Friday, January 04, 2013

Peculiar Cross Currents in Q4 Sales and Rentals

A trio of summary articles caught my attention as I browsed - both in The Real Deal.  Today we found out that Manhattan's sales volume for 4th quarter was up nearly 30% from fourth quarter 2011.  At the same time, median sales price dropped, meaning that more than half of all apartments sold went for under $1 million.

In fact, New York's over-$1 million market dropped by 13.5% for 2012. These two facts coupled suggest that people who are starting up the home ownership ladder are the ones doing most of the purchasing - much like when small cap stocks lead the market rally after a bear market has shaken out, no?

Adding support to my theory is the fact that Manhattan rents have hit a plateau for now. That's right. It might not feel like they are going down, but the average rent in Manhattan has in fact dropped each month since October. Now, that doesn't mean you'll suddenly get a deal, since rents overall are up about 1.5%  from 2011, and at an all time high. We also have to factor seasonality into this calculation, since the best rental deals are found from November-February (usually about $100/month difference). The article cites a jump in available apartments as well.

The conclusion? Low mortgage rates and improving job prospects, coupled with high inventory which kept prices from jumping as soon as the fish started biting, convinced a lot of renters that it was time to take the leap. I remember this happened around 2006 as well, when rents were at an all time high (then). In 2005, the sales market started flattening out, and mortgage rates were historically low. That hiccup, plus the appearance that the economy was working out its problems, combined to help a lot of people buy.

The smart money says the runaway housing market of the early 2000s is not about to resume, but with the total sales inventory having been halved since 2011, prices could start to creep up depending on the spring selling season.  In the meantime, you confirmed renters may have a year-long breather in rent increases. Maybe.

No comments: