Has the market peaked?

no end of buyers for turnkey mid to low priced properties. Where there is some movement in my area is properties that need work and the high end. I see some movement again in the high end, as the US remains the only place to invest.

You never really know if a market has peaked until you know for sure it has gone down and point backwards in time to where the peak was.

>You never really know if a market has peaked until you know for sure it has gone down and point backwards in time to where the peak was.

that's just weak.
I called the peak at Q2 2015

@30 yrs., true, but I am just wondering what people think. So many brokers you talk to seem to think that prices are going to go up indefinitely every year and obviously they are self-interested and not always the sharpest, but in my many years this seems like very much pre-bubble bursting thinking. Personally, don't think it's going to come down all that much and a good apartment will always sell, but maybe it will begin to stabilize?

In my non-expert opinion there is at least a plateau at the 1-2m range, with things over 3-4m coming down. Properties under 1m still going up due to lack of supply. Lots of resellers too starry-eyed and trying to get same prices for their properties as new construction--there have been a fair number of price chops over the past several months on SE, and things are sitting longer. Also several seller reps in new developments have quietly suggested to me that under-ask bids will be accepted.

No softness in coops but high-end condos soft. Low rates will continue to put a floor in the real estate where people live rather than park potentially dirty money.

http://media.corcoran.com/pdf/reports/2016_Q2/Manhattan_Q22016.pdf

@UES_Ida,
It's rare in NY that the market just comes down a little, especially after it has been on a huge run up as it has been over the last decade plus. I can't tell you when the next market correction will come, but I would be willing to bet that whenever it happens that it will be substantial. There is an expression "Real Estate is the only thing that no one wants to buy when it's on sale." So when prices start coming down, buyers tend to disappear and send prices on a big tumble.

There is a well-documented softening of the market for units listed in excess of $3M and a virtual standstill in the market above $10M. This pull-back has not trickled down to the 1br/2br market, which remains woefully underserved and seems as strong as it has ever been, with most properly priced units with reasonably broad appeal receiving multiple bids and going above ask. I don’t think that prices will go up indefinitely (even though I am a broker), for that would ignore the volumes of data that support the cyclical nature of real estate markets. The NYC residential market will go down at some point – nobody knows when or what that correction will look like, but it will go down. It does not feel like we are close to a correction right now, but we are 6 years into a bull market…

Dan Gotlieb
Digs Realty Group
www.digsrealtynyc.com

I think we will see that 2014 was the peak of this last bull cycle. Sellers were fully in control; almost impossible to get a deal done in with a financing contingency on any unit. Multiple bids on every unit we were involved with and the highest and best call was in theory. Even after you were told you 'won' another bidder would come in and make a highers bid that was 'Too much for the seller to refuse....sorry'. I remember January of 2014 we had 19 offers submitted; 2 got to contract.

In our little world we are still seeing strength, however it is a bit more 'normal' even the calls for highest and best are more subdued and certainly less of them. I have a few listing agents dogging me when buyers showed interest but no offer was forthcoming. We actually negotiated a financing contingency on a new development in Brooklyn with the transfer taxes paid (one of the last units left in the project $2M+). I feel like we are getting some summer doldrums, which we like! Is it a market trending towards normal price action; we'll see.

I am thinking we continue to see a stable market with a nod still going to the sellers.

Keith Burkhardt
The Burkhardt Group

Just to give you an example of the regular price chops I am seeing in apartments in 1-2m range, check out the price history on these listings:

http://streeteasy.com/building/gramercy-starck/5h

http://streeteasy.com/building/griffin-court/2o

http://streeteasy.com/building/onyx-chelsea/2a

More:
http://streeteasy.com/building/onyx-chelsea/6b

http://streeteasy.com/building/388-bridge-street-brooklyn/ph49c

http://streeteasy.com/building/platinum-condominium/603?featured=1

And some more:
http://streeteasy.com/building/the-charleston/7c

http://streeteasy.com/building/78-south-3-street-brooklyn/2

http://streeteasy.com/building/one-museum-mile/17f

Price growth rate over the last five years is simply not sustainable given lack of income growth. At some point, the correction will have to come. How most "average people" can afford to buy a 1-mil apartment is simply beyond me.

^^^Right. Presumably, there is also not an endless supply of wealthy foreigners to buy the units as pieds a terre or to rent out.

You'd think so, but the prices in the one million and under category seem to be going up at the fastest rate vs. even last summer. A friend bought a 2 bdrm in one of the east river coops on the LES less than 2 years for somewhere around $650K, and now unrenovated apartments in his building are asking north of $850K. Maybe this is just the new normal?

@UES_Ida,
this is the reason for my prior statement: how little would it take for prices to drop back down to that $650K level?

@CCL3 The listings that you selected are a good example of homes that don't sail into contract. They have location, price issues. This is what we are seeing with less than ideal situations. I could also post links to half a dozen properties (that we bid on in the last two weeks) that went to contract at, near or above their asking price within 2 weeks. The cream continues to rise but if you are a seller, you better get your price right. It's not 2007 or 2014 where all things sold with little regard to condition or location issues (even price took a rear seat to 'winning'.

Keith Burkhardt
The Burkhardt Group

What's wrong with the location of the Onyx Chelsea and Griffin Court? Both in well-trafficked areas close to several subway lines. But yes, they are now overpriced....because the market is retreating from 2014 levels.

Here's a new condo conversion on UES; I guess the sponsor found out the 1065 sq ft were not worth $1.95m and just chopped 200k off the price: http://streeteasy.com/building/carnegie-park-condominium/714

hudsonhome, "average" people can not afford to buy in prime manhattan. However, there are plenty of two income families with $300k joint income who can buy more than $1mm with the current low rates. In addition, you need to have worked for 10+ years to save money for downpayment.

$1m doesn't get you much--maybe a 1 BR. Are couples, possibly with children, looking to buy a 1 BR? Not really. Not much income growth in the the $300k families either, plus when you add in NYC RE taxes and common charges, affordability is even less. I am coming from a dual income of almost double that and can't find a decent 2 BR to buy in Manhattan, once you factor in taxes and common charges, unless we are willing to spend over 50% of our take home on housing costs, which we feel is irresponsible. (Also don't forget there's no cost of living adjustment on income taxes, so Manhattan couples making a combined $500k are hitting the top income tax bracket). At some point the market will run out of these types of buyers as well.

I should have said, "Location and/or price issues".

CCL, I know you only want to buy new condo but there are nice non-luxury coops in good condition with 2 bed rooms for under $1.5mm and maintenance and taxes below $2500 per month. $500k total will put you in all in 38-40% taxes which is unfortunate reality. Under $2mm coop market is the only market where I do not foresee much softening. There are still nice apts including condos to be had for 1100-1200 per sq ft.

True, but when you limit the co-op search by (1) non-land lease building; (2) does not require more than 20-25% down; (3) does not require major renovation and (4) fair location (not above 116th street), there aren't that many options.

I don't think the market has peaked! The fact that Brexit happened only confirms NYC as the place to park cash in real estate :-) imo

@CCL#,
back to a building I think I recommended you to look at before:
http://streeteasy.com/sale/1224501
It does require a major renovation (I think if you just put in new high quality appliances in the kitchen and perhaps some granite counter tops that is all it really NEEDS). Plus with your concerns about affordability it falls well within your means.

Thanks. That one's not bad though it just took a price chop so I wonder why no one is biting. We're also really holding out for over 1200 sq ft and there must be an ability to have a w/d installed if not already provided as it makes a huge convenience difference to have w/d in apartment. We have this in our current rental and it would feel like a downgrade to buy without one.

Definitely has not peaked. Rates are negative. Rates need to go up before we can have the next downturn. That will take a while.

No way the market has peaked. Chinese buyers simply taking a break. They'll be back imo.

Just lost a unit in a 5 way bidding war above ask in Park Slope..

30y, Nice find. It will sold as 1300-1400 sq ft in new development.

CCL, What is washer dryer worth to you? Usually, you can get your cleaning lady to do the laundry. So, it does not matter as much. Cleaning lady for 2 bed is $120-$150 every trip including laundry. Or you just want new construction regardless.

Are you saying that if it were in a new development you think it would sell for only $1300 to $1400 per SF or are you saying that in a new development they would call that same apartment 1300 to 1400 SF?

The latter. They would call it 1300-1400 sq ft.

This is why using $/sf as a barometer for pricing can be misleading. When the same apartment can be different SF, how can using a fixed $/sf yield any sort of correct answer?

You have a point but using a benchmark even though subject to 10-15% error is better than using no benchmark. Ideally, govt should set standards on how sq footage should be measured (rather than regulating many other things) but with the real estate lobby, that will be far-fetched.

I have also used price per share and price per room to assist with appropriate value.

W/d is worth a lot. I have cleaning lady come twice a month and sometimes I need to wash things before then, i.e. i run out of clean gym clothes etc. I also think I'd rather have luxury new construction in Brooklyn than non-luxury in Manhattan. Aesthetics are very important to me and I don't really want to go through the expense and hassle of buying a place I feel is "meh."

CCL3,
It sounds like you are saying you are open to coops but then setting the bar where you know no coop an reach.

CC, I think I understand your point of view. A 60s white brick coop with 8 foot ceilings and not so nice windows will never give you the aesthetics of a say 9 foot or higher ceiling and floor to ceiling (or large) windows. Your washer dryer problem could be easily solved by getting another week's supply of gym clothes for $500. I have a washer dryer, which is nice to have, but only our cleaning lady or nanny uses it. For a $2mm ish apartment, I only put max $50k premium on having a washer dryer in the apartment. I am sure you will find a good price in new development as you are flexible about the area.

Yeah, I am probably setting the bar where a co-op won't work. :)
We will probably end up getting something in one of the many new brooklyn developments coming up (not in Williamsburg or DUMBO!). We are waiting to pull the trigger for something to happen with my husband's job and also for the market to soften a bit more. Sounds like there's no risk of interest rates going up any time soon so at least we have that on our side.

NO way the market has peaked. Bond yields keep falling. They say TINA (there is no alternative) for equities. Guess that applies to real estate too.

You should pull the trigger now! While rates are still low :-)

Market really softening? http://fortune.com/2016/10/04/manhattan-apartment-sales/

^^^Good article. I think some sellers are still not getting the memo. While there have been many price reductions, there are still plenty of apartments that have been sitting on the market 6-12 months unsold (or longer), with no price chops. Not sure if those sellers really want to sell?

"Sales of Manhattan's Cheaper Apartments Are Way Down" ? Huh? What exactly does that mean? Good article? I'm thinking it was written by a 12 year old. What about the different Manhattan markets, 20m+,10m+ 5m+, 3-5m, 1-2m under 1m? Condos/Coops? What about the inventory levels for the lower end being at extreme lows? The journalist needs to clarify what market she is referring to. She only hints at it being luxury in the last paragraph, hmm how convenient. Fortune is a notorious sensationalist publisher. You should see the articles they put out in the equity markets. What garbage. Author probably got outbid on that 1 bedroom condo she loved and now is pissed! :)

Perhaps the report the 'article' is based on is more informative http://www.millersamuel.com/files/2016/10/Manhattan_3Q_2016.pdf

What we are finding is that while sales in general have slowed significantly, "lower" priced apartments in in good locations (like Chelsea, GV, etc.) are still very strong with no softening in prices.

Note that the last paragraph in the Fortune article quotes a source that only deals in commercial Real Estate. Sloppy reporting.

As reported by the StreetEasy Price Index, Manhattan’s median resale price was $994,458 in July 2016, up 2 percent since last year and the slowest pace of price growth since April 2012. ----So compared to a year ago, July 2016 price is still higher--is that higher or lower than previous months?

SE index is a repeat unit regression analysis based index, so sample size will always be limited to only same-unit resales over time and not take into account value of renovations that may or may not have been done to the same unit sale vs prior transaction. At least I dont think. Now, its a very useful index for sure as this is the proper way to analyze manhattan price action on an apples to apples basis, without the noise of seasonality + the diversified ix of products that sell in this market.

With that said, all 'sales' based metrics are lagging so if you are looking at SE Index, or PPSF trends, or Med Sale price trends, etc, its actually a rear view mirror look at the market how it was 4-6 months prior. The reason is (i) it takes 2-3 months to go from csgn to close and (ii) it takes 2-3 weeks to up to 2-3 months for ACRIS to file the transaction and make the sale price public record for inclusion in all stats, indexes, etc. Add it up, and sales released today were signed 4-6 months ago or so.

Therefore, when people ask if the market has peaked in todays world + use lagging sales data to validate the theory, it could be very misleading. If we look at deal volume for contracts, the peak was early to mid 2015. Pending sales peaked in May/June 2015. This realtime deal vol peak is more pronounced when you break of pending sales into price tiers. The high end peaked early 2015 and then cratered. The low end peaked in mid 2015 but never really saw any leverage shift to buy side. High end did, and rolled over until early 2016, and since has started to normalize and recover. All conclusions looking at real time trends of contract activity, supply, days on mkt, etc.

https://www.urbandigs.com/chart.php?type=CONTRACT+SIGNED&nbhoods%5B%5D=Manhattan&proptype%5B%5D=all&price=all&bdrms=all

So what the heck does this all mean? Those in the field will tel you todays market is no where near as 'crazy' or active as it was in early to mid 2015. Also, there is noticeably more inventory trying to sell compared to 2014 and early 2015. The ratio of this supply/demand, was tilted heavily in favor of sell side for all of 2014 and up to mid 2015. Then it all changed - starting with the high end and working down to lower price points over time until about early 2016, March/April when we started to see activity recover. In sync with equity market trends as well which were rocky late 2015 into early 2016 and bottomed/started to recover in mid Feb 2016. So 2016 from a data perspective and from talks with colleagues in the industry was "sluggish" compared to 2015. More stuff on the market, less stuff in contract, more time to sell listings. Leverage shifted from heavily in favor of sellers to a more balanced level. If 10 was strong seller mkt, and 0 strong buyer market, I would say leverage went from a 9 in early 2015 favoring sellers to a 5-6 level today. Thats in general, when you break into price tiers its again a different story with high end leverage shifts more heavily towards buy side. Less so as you get to low price tiers.

Noah, thanks for the analysis and info. It is interesting that two-bed condo activity hasn't come close to meeting the Spring 2008 peak after all these years of recovery.

Also, depending on the neighborhood, it seems:
http://www.nytimes.com/2016/10/16/realestate/new-york-neighborhoods-hot-and-cold.html

Also, depending on the neighborhood, it seems:
http://www.nytimes.com/2016/10/16/realestate/new-york-neighborhoods-hot-and-cold.html

The situation is definitely not favorable. The high prices are partly due to the lack of housing. Many properties are rented instead of being sold. The vacancy rate of Manhattan rentals have decreased and a huge percentage of apartments and homes available for rent in the neighborhood are occupied. I read that the median rental price of $3,500 marks the second highest price recorded in eight years. The only type of Manhattan apartment that saw a drop in median price was three bedrooms.