering plans have fallen by 50% (2800 units as opposed to nearly 5000 a year ago). What does this mean? It means that there is not as much competition coming online for the condo units that are currently on the market, or about to come on the market. In market-speak, Manhattan will be able to "absorb" the current units, and that may put us back where we were in terms of low inventory two or three years ago. Co-op units are already extraordinarily low - people who are not in the market for new construction have been facing bidding situations for several months now, since the beginning of the year.
Now, this doesn't mean we will get back to the hot hot market of 2004-2005. That was insane. For one thing, a lot of purchasing power rides on the interest rates and the economy. Interest rates popped up a bit a couple weeks ago (affecting a couple of my buyers in the $400K range), and that can affect the monthly payments buyers can afford. But overall, the New York market seems cautiously optimistic that values will hold for the near future, and that gives buyers enough confidence to go ahead with their life plans.
As always, please email me to discuss!