A New York City Real Estate Market with No Identity

Historically, during this time of year, the market slows down, but buyers and sellers still find common ground on pricing. Buyers offer, sellers counter, and a meeting of the minds is reached. However, this season, from late fall to early winter, the market has been different.

First, there's the low inventory issue: With only approximately 6,800 total listings in Manhattan, sellers are not partaking in today's market because of lower prices. Over the last 30 days, sellers have removed almost 900 listings from the market. The current overall inventory is approximately 5% below historical norms. Next, there's the transaction rate or “market liquidity,” which is significantly lower than in prior years. In the 30 days prior to this newsletter, 683 listings were put under contract. That's 10.8% less than the prior month and 0.6% lower than last year. Finally, there's the issue of fewer buyers and higher interest rates. There are significantly fewer buyers at open houses and in the market in general. Many say this is due to listing prices staying the same despite higher interest rates.

So, it's not a buyer's market, although buyers are getting decent deals when it comes to sellers who have to/need to sell. But it's not a seller's market either, although many sellers see the lower inventory numbers and are trying to hold the line on pricing because they feel their unit is worth every penny. As the market searches for direction, buyers blame sellers for not coming to the reality of today's market. And their argument has some merit. Sellers are stubborn on pricing, for inventory which has moved it was partially due impart to price improvements.

Most listings that have gone under contract over the last month are priced anywhere from 3% to 7% lower than last year's inventory. As Steven James, former sales director for Douglas Elliman and currently the President and CEO of Berkshire Hathaway HomeServices New York City, puts it, “You have worry on the part of buyers and worry on the part of agents and sellers who aren't willing to see the reality of pricing.” This stubbornness creates a low transaction environment, not quite a stalemate, but it's definitely slower. James goes on to say that “inventory is down, but pricing is stable.”

The Manhattan market is primarily made up of co-ops, which require at least 20% to 30% down payments. And with the high incomes in New York City, sellers often don't need to sell. Because of this, some would say sellers are preventing a more liquid or higher transactional market from happening. Many buyers would love to dip into the sales market, especially with a hectic rental market, where prices will likely rise again this spring. This all creates an environment with significant pent-up buyer demand. We saw this bear out over a few weeks in the middle of November, when there was a slight adjustment in interest rates down to around 7.125%, which galvanized some buyers to place offers and get deals done.

For the buyers who stick it out, make offers and negotiate deals, there are great (hidden) opportunities in today's market. Many sit on the sidelines as they look at listing prices that have only adjusted slightly off historical norms, but good things can happen for those who do partake!

So, as this market searches for its identity, smart purchasers are out there hammering out deals with sellers who — seeing that the market won't likely change much over the next 12 months — liquidate and move on.