A lot has been going on in the current real estate market, and many people have questions. Here is a quick view into what is really happening.
To start, supply in the Manhattan market is looking pretty normal with about 350 properties listed for sale this week. However, when we look at demand, there have only been 145 contracts signed. Historically, we should have more contracts signed as this is historically a busier time of year for sales than what we are experiencing. With this past week’s additions, we only have about 600 signed contracts for the month when we typically end the month with about 900. Let’s dissect this further…
During the Covid months, sales were being negotiated at around a 10% discount. That means that buyers were controlling the direction of sales. That faded until about July when sales were beginning to once again be negotiated closer to the 10% mark. We are watching to see what side negotiations are leaning on because that could turn around relatively soon.
This can be seen in the luxury market where only 7 contracts were signed this week, but what’s interesting to note is that there was no discount greater than 2%. Although seven sales can be viewed as quite a small amount and we want to see more, those sold properties received close to the asking price.
What About Rates?
Another area that is getting a lot of attention is the current rates. What’s interesting to note is not so much how high the rate is being raised, but how fast the rate is being raised. Rates have gone up 2.36% in the past six months. In the past, between 2015 - 2018 we saw the same rate increase. What’s the problem you may ask: what took three years last decade took six months this decade. That’s enough to make people start to feel uneasy.
In the early ’80s, rates were at an all-time high of 15.8%.. A 2% hike is not something to fear, but the speed at which the market is changing is what’s making a lot of people stop and see what’s going to happen next.
What Should You Do Next?
Based on my 18-year experience in the Manhattan market, you can’t predict the future. What we are currently looking at is if you are looking to buy, you should be aggressively looking for a property because now is your time on the negotiation chart.
An inverted yield curve on the treasury has been a leading indicator in the last ten recessions. It happens when investors are more agressive on the long-term economy rather than its the short-term prospects. The federal government is raising the federal funds interest rate to put a break on the economy with the hopes of taming inflation. This also has resulted in mortgage rates rising.
Investors are adjusting their investments and expectations accordingly. Fear and increased costs can affect buyers and slow down transactions. But on the contrary, the successful broker that I am says the following:
I like to say marry the apartment, date the rate. If you fall in love with a great place, buy it. Rates will always change and you can always refinance in the future on a long-term investment. The market fluctuates and it will right itself in the future.
As always, share this with anyone you know who is looking to buy or sell their apartment. If you are a seller, remember, you may sell at a lower price, but you’ll also buy your next place at a lower price, so you are still going to make money on your investment. Selling is a very personal decision and can't be looked at in a vacuum. A seller may sell at a lower price, but also buy their next place at a lower price, and still make money on their investment. Also, it is important to remember to analyze both the true carrying and capital costs vs personal expectation on the market. If it costs 5% to carry the apartment, the market needs to appreciate to an attractive point while adding the additional 5% on top as well. If you would like my assistance in this type of analysis, please reach out to me. If you’re a buyer, now is your time. I am always reachable at [email protected] and at 917-209-4300. Thank you! I’m excited to see what’s next.
Selling is a very personal decision and can't be looked at in a vacuum. A seller may sell at a lower price, but also buy their next place at a lower price, and still make money on their investment. Also, it is important to remember to analyze both the true carrying and capital costs vs personal expectation on the market. If it costs 5% to carry the apartment, the market needs to appreciate to an attractive point while adding the additional 5% on top as well. If you would like my assistance in this type of analysis, please reach out to me.