To start off my second year with Keller Williams, I sent out a newsletter covering the residential Manhattan market through Q1 2013 and I also introduced my new team, Braswell & Associates.
For the full newsletter, click here
For Q1 2013 news, see below:
NYC Market Report: Q1 2013
In 2012 the story revolved around slowly rising housing prices, declining inventory and the dearth of new development. As the year came to a close and 2013 began, the extent of those issues came to a head. The effects were generally unwelcome to buyers though developers and sellers are sitting in the catbird seat. Renters saw a few months of minimally declining rents, but that ended this February.
As new development has still been slow to hit the market after most of it stalled post 2008, developers have been able to sell out buildings extremely quickly. Chelsea Green, a sold-out yet unfinished new development by Alfa, sold half their stock very quickly out of the gate last summer even after a 5% bump on all prices. As fall rolled around they increased the prices of their remaining stock as high as 28%! The Citizen, an Anbau development between Chelsea and Flariton, also tried this approach. However after a shocking 43% increase in prices, they have had to cut the new prices by about 20% to date to try and finish selling out (around a 15% increase from the initial offering). The Walker Tower still being worked on by JDS development has had an incredible 13 price hikes which is incredible for a building with 2BRs going from $4m to $21m for 4BRs.
Resale inventory is also hurting significantly. The number of units on the market is down 50% to around 5,000 whereas that number had been historically around 10,000. As well, the apartment absorbtion rate (ie the number of months it would take to sell all the inventory on the market barring new inventory) is down 40% to around 6 months, the 10 year average is 10 months.
Why the low inventory? As Jonathan Miller states in his article on inventory, the current thinking is that owners have not gained enough equity through appreciation and mortgage payments since the peak of the market to resell and trade up (trading up is a primary driver of selling properties). This sentiment has been echoed in other places as well and makes plenty of sense. Why sell if what you can buy is going to be no better? This creates more holdouts who shrink the inventory pool further.
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| Courtesy of Miller Samuel Inc |
So where will it go from here? From working with buyers, we know that this low inventory has created an unfortunate and difficult situation where anything priced reasonably, which is generally a touch higher than Q4 2012 closed price per foot, is going into contract within 2 weeks for 5%-10% over ask. As such, when these apartments close the actual sale price will show these new and higher achievable price per foot. With a higher sales price sellers will be getting more equity in a sale and thus will consider listing their property.
Posted in: Market Reports
This Braswellian Life 
Posted on May 20, 2013
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