Even though winter is usually the slowest time of year for real estate, the condo market in Manhattan started the year with a fair amount of growth as prices stayed high due to the continued low inventory. (There were 3.7% more condos available compared to the same time last year; however, last month's total was still 18.2% lower than the five-year historical average in Manhattan.) Many of you may have seen that the New York Times dubbed 2015 the "Year of the Condo in New York City," with twice as many new developments projected to hit the market as last year. However, it is very important to keep in mind the difference between the uber-luxury condo market (from roughly $20mm to $100mm) and the rest of the market. These exceptionally tall and skinny buildings, like 432 Park Avenue (where I shot this photo from the 95th floor penthouse, 1271 feet up in the sky), are starting to take over our Manhattan skyline. I expect there will be softening in this uber-luxury market, where more inventory is sure to pile up due to fewer buyers rushing to purchase and an increasing number of projects hitting the market. Most of the buyers for these spindly towers are foreign and there is much happening globally which may tighten the spigot of international money flow to the NYC real estate market: oil prices have plummeted, hurting the Russian and South American economies, the dollar has gained significant strength relative to the euro and the Chinese economy is off to a slower start than usual. Though the focus of this update is on the condo market, it is interesting to note that high end sales across the entire market, co-ops included, have been lackluster as well. Sales above $8-9 million have continued the sluggishness we saw beginning last fall. All this said, I do believe the rest of the market will remain strong. The reasons have a lot to do with what is going on right here in our city. New York City is experiencing a uniquely healthy and stable economy, with employment and job growth far exceeding the rest of the country. NYC added over 105,000 jobs in 2014, the most jobs added ever. Those jobs spanned every borough and that growth was led by non-office based industries such as retail, restaurants, health and education. Additionally, the office sector, which historically has been the first sector to add jobs after a recession, is also expected to accelerate in the coming years. Tech jobs too should experience a positive bump this year. Companies in both sectors are signing leases for office space at ever increasing speed. Population growth in NYC is on the rise, with more people than ever (4.1mm) fully employed. Many economists believe inflation will remain stable and interest rates low for at least the short-term (futures traders expect a rate hike in September, but if and when it will happen this year remains anyone's guess). Finally, real estate inventory and absorption rates remain very low. When you consider all these factors, the market is doing exactly what one would expect. The price tags for condos are projected to grow nearly 5% this year, according to the StreetEasy Condo Price Forecast, though if the pace of sales further slows at the same time additional inventory is added, there should be a corresponding downward pressure on prices in the new development projects. Here, the quality (including location) and value of each individual project will determine which buildings sell out quickly and which will see price cuts. In the West Village, the year-over-year median sales price of condos was up 46.6% in January, while in the East Village it was up 27.5%, according to StreetEasy, a result I believe of the still limited supply of condos available to downtown buyers. If and when the $80mm uber-luxury market slows, surely a lot of media sensationalism will follow. Remember...that is an ephemeral marketplace, distinctly unique from the market in which most New Yorkers buy and sell.
It’s been a record-breaking year in Manhattan real estate, although things have slowed down just a bit this fall as more inventory has become available. As the most recent Warburg Market Report shows, various segments of the market are reacting differently. Co-ops priced below $2 million—often the most popular segment of the market—are still selling very briskly, while the demand for pricier homes may have peaked, with an increased average time on the market leading to more availability. Here on the Upper East Side, the median price for new developments more than doubled in the third quarter, reaching $4.5 million. Resale co-ops on the UES rose by a more modest 8%, and those above $4 million (even on Fifth and Park Avenues) are languishing except when renovated and priced appropriately. Overall, I expect the market in 2015 to look very much like it has this past year. The inventory shortage likely will persist in the under $2 million market and especially for two-bedroom apartments under $1.5 million, continuing to drive strong sales in that segment. Meanwhile, the very high-end new development market has shown signs of stalling as a flood of pricey towers debut along the 57th Street corridor (sales at the ultra-luxury One57, for example, have slowed sharply as of late), and I would expect sales to continue to slow there. One segment of the new condo market that does remain strong is on the UES, where co-ops make up such a large percentage of the housing stock and condos are a rare commodity. New condo developments like 60 East 86th, 151 East 78th and 135 East 79th have sold quite well. Streeteasy predicts a 3.9% growth rate in the Manhattan condo market throughout 2015 and that sounds about right. As always, reach out to me directly for news and advice about specific properties or neighborhoods.