Wow, what a spring. Manhattan continues to push higher as supply shows no sign of surging anytime soon. Yes we have seen an uptick of supply over the past few months but it's a full on utility squeeze as buyers who need are forced to bid aggressively to get the best of what inventory has to offer today. Lets discuss.
In the field we're starting to notice buyer fatigue, as yesterday's price range can no longer afford today's listings. Many are simply taking a break from the market - they've either found other opportunities outside Manhattan or are willing to sit on the sidelines as bids are chased and offers lifted. The buyers who are still searching are becoming battle hardened, and are ready to pounce immediately after one OH viewing, as they've already seen everything else, have lost a couple bidding wars and are ready to go.
"How long can this environment last?" is a question we hear early and often from our buyer client base. How else can I respond to this other than in this manner, "...as long as credit markets & equities don't deteriorate, and both are generally tied together, there will be little to no fear in the minds of buyers out there in Manhattan". That is what its all about here. Fear. Or lack there of. Fear simply doesn't exist if you look at the traffic jam of bids out there for quality, reasonably priced property.
Sellers continue to be in full control as buyers adapt by sweetening their deals; usually by putting more money down and/or removing the financing contingency to get an edge. Buyers who borderline can pass a coop board and insist on keeping that financing contingency in place will be passed over rather quickly for the top products out there. Not out of disrespect of course, rather, the market is simply producing much higher quality offers for sellers to choose from. Its gotten so bad in some situations that sellers will refuse a full ask offer if the buyer does not agree to remove the financing contingency. Crazy. It is what it is and the market will continue this way until something triggers a pause in the mindset of the buyers.
Let me show you. Here is a snapshot of one of the new UD tools that will launch soon and shows 6-MONTH SALES TRENDS @ THE ORION CONDOMINUM - 350 West 42nd Street:
Two things to notice on the 12 sales in this building that closed in the last 6 months:
1. The Median Days on Market of '25 days' for the eleven 1bed/1bath sales in past 6 months and only '24 days' for the one 2bed/2bath sale. Days on Market is one of the very telling data-points of todays market strength. Usually this # is in the 90-110 range.
2. The AVG % Listing Discount from Original Ask is positive meaning these sales on average traded ABOVE ASK! The 2bed/2bth sale sold 9.6% ABOVE ASK.
We are finding this trend across most full service buildings in desired locations. But these new tools really do allow you to see how every building trades in its own unique way -- a great vertical market toolkit and I cant wait to push the new site live for everyone!
Occasionally we will find some hidden values for clients but more often than not, we're finding listing prices that assume a continuation of the trend - pricing in current fair market plus a 4%-5% premium. Remember today's sales prices & trends are a reflection of the market 4-5 months ago so there is always a TIME adjustment element at play here to bridge that gap to realtime field conditions.
Our advice to buyers lately is 'be prepared' and to understand the dynamic that they will likely soon experience. Yes you can find a great property but expect buy side competition if that asking price is not ridiculously overpriced. Due to continued tight inventory trends it shouldn't take long for you to determine which products (a) work for your needs and (b) have the most desired attributes. So, when you do find a property that fits the bill you should act fast and present strong. Some quick tips:
1. SEE AS MUCH AS YOU CAN RIGHT AWAY -- Sunday OHs are the quickest and easiest way to see 4-6 places in a two hour period. If you are a serious buyer especially one with a time pressure, cancel your Sunday plans and get your a$$ out to see your most desired apartments. Gaining product knowledge early will allow you to know instantly if a new listing works for you, allowing for a "quick pounce" bidding strategy. Keep in mind, the people you encounter at OHs are probably seeing the same apartments you have and are bidding accordingly.
2. BE PREPARED -- Have your attorney selected and ready, have your financial statement #s updated, and have your lender ready to get you a custom pre-approval & building "approved list" confirmation if you are considering removing financing contingency to sweeten your offer. Don't wait to find an apartment that is perfect to gather all these items. Time is a deal killer in this kind of market so if you do get the place you want early in its listing history, the clock now starts to get that deal signed!
3. POST CLOSING LIQUIDITY -- In Manhattan, a mostly co-op marketplace, bid quality counts and sellers want to see high liquid reserves! Buyers who are "liquid strong" should consider putting more money down to lessen the perceived risks from seller on the deal closing. It won't trump 'the #' by much, but it will make your offer look much stronger especially if your offer is contingent upon financing.
4. DEALS ARE HAPPENING AT/ABOVE ASK -- Buyers should go into this process knowing that they likely will have to change the aggressiveness of their bidding strategy. When I launch my new tools you will be able to see how Building Trends are showing listing discounts ABOVE the asking price. Its really cool to see, yet frustrating for buyers out there. But its added transparency for this very fast paced market and with each new closed record sale, a new barometer is set and a new seller tests for a new threshold. What can I say? The market continues to produce these strong bids and has been for a while. Its because buyers are bidding on utility and to beat out the competition they are submitting "gap up" bids. Find your comfort zone via comps reports, expect a 4%-5% crazy market premium in todays market, and present strong right off the bat. Put a deadline on it if you have to but don't give the seller a reason to wait for more offers. If the asking price is justified, go in at full ask off the bat. The best outcome is a private, 1-on-1 negotiation with the seller as potential buyers are told "a full ask offer is in" by the listing broker.
5. FOR SELLERS -- Understand that there is no better market than todays to listen to when it comes to gauging your pricing strategy! If you have a high quality apt and you are priced right, be prepared for offers to come in rather quickly! If you had 30+ people in to view your apt with zero offers, I would check that price of yours again as the market is telling you its a bit high. I say this often: If your apt isnt selling its either a MARKET problem, a PRODUCT problem, or a PRICE problem. Well, its not the market I can tell you that so only can you determine if its the quality of the apt your offering or your asking price is too high. Listen to what the market is telling you in those cases.
Cheers all. Next time I write something it will be on the NEW URBANDIGS.com!! I cant wait to share what I have spent 9+ years visualizing, conceptualizing, and building. This current site was just a launching pad. I think the market will DIG IT!
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