The Luxury and New Development Sectors are Thriving

This year's spring market has had more than its share of ups and downs for most NYC sellers. One surprising bright spot has been the luxury new development sector which has been relatively reliable this spring. Just last week, there were a total of 32 contracts signed in the luxury sector (homes priced at $4 million and up), which surpasses the 10-year average for the week leading up to the Memorial weekend holiday by six contracts. Also, the 40 contracts signed the week of May 8, 2023, was the highest one-week total in a year.

Overall, the luxury market has been more reliable this spring, and the condo segment, in particular, has driven much of the activity. More than 70% of the luxury contracts signed over the last four weeks have been for condominium homes. (That's significant, considering roughly 75% of NYC buildings are co-ops.) Some of May's notable new development condominium sales include a penthouse at Yorkville's new 360 East 89th Street, which was listed at $22.5 million and went into contract within a month of being listed. The Keller, a new luxury development in the West Village, also had numerous contract signings in May.

The luxury and new development activity in May looks to be on par with the hottest months of the 2021 post-COVID rebound. Now, all the data is not in yet, so this info could be somewhat skewed, but it's definitely looking like it will be a strong month for these sectors. We're even seeing it right here at the Hoffman Team: One of our top-producing agents is currently working with a $40 million budget for a buyer expected to submit a backup offer on an ultra-luxury residence that's already received two other offers in just two weeks. At the $35 million level!

So, why is this happening? Is the top one percent of the one percent looking to park money somewhere other than the volatile stock market? It's true that many people got extremely wealthy during the pandemic, but to invest in Manhattan real estate is somewhat surprising given the difficult ride most sellers are experiencing in today's market. That said, a recent report showed that real estate investments, in general, have supplied higher, more reliable returns during three recent downturns — the 1990s recession, the dot-com bubble and the 2008 financial crisis. During those periods, real estate generated a 5.9% annualized return versus a 3.8% annualized return for risk-free Treasury bonds.

New York City residents and homeowners love to hear this news! Moreover, if the rest of the market sees the positive luxury and new condo sales trends, it can help pull buyers off the sidelines. New York City real estate generally follows the way of the luxury sector. The trickle-down effect can take some time, but given all this happened over the past year with interest rates, politics, crime and homelessness, it's nice to see many still believe in New York City as the rest of us do — even if the ultra-rich are simply using real estate to shelter their money.