Mortgage Rates – Perhaps the most important variable, mortgage rates have dropped dramatically from their highs several months back. With still-President Bush requesting the second half of the TARP funds, credit markets should continue to thaw over the rest of the year. Average rates for thirty year mortgages in Manhattan apartments are currently below six percent – 5.875%, to be exact.
Furthermore, interest rates are likely to get lower for at least the first half of the year. Everyone knows the fed is going to be keeping the interest rate effectively at zero percent for the foreseeable future. That means that for both the long and short term, interest rates are going to be as low as buyers can reasonably expect.
The Selection – While high inventory rates may be bad for the market as a whole, that just means it’s bad for speculators who are stuck with properties whose values are currently falling. For those thinking about buying an apartment, it means that the New York Apartment market is beginning to resemble a normal real estate market, with a fair share of good apartments for reasonable prices. With the tumult of the past several months, it’s likely that a number of exceptional deals exist out there, as sellers have begun to fear being trapped with their properties for years to come.
Resale Prices – The fourth quarter numbers showed that the value of resold units took the biggest hits. For most buyers, these units are the apartments they are looking at anyway. So, while the price of new units may be coming down for most of 2009, older units have already seen a good amount of depreciation.
That’s not to say median resale prices won’t fall further. It does mean, however, that resales have seen more of their fall than the market as a whole.
Incentives and Contract Details – As we’ve mentioned a number of times on this page, the incentives and contract details that have been reported recently show buyers easily taking advantage of the current conditions. It’s simple to understand: Buying a home right now is much, much easier than it was a year ago. The myriad details that would have hung up a deal a year ago are now just another part of the deal that sellers are willing to cave on after the slightest bit of pressure from the buyer.
It Takes Time to Find a Home – While prices will fall for a while longer, the goal of a buyer vis-a-vis the market as a whole is, ideally, to buy when the market is at its bottom. Buyers that begin exploring their options and thinking about their choices now and begin shopping around in the next quarter or two will likely find that bottom.
Original Post: Elika Blog
Prices are declining throughout New York City, but certain neighborhoods are
being hit harder than others.
It is usually the case that changing and marginal neighborhoods are hit hardest
by slowdowns. Despite this entire recession being caused by those on
Wall Street, this time is no different from most.
Harlem is already feeling the pinch more than any other part of the New York City real estate market, save for Morningside Heights, which dropped 30%. Residential property values in Harlem and East Harlem combined are down a full 20% from last year’s numbers.
Midtown East and Turtle Bay were runners up. Values there dropped an average of 18.6%. Hell’s Kitchen last quarter lost 8% of its real estate value from last year.
Median co-op prices in Lincoln square, meanwhile, rose 18.6%. Similarly, the rich don’t seem too effected by the downturn caused by the financial industry, with Fifth Avenue and Park Avenue seeing average rises in residential property values of 35% from last year’s third quarter.
Outside these areas, losses were more moderate. The Lower East Side and the Village each lost 5.5% of their residential real estate value.
No other neighborhoods saw declines greater than 5%. Some areas even saw significant price increases. Battery City Park, for instance, saw median prices rise a full 6.5%. Inwood saw the single greatest increase, despite a sharp decline in the number of sales. Prices there shot up 17.1%. Most of these increases in value came from new high-end condos finally coming onto the market. Greenwich Village saw a 3.9% increase.
Prices dropped in SoHo and TriBeCa, but sales volume remained quite strong. The
Upper West Side, on the other hand, saw a drop of over 30% in its sales volume. In
total, sales volume dropped 24% in Manhattan.
What’s scary, though, is that next quarter is widely expected to be even worse than this quarter. The real damage to the economy has been done by consumer reaction to the financial crisis. Many potential buyers have put their purchases on hold to see what happens with the macroeconomy, thus driving prices down even further.
Much of this correction will be, in the long run, good for the New York City real estate market. Many experts have long argued that prices in the city were heavily inflated in comparison to similar urban environments.
One of the most striking features of the new market dynamics is the shift in
demand: Buyers have refocused their energies on more moderately priced
units. While the highest end of the luxury market is still the healthiest
market segment, many buyers who had been looking at comparatively low-end
luxury are now moving into more reasonably-prices high end standard units.
Similarly, the average size of an apartment sold in Harlem dropped roughly 300 square feet from the last quarter.
It is clear that owners that reacted quickly to the downturn have not seen much slack in demand for units. Not all owners, however, have been so nimble. Much of the expected price drop in the fourth quarter, for instance, will be from landlords who finally get it that the real estate market in NYC is once again behaving like a normal market, not the fantastical profit machine it’s been for most of the past decade.
The effect of the election on the market will be one of the most fascinating questions in the industry that will be answered over the course of the next several weeks.
We would like to invite you to participate in the inaugural Elika Real Estate Buyers' Confidence Survey. The survey has been designed to gain better insight into the needs and wants of buyers' in today's market and to give buyers in New York a voice. Tell the market how you feel.
Thank you everyone in advance for participating in our survey. We really appreciate your insight and help.
What is Elika Buyers' Confidence Survey? Learn More
The survey will take about 5 minutes to complete.
Don't forget to invite all your friends to take the survey.
With the seemingly all-consuming election finally over, the real estate industry is turning its attention again to the country’s major markets. The epicenter of the national market is, once again, New York City. The financial debacles of the past economic era have ushered in a new set of conundrums for investors, and the city’s market resembles the national market, yet with important factors considerably more poignant.
The positives in the New York City real estate market are much more positive than most of the rest of the country, but the negatives are also more negative. The financial crunch has hit the city like everywhere else, but has also threatened the city’s jobs sector, as numerous NYC-based investment firms have either consolidated or folded completely. The long-term demand for apartments, on the other hand, remains high from a historical perspective.
While the gentrification of many neighborhoods will presumably stall over the next several years, there is little to no likelihood that New York City’s situation will return to what it was during the late 1970s. That being said, hipsters that recently bought condos close to Morrisey might be in for a little disappointment about the direction their neighborhood takes over the next several years.
Queens in particular seems like its rough patch will only get worse during the coming several quarters. Apartments on the market have increased dramatically, both in terms of year-on-year numbers and in comparison to the previous month. The figures were +33.8% and +14.4%, respectively.
These are especially negative numbers. It is likely the near future will see a significant reduction in the average prices of many neighborhoods, even if the luxury market remains functional and even-keeled. One sign of relief has been the stalling of the US dollar’s recent rapid climb. If the absolute ceiling to the dollar’s value is somewhere around $1.30 per euro, than the city has little to fear in terms of losing the strong stimulus that a weak dollar provides to the real estate market here.
While the worst is yet to come in terms of the macroeconomic data, the downturn of the recent downturn in the New York City real estate market is probably more severe than it will be during the rest of the year: Credit markets froze for a considerable length of time, and it was hard for anyone to get reasonable conditions on their mortgage loans, if they even had access to quality credit in the first place.
The sector of the market that is most likely to get hit hard are landlords with units that are not an A or A+ in their overall quality. Owners that think they still have a strong hand to play in terms of negotiating sales details are in for a very rude awakening. Most buyers are still actively looking, but feel perfectly content to rent for another year. This being New York City, though, that might be a good thing. It’s about time the buyers had a powerful hand to play.
With stocks crashing, then posting their largest rally since the early days of the Great Depression, than crashing again, it’s clear New York City’s housing market is going to feel at least some of the turmoil.
The market was already retreating from a buyer-seller détente into a full-blown buyer’s market before the calamities that followed Lehman Brother’s collapse. As the stock market has dived and news from the national economy has been truly horrible, though, buyers have become more aggressive.
There are reports of buyers making half a dozen low-ball offers in order to try to capitalize on nervous sellers who are now perhaps regretting spending the summer over-confidently rejecting offers of a more reasonable nature.
That type of strategy, of course, is common in all real estate markets that are in transition. The more dramatic sign of the turmoil facing the New York City real estate market right now, however, is the terms being offered to brokers. Some property managers have upped the typical commissions being paid to real estate brokers who make sales happen.
The New York Times reported on perhaps the most striking example of this new trend: Prudential Douglas Elliman is recommending its sellers increase commissions for buyer’s brokers from 3 to 5 percent. While not all sellers are following this path, certainly the actions of one of New York’s most prestigious real estate companies is a sign of the times.
With many buyers waiting on the sidelines, waiting for the turmoil in the financial markets to settle itself, a number of deals abound. Right now seems to be the time when sellers are transitioning from added perks – free storage, free parking or the such – to significant cuts in the actual asking price.
That being said, many landlords are still unwilling to reduce prices directly, but instead have opted for backdoor discounts like reduced transfer taxes, delays in fees and other such de facto cost-reduction measures. Many owners in Manhattan are only now just starting to seriously re-evaluate their pricing schemes. Many landlords in Queens and Brooklyn, however, are starting to feel a certain sense of desperation to sell their new condo developments and older apartment units.
Builders at the early stages of large projects are becoming especially worried about the prospects of following through with their projects. Demand is still strong for the newest apartment buildings and condos, but investors have become increasingly wary of risking money on a market on which few can offer many meaningfully confident medium-term predictions.
Posted at: Elika Real Estate Blog
Elika Associates is New York City's premier real estate buyers broker. We exclusively represent you the buyer and provide exceptional services tailored to each client's unique real estate needs.
ActiveRain Corp. is not responsible for the accuracy of the site's content (which is written by members of the ActiveRain Real Estate Network) and does not endorse the views of the real estate agents, mortgage brokers, and others listed here.
Powered by the ActiveRain Real Estate Network
© 2009 ActiveRain Corp. All Rights Reserved
