This article illustrates what I consider to be Phase 3 of the housing market. In Phase 1, lack of buyers caused prices to fall. Sellers who had to sell at that time did so for much less than they could have just a few months before. But the sellers who didn't have to held onto their properties. Sure, there was inconvenience for more than a few. Some had outgrown their space, while others needed to relocate for jobs or personal reasons. The ones who could hold on in their spaces did, while others managed to find renters to cover their expenses while they moved on with their lives. The result: eventually the equilibrium between available buyers and available sellers returned, but at a lower price point (econ 101, as some of you may recognize).
Phase 2: The buyers return. In this case, an easing of lending criteria (not by much, but you no longer had to be Bruce Wayne in order to qualify for a mortgage), an overall sense of more security that people weren't going to lose their jobs, and the resumption of the march upward in Manhattan (and Brooklyn) rents made them interested in buying again. People started looking around.... and didn't find all that much on the market. In the course of about 3 months over fall 2012-winter 2013, the lingering properties were swooped off the market. That lead to a shortage in apartments, which means prices go up! So, yes, there were stories of bidding wars earlier this year.
Now we are hearing signs of Phase 3. Phase 3 is - you guessed it - when the sellers return to the market. Not just any sellers, but what I would call "optional" sellers. These are people who would like to get rid of their apartment but have a little flexibility in when to do it. The owner who's renting after relocating to another city, or someone with a pied a terre that they don't use as much but can afford to keep. Or even the growing family who's a bit cramped but making do.
Suddenly, selling seems more convenient to them now, and they are starting to put their properties on the market. The result: buyers have more to choose from, and a little more time to look. Prices probably won't drop, though. The market isn't loose enough for that. The bargain hunter days are pretty much over. Sellers may not all get the delight of having multiple sellers willing to jump through hoops for their property, but you can only sell to one person anyway. So price well (ask your real estate agent for help with that), and you'll still feel the love.
Is there a Phase 4? Yes, but it's not pretty. It's the crazy market that existed 2003-2005 and again briefly 2006-2007 before the weakness finally caught up to NYC. Bidding wars, lack of contingency clauses, and lots of heartbreak. It's painful to be a broker during those times, even if I'm the listing agent, because I meet a lot of nice people and a lot of them end up heartbroken because they lost out on a bid. So I'm hoping Phase 3 - where buyers meet sellers in a healthy market - is here to stay for a while.