Continued Record Sales Volume
The Manhattan residential real estate market has proven its resiliency with record sales in many areas of the market. With over 1,350 contracts signed last month, last October was Manhattan’s strongest on record, beating out the two strongest sales years, 2013 and 2007, by 4% and 19% respectively. Thanks to October’s strong performance, the Manhattan market is on track to achieve its strongest year ever based on the number of contracts signed.
Areas of strength in the market
A few segments of the market are responsible for the huge growth in sales:
- This past October was the best since 2007 for new developments, with over 200 sales.
- The luxury market over $5M had a record month in October with sales hitting their second-highest level ever at 125 contracts, 71% over September 2021 and 191% over October 2020.
These numbers help account for what was a fantastic month contributing to a record-breaking year. Lower prices, low (though rising) interest rates, and high consumer confidence continue to fuel the market. New York City real estate is still undergoing a rebound, which has been driven by New Yorkers trading up for larger apartments, suburban buyers moving back in, and others looking to capitalize on the moment. This momentum will likely continue throughout the end of the year. Notably, the United States lifting the travel ban this past week has allowed foreign buyers to re-enter the U.S. International buyers makes up between 10 – 30% of condo sales (currently it is 8%), so more buyers coming to market from overseas could provide an additional boost to sales activity.
What areas are struggling in the market
This recovery is uneven, with the lower and higher ends of the market selling better than the middle (particularly of prewar and many postwar co-op sales and older postwar condos). It is important to understand that New York is made up of a wide variety of market segments – with sales volume and prices at various levels. Each segment has a distinct story – most of those untold stories are in the middle market, between $2.5M up to $10M. Some factors that contribute to weaker sales include:
- Apartments that need work – current supply chain challenges are impacting renovation timing and costs. This negatively impacts sales activity in many markets as buyers are hesitant to take on large renovation projects right now. This fact alone has buyers looking at and purchasing renovated homes.
- Smaller units that don’t have extra space or outdoor space – when these two qualities are lacking, sales suffer. Those with the extra space or added outdoor space trade at a premium given the recent shift in buyer priorities due to the pandemic.
When does high activity translate into higher prices?
Properties are selling for more money now than they were a year ago, and if priced right, demand can drive the price over the asking price. Right now, approximately 8% of deals have bidding wars. While this figure tracks with a stable average, it is well below the height of the market in 2015 when 30% of deals resulted in multiple bids.
Overall, the high-end market is up 5-10% and the lower end down 5% year-over-year according to Jonathan Miller, real estate appraiser and market analytics expert. Following the end of the initial pandemic shutdown last year, sellers often received offers 8-10% off their asking price, while this year sellers got closer to their asking price, closer to 5% off. Inventory is also significantly down from the bloated levels early last fall and there is less redundancy in the market. Overall, Manhattan prices are only 10-15% down from peak level pricing which is encouraging, but it may take a few years to reach these former high sales prices.
The economy and future Impact on real estate sales
The economy is generally healing with jobless claims dropping. Moody’s Analytics concluded that the two infrastructure bills currently in congress will strengthen long term growth and will pay for itself. The measures will add 1.5M jobs per year, and increase GDP by nearly $3T in the next decade. The strength of all these recent numbers boosted confidence, and the S&P 500 index closed at all time high last week. The reinstatement of the SALT tax deduction is also being currently being debated and if that is restored, it will serve to further lift the entire Manhattan market.
When is a good time to list my home?
Sales were strong in non-traditional seasons this past year, during the winter and summer, due to pent-up demand from the pandemic, low interest rates, and savvy buyers taking advantage of lower prices. Historically, the real estate market is seasonal, and the fastest paced markets occur during the spring and fall. This past year was an exception leaving people to ask: Should I list now, or wait until the spring market gets into full swing?
There are a variety of factors to consider when deciding when to list your home, including how much work your apartment needs, what your personal timeline and goals are, and the increased desirability of certain features such as outdoor space, home offices, or wood-burning fireplaces. The spring market will always be the most active in general, and traditionally active markets will likely return in 2022. With that said, many apartments will sell successfully in the fall or early winter if the property has qualities buyers are looking for now – and if priced correctly. In fact, we often see a surge in the last few months of the year as some buyers make decisions before the new year or want to avoid increased buyer competition in the spring. Normally it is not advisable to list near Thanksgiving and the holidays as buyers are often distracted during that period.
It is easy to look at the record sales volume news and expect that all apartments will sell quickly and high, but this is not the case. In times where the market is behaving unevenly, it becomes even more critical for sellers to understand where their apartment fits within the current inventory on the market. If your market segment was significantly hurt by the pandemic and is currently experiencing lackluster sales activity, it is probably best to list in the spring. My team and I are happy to offer clear and reasoned advice on correct pricing valuations, timing and how to best prepare your apartment or house to achieve the highest sales price. We are always happy to help you develop the strategy that will optimize your goals.