Market Report: Tight Inventory
A: I've been back to work for a week now and trying to get my mind off my family's recent loss. While one week is not enough to deduce any trends from after working only part-time for the 3-4 weeks before that, I can tell you a few things about Manhattan's current real estate market. There is very little good product, still healthy buyer demand, but higher rates seem to be hitting home with more patient buyers less likely to throw their money around so quickly. It seems to me that buyers are very picky these days. Or is it they are savvier?
First some macro & local market observations and example listings:
1. Interest rates made a big move higher in the past 4-5 weeks forcing sellers with overpriced properties to lower their prices to re-stimulate demand. Those sellers with no time pressure to move are keeping their asking prices higher. Buyers are beginning to realize how much the rise in rates is actually causing them.
2. New properties that are priced correctly (that is, a bit lower than what comparable units were priced at during the more active earlier months of this year; Jan-April) are getting quick offers. Some examples of properties with Accepted Offers within 2 weeks of listing:
205 E 78th - 1 Week Total on Market
444 CPW - 4 Days on Market
516 W 47th - 2 Days on Market
3. Sellers who originally priced high and now appear to want to move their property fast have been lowering their asking price repeatedly since rates really started to rise. These types of properties should be focused on by serious buyers. Some examples of properties that cut their price at least twice in the past 4 weeks include:
205 E 78th - 2 Price cuts in 25 days
23 E 10th - 2 Price cuts in 19 Days
159 W 53rd - 2 Price Cuts in 11 Days
4. Buyers seem to be picky to me given tight inventory trends and very little product to choose from. It seems that with rates rising they feel they should be getting a better deal on price, however, since inventory is so tight and buyer demand is still healthy prices are yet to come down here in New York City. How long this trend will last remains to be seen, but if buyers continue to remain picky and if rates remain at these levels or rise further, I would definitely expect sales volume to slow dramatically and that could help reverse inventory trends as we get closer to years end. Of course, even if this theory did prove true we wouldn't know until Oct-Dec when lagging market reports start reflecting activity from July through September or so.
I'll break down advice this way for buyers and sellers, with the common denominator being time pressure on both sides.
For Buyers Who Must Close By Sept. 30th - It will take time for inventory trends in Manhattan to become favorable for buyers. That means months at the very earliest! Months you do not have as it normally takes at least 2 months to close on a co-op or condo deal; generally longer for co-ops and for deals with financing involved.
Get out there NOW and start looking at every possibility. Don't wait for inventory to build up or else you might be stuck with a property that you don't like. Consider short term rental to help extend your purchase deadline!
For Buyers With No Time Pressure - Learn product knowledge in this tight New York City real estate marketplace and only move on a deal if you fall in love with it and its priced more in line with market value. Sales should slow as we get deeper into summertime helping to reverse inventory trends as product takes a longer time to sell on the open market. This should give you more options towards the end of the year; hopefully!
For Sellers Who Must Close By Sept. 30th - Reduce your price. Stop playing around and make that price cut so that your property is aggressively priced in your building. Instead of being at a price point that HELPS THE OTHER PROPERTY SELL FIRST, be proactive and make your property the best deal in the building! If you don't do it now, it'll only get worse in the next month or two eventually forcing you to take an even bigger hit if you must sell and close within 45 days or under. In that event, you'll have to advertise a fire sale because you have no other choice but to get an offer secured within days to close by your deadline.
For Sellers With Time / Little Incentive To Sell - Consider taking the property off the market. If you haven't gotten top dollar for your apartment by now, and you are testing the market with an overpriced asking price, then chances are you won't get it at all in the next few months. Take the listing off the market and try to keep it fresh for the next time you decide to try again; hopefully during the generally active months of every new year. No good can come from having an overpriced property on the market for 6+ months with still no incentive to lower the price!
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Comments (6)
First of all , welcome back and i hope your family is doing well....Im a bit confused.....awhile back you said that inventory will increase in the summer and prices might be more negotiable......now i think you are saying that could start happening at the end of the summer and deals might be had in 4th quarter........i know you dont have a crystal ball, but it seems that this "buyer" market in manhattan keeps getting pushed back all the time....maybe it will never really happen? Thanks for the website and insights.
Posted by Michael | June 25, 2007 9:19 AM
Michael - Thanks for thoughts. I believe I said summer slows down with more control going to the buyer as sellers have to reduce prices to move property. However, usually you will have to sacrifice options for more control during summer months. Here is my post from April 12th on seasonal character of this marketplace.
http://www.urbandigs.com/2007/04/data_shows_nyc_is_seasonal.html
"..you should gain more control over negotiating during the summer months at the expense of less inventory to choose from!"
Your right, I dont have a crystal ball, but what I see now is very little product on the market and I am having a tough time finding good product for my buyer clients. I noticed a substantial increase in buyer activity with my exclusive that has lowered price twice in past month.
Inventory is one of the main contributers to the cyclical nature of real estate. It helps move cycles. As inventory gets tight, prices go higher luring more inventory INTO the market. I would expect similar dynamic if this summer proves strong for sellers. I'm sure at some point inventory will reverse course and favor buyers; I just dont know exactly when.
Posted by Noah | June 25, 2007 9:28 AM
Mr. Digs -- check your calendar (not your crystal ball) ... I predict you will not find more than one date between September 29 and October 1. Hang in there!
Posted by Sandy Mattingly | June 25, 2007 12:25 PM
Sandy - ha! Oops. Thanks Ill correct now
Posted by Noah | June 25, 2007 1:22 PM
Hi Noah - welcome back and hope all is well. As I commented earlier, we're seeing very little inventory of quality condos this summer. At this time, I'd like to share some of our experience with your readers. For buyers in our situation (facing time pressure and looking at a few preferred neighborhoods), it's important to get out there and learn the market. Secondly, you should be prepared to act quickly so that you don't lose a good apartment that is priced right.
Finally and most importantly, don't get emotional about any property that you missed or about locking in interest rates earlier this year. Of course we could always have done better with 20/20 hindsight. Work with the real world facts that you are facing right now and don't add intensity to an already pressurised situation. Especially important if you have a spouse - remember what's important is to build a home together and it's not healthy to argue about lost opportunities.
Posted by sydney | June 25, 2007 7:33 PM
I am a buyer as well, with no time pressure. Ideally I would like to buy asap, but don't have a pressing need to buy right now. I was in the market looking aggressively and even lost two bids. Right now I am waiting the market out because there is no new good inventory. Anything good that comes out ends up in a bidding war during the first week itself. My only concern is that come fall, sellers will hold inventory to wait for bonus season and then raise prices because people will have more money early next year. It is quite unfortunate, because there is no right time to buy in Manhattan!
Posted by Anonymous | June 26, 2007 11:59 PM