In the first months of 2017 both the pace and the volume of New York real estate transactions accelerated. In the $5 million and above marketplace, months of doldrums were supplanted by strong and incremental deal flow. Trading improved in the new condominiums, even at the higher price points, and a mood of tempered economic optimism has so far countered the inevitable rise in interest rates, which has now begun to impact the mortgage marketplace. It was a strong quarter throughout New York.
We continue to see high transaction volume fueled by limited supply in the market for properties priced under $2 million. One of our Upper West Side Open Houses in February literally had a line around the block of buyers waiting to view the unit!
The upper market still has a fairly thin constituency, although we have seen a few particularly desirable, well priced properties going to multiple bids. There is a limited number of buyers for these units; the big change is that these buyers are ready to act to secure what they want. This change in buyer behavior has substantially boosted absorption rate for units priced at $3 million and above.
The attributes which make properties “must haves” remain the same: location, price and condition. Two recent sales of Upper East Side exclusives illustrate the importance of these attributes. Both are in highly regarded buildings, both are in lovely condition, and both sellers priced for sale and not for ego gratification. Although neither attracted a huge influx of buyers, both brought in the RIGHT buyers. They sold quickly, and either at or close to their asking prices. That is the behavior of an efficient market. At the same time, there are still units which have only one, or even two, of the three attributes described above which linger after months on the market. And the conclusion is clear: if you don’t have the location and/or the condition, that needs to be reflected in the price.
The long anticipated opening of the Second Avenue subway, and the restoration of Second Avenue to its pre-construction appearance, can now begin to have an impact on prices in Yorkville and the area south to 59 th Street. We already see an uptick in prices along the Second Avenue corridor, and we anticipate, over the next year, to see this positive impact spread to the venerable buildings along East End Avenue as well as the co-ops and condos along York, First, and Second Avenues.
The past two years have seen substantial price appreciation in many formerly “outlier” neighborhoods: Harlem, Washington Heights, and Inwood in Manhattan, Prospect-Lefferts Gardens and Ditmas Park in Brooklyn, and Long Island City and Astoria in Queens. As Brooklyn prices continue to escalate, and it is necessary to go deeper and deeper into the borough to find affordable housing, Queens and a number of more moderately priced neighborhoods in Manhattan (including, at least for now, the eastern reaches of the Upper East Side) are luring both buyers and renters back to the boroughs which they fought to escape as they came of age!
A whole different ethos permeates the rental marketplace. As more and more investor-purchased new condominiums closed over the second half of 2016 and into this year, there has been sharp downward pressure on rental prices as all these new units flood the marketplace. We have seen a return of no fee and owner-paid commission apartments (in the rental market it is usually the tenant, not the landlord, who pays the commission), and larger units renting for as much as 25% lower than three years ago.
So overall the sales market has strengthened substantially during this first quarter, with inventory remaining low and buyers increasingly ready to act quickly, while the rental market experienced challenges due to increases in inventory, which resulted from newly constructed investment purchases being marketed for rent. At Warburg we anticipate a strong spring selling season throughout the marketplace, with some modest price increases owing to limited inventory and greater demand. The rental market will likely remain more in stasis till the summer when it always picks up. But for now, enjoy the return of spring!
