Welcome to October!
I hope you’re having a great start the fall season. In this update I dig a bit deeper into the news and real estate activity over the past month. Please feel free to reach out with any questions, comments or real estate needs.
Open House Activity
Buyers were back in force and open houses were busy. According to the RLS, there were 1,015 Open Houses during the week of Sep 11 thu 17. That is an 8% increase from the prior week. Our most recent survey showed the average number of attendees was 2.47, almost a one-party increase from the prior week and our highest number since April. Of our results, 55% of the OHs had 1 or less, a 10% drop from last week’s. 38% of our results showed 0 groups attending and 97% of these no-shows were in Manhattan. The highest OH attendance reported was a 2B/2B for $2.75M in SoHo which generated 20 group visits. Of our top 20 OHs, the average attendee was 8.05, 1.7 x our last report. Additionally, we showed stronger traffic across two and three bedroom apartments. Brooklyn saw more activity than Manhattan. There was also a pick-up in interest in the luxury home sector by higher-end buyers. Overall, sellers have been seeing good traffic on their listings and buyers have a more diverse range of options across the city.
Manhattan New Development
Our new development team recently provided some interesting insights on the Manhattan new development market over the past quarter. For the first time in nearly a decade, inventory dipped below 6,000 units. Given that Manhattan generally sees absorption of around 1,500 to 2,000 units annually, we’re looking at under four years of supply, a figure strikingly low by historical standards. Compounding the problem is the noticeable decline in future projects, evident from fewer cranes dotting the Manhattan skyline and the various economic challenges currently facing developers. With approximately 90% of the inventory ready for immediate occupancy, it is expected that absorption will increase (given the market preference for fully transparent and move-in-ready properties). Consequently, Manhattan may face a supply shortfall in the upcoming year or two, a scenario not seen in over a decade. This is expected to exert further upward pressure on prices. While elevated rates have affected the appetite for properties under the $3 million mark, the demand remains robust for those priced above $4 million. It’s noteworthy that more than half of these transactions are cash purchases, and there’s been a marked uptick in parents acquiring properties for their children.
Commercial to Residential Conversions
Additionally, despite all the talk about office to residential conversions, industry experts say that few buildings are easily convertible and that such conversions are not likely to result in a significant source of future supply. In most cases office buildings do not meet the standards required for residential property with the most important aspect of the conversion being the core of the building that incorporates the elevator shaft. Oftentimes, the expense of reconfiguring the core to accommodate residential space is so expensive that the project becomes non-viable.
In early September, the city started to crack down on Airbnb properties across the city. According to one article, the tighter enforcement has led to a 77% decline in the number of Airbnb listings in September and has some speculating that certain economically stressed buyers may be compelled to sell. It’s too early to tell, but something to keep an eye on.
NYC Mayor Eric Adams seeks to ease the enforcement of a landmark climate law aimed at reducing building emissions. Building owners in New York may receive an additional two years to comply with Local Law 97, which establishes limits on greenhouse gas emissions for large structures. At the same time, the city’s planning department has greenlit a zoning revamp to expedite climate initiatives citywide. This underscores the political tension and challenges in aligning the city’s ambitious climate objectives with the practicalities of their execution.
Brooklyn and Manhattan New Listings
Weekly new listing activity was up substantially over the prior month; new supply was lower than same time last year but substantially higher than August. Charts 1 & 2 below track new monthly supply in both Brooklyn and Manhattan over the past two years relative to their monthly historical average.
Both Brooklyn and Manhattan are currently experiencing listing trends that indicate a more challenging market for sellers than during the same period in each of the last two years. The attached chart illustrates the percentage of new monthly listings that either sold or went into contract. Due to a delay in updating sales data, the most recent listings might not accurately capture the latest activity, potentially leading to underreporting. However, it’s evident that the success rate of listings has been on a consistent decline since March, likely a consequence of waning demand during the summer coupled with the impact of high interest rates.
Brooklyn and Manhattan saw greater price cuts on properties during the month of September, with median price cuts of 3.8% then 4.8% respectively. Monthly price cuts typically rise in the month of September over August, likely a result of older summer inventory competing with new listings in early fall. As a result, sellers of stale properties face pressure to reduce prices in order to become more competitive with new inventory. This represents an opportunity for buyers that Are open to older inventory as prices and negotiating leverage have likely skewed in favor of buyers.
Price vs. Ask
The charts below highlight the pitfalls of making generalized assumptions about the market. Each chart displays the percentage of sales at, above, or below the asking price for the past two quarters in comparison to Q3 of the previous year. Specifically, Charts 7-9 detail sales trends in Park Slope, Bay Ridge, and the Upper East Side respectively. Each shows a decline in the percentage of properties selling above asking price when compared to the same period last year. It’s important to recognize that these percentages can significantly fluctuate based on neighborhood and property type. For instance, Charts 10 and 11 compare $2-5 million townhouses in Park Slope with studio and one-bedroom co-ops in Bay Ridge. In Q3 2023, 25% of townhouses in Park Slope sold above their asking price, while none of the studios or one-bedroom co-ops in Bay Ridge did the same.
Thus, when entering the buying or selling process, it’s important to consider the specifics of the property, its location, pricing, and the prevailing market sentiment. Otherwise, there’s the potential for setting unrealistic expectations and formulating strategies that may not yield desired outcomes.
Conclusions & Opportunities
As always, dynamic markets create challenges and opportunities.
For Sellers: In the current competitive listing climate, properties that have been on the market for over 90 days are likely to face stiff competition from fresh listings. If a listing has seen limited interest, sellers might contemplate adjusting their price, especially in anticipation of a potential surge in demand come October. New entrants to the market should recognize that buyers are exceedingly discerning, often gravitating towards specific properties and typically bidding with caution. Hence, it’s crucial to set a realistic price and temper expectations, as the prevailing market doesn’t necessarily favor all sellers.
For Buyers: The current market landscape presents unique negotiation opportunities, especially for properties have lingered on the market or neighborhoods seeing less demand. Reduced liquidity, suboptimal listing success, and overarching market challenges hint that certain sellers might be particularly amenable to negotiations, especially if their initial pricing missed the mark. While the market doesn’t reflect broad-based urgency among sellers, those in a position to make a sale might be more accommodating to lower offers. Properties on the market for over 90 days could represent an opportunity. However, as market dynamics can shift rapidly with unanticipated demand, it’s essential to strike a balance in negotiations to avoid missing out on potential deals.
If you’d like to discuss specific properties, neighborhoods or opportunities as either a seller or buyer or if you would like assistance or advice, please feel free to contact me.
That’s all for now. Have a great month!
All the Best,