It’s still a buyer’s market, but not for long
Posted on March 4, 2021 at 1:54 PM by West Sider
Since there are NO deals in the Hamptons, focus on Manhattan before the pendulum turns completely back to the vendors. Timing becomes one of the most crucial factors.
Everyone always asks, “How is the market? “ Because Manhattan is segmented into so many micro-markets, a Tribeca loft against a high rise condo in the city center against an Upper West Side townhouse or an Upper East Side studio etc … this question is too vague and has a multiplicity of answers. Generally, however, the market is on fire; demand exceeds supply. The sellers have become more realistic, which has become an invitation for buyers to join in the fun. Buyers also realized that there was common ground; that 50% off the sale they anticipated never happened. This commitment between the two parties is contagious and has resulted in agreements … many agreements. Trading volume in February increased by over 30% compared to February 2020 (which, if you recall, was pre-covid volume). Activity was most robust in the lower price points; Over 70% of all transactions take place below $ 2M and 85% below $ 3M. The luxury market, loosely defined as the top 5% of all inventory (around $ 5 million and above), which had been sluggish, is now catching up. We see numbers that reflect much busier times like 2015 and 2016.
While still a buyer’s market, the pendulum has changed direction. The reason has not started and / or will end with, interest rate*, but they will become an increasingly important part of that buying equation. As never before, virtually all measures are in favor of the buyer.
One of my industry colleagues, head of one of the largest companies, said: “IIf you are not a buyer in THIS market, you are simply not a buyer.“
In my opinion, the past 8 months has been the biggest buying opportunity in Manhattan, which I have witnessed in my 23 year career. Never before have so many metrics aligned for buyers, all at the same time.
Compare where we are now to some of the others great historic buying opportunities Meanwhile. Note: If you are not a buyer, please disregard what I have to say, because I am not forcing you to buy; however, for those who want to buy, you will find it interesting.
These great buying opportunities are most often the result of catastrophic events. Consider the 4 to 5 months after September 11 and the 12 months after the collapse of Lehman Bros. in 2008/9.
While these were incredible opportunities, consider that in 2001 stocks were still very thin, so the supply side of the “supply and demand principle” was still tight. And consider that the interest rates were 6-6.5%. Right now we are below 3%. I want you to look at the chart in the “Mortgages and Interest Rates” section of this newsletter, to really understand the impact of even 1 percentage point on interest rates. It’s shocking.
In the post-Lehman Bros. 2008/9, stocks and interest rates were less of a problem than in 2001 because there were more stocks, but interest rates were still 5-6%. The most important factor then was liquidity. There was no money; people struggled to get funding.
For buyers today, not only is the inventory sufficient (i.e. choices), sentiment on the seller’s side was low (i.e. negotiability) and interest rates are close to historic lows, 3% or less for a 30-year jumbo loan. However, the pendulum on almost all of these three bars begins to change course. Although there is 10% more overall stock than last year around this time, that number is shrinking. Again, not because the apartments do not reach the market, but because the volume of transactions exceeds the incoming supply; they are basically musical chairs for Manhattan apartments. While prices have not yet increased, it is precisely this deal activity that begins to give sellers a little more determination (that is, they become less and less negotiable). And most importantly, these are the interest rates; they go up slowly. This factor will affect the entire market, as it reduces purchasing power. So if you’re a buyer, getting is still good… very good… and in your favor, but it is fading away. You might have missed the absolute bottom, but you can be sure you bought in a “buyer’s marketWhich never lasts long in Manhattan.
For sellers, things are also improving. All of this activity is good for you, but you need to price it right and get it right. As the chart below shows, time in the market is eroding value. You will capture and maximize your value if you get in and out of it quickly. Even now our market is extremely efficient. Buyers who have the right advice are more educated than ever and know the value when they see it. The saying that overpriced properties help sell other people’s apartments couldn’t be more true. Also, keep in mind that interest rates also affect sellers; if a buyer has less purchasing power, he has less to offer. So sellers may also need to consider their timing, as interest rates will inevitably rise in the future.
There are so many nuances to every transaction. The factors and data points are endless and will be very unique to your own circumstances and time frames. So, partner with an experienced broker to help you get the job done, advising you on lawyers, mortgage brokers, architects, designers, potential contractors, etc. Find a broker who can help you find that location and / or negotiate for you accordingly to get you the best price.
“It’s all in the negotiation. Everything is in the representation today … everything
is very emotional and sensitive with buyers. Anything can kill a chord in a
second. Use a smart broker who knows how to negotiate for you.
– Shlomi Reuveni, President and CEO of Reuveni Real Estate
At the same time, the rental market remains down by almost 40%. The bottom will hopefully come soon, especially as more and more people start to return to their offices. We don’t anticipate a 100% recovery on this, but a substantial rebound should occur which will only help the sales market further.
All of this means that we are at the start of a very healthy market where people are trading fairly. Of course, we still have many obstacles to overcome. Beyond the challenges of covid and vaccine deployment, there are a myriad of issues that will affect our market for years to come, not just the mayoral race, many city council seats up for grabs, taxes. … the list is long . But keep checking back, as we’ll cover all of these topics as they continue to develop.
Please join me Thursday at 4 p.m. EST as I co-host a weekly zoom program called “Boroughs & SuburbsWith my colleague John Engel. We talk about countless real estate issues and topics in and around New York City and its suburbs including CT, The Hamptons, NJ… we even recently checked out to see what’s going on in Palm Beach, Miami, and LA.
Click here to see the entire Newsletter.
Your city, your broker …
#YourCityYourBroker #NewYork #Manhattan