Although luxury skyscrapers are in development in Manhattan, particularly on 57th Street, the market is still in need of new “inventory” (more apartments for sale). Many experts say that it will likely be a few years before the city sees a noticeable uptick in the number of homes on the market.
To heighten matters, resales seem to be moving at a slower pace since people still want to see more signs of economic recovery as they decide to their apartment on the market.
The luxury units (priced at $3 million and above) that will hit the market in the next six to 12 months will only affect the upper 10% of the population that can afford those kinds of products. There will still be a shortage of “regular” homes ($3 million and below).
The current inventory crunch has its roots in the recession and credit crisis, which halted many under-construction residential projects and scuttled plans for new ones.At the same time, tight credit, job losses and reduced incomes have prevented many homeowners from putting their homes on the market, since they can’t afford to upgrade to bigger units. As a result of these factors, inventory is at records lows.
In mid-September, there were 4,342 Manhattan homes on the market, down 25.7 percent from 5,847 in the third quarter of 2012, according to data from Miller Samuel. By comparison, when inventory was at its height in the first quarter of 2009, 10,648 units were on the market. This explains why the limited mid-priced units available in the city are seeing a frenzy of demand.
Despite such a demand for mid-priced units, Manhattan’s sky-high land costs have made it increasingly difficult for developers to justify building condos that aren't super-expensive. Once land hits a certain price point, it only makes sense to build with nicer finishes and higher-grade appliances.
Meanwhile, New York City real estate welcomed the latest massive apartment listing last month: a unit at the exclusive Midtown co-op River House hit the market for a whopping $130 million, becoming Manhattan’s priciest-ever residential listing.
The borough saw 3,837 closed sales in the third quarter, a dramatic 30 percent increase from 2,952 in the same period of last year, according to a market report released by Miller Samuel. On the other end, the average price of a Manhattan apartment in the third quarter was $1.43 million, a 0.7 percent decline from $1.44 million in the same quarter of last year, according to Miller Samuel's report. The median price, meanwhile, dropped 2 percent year-over-year to $872,000, down from $890,000.
Jonathan Miller, who prepared the report, cited mortgage rates as the explanation for these seemingly incongruent trends.Mortgage rates have been steadily rising since May, which Miller said has pushed previously undecided homebuyers off the fence as they rush to take advantage of low rates. Most of these buyers, for whom interest rates can make a big difference in the affordability of a new home, are at the low end of the market, he said.
As a result, apartments that traded in the third quarter tended to be smaller than those that sold in the same period of last year — hence the drop in overall prices.
This is it for today, my dear friends. I am always available to answer your questions and provide you with more information on New York City real estate. Whether you are interested in buying, selling or renting a piece of the Big Apple, I am looking forward to assisting you.