2016 is finally coming to a close. It is a year with dramatic twists and turns, but for NYC real estate, it is a year of a consistent theme: orderly slowdown. The first few months of the year saw the market coming off from record prices reached in December 2015. Both prices and pace picked up in March through June. Then the summer lull settled in. Fall did bring with it the usual seasonal uptick in pace, but overall the market continued its slowing trend. Here is a look at the market from November 2016, 2015 and 2014.
We can clearly see a market that is taking longer to transact. However, both the number of transactions and deal volume stayed in a tight range for the whole year, meaning despite the slower pace, transactions were still happening.
What will 2018 bring us? Some respected industry voices like Jonathan Miller say that the prices will go down slightly. There are two reasons. One, new construction pipeline is still quite full. Roughly 5500 new units came online in 2015, 6000 in 2016 and 3000 in 2017. The second reason is mortgage rates will be higher in 2017. On the other hand, there are quite a few positives. Number one and the most important one is that leverage is still very low in the system. The percentage of transactions financed with a mortgage contingency is still at a remarkably low level of 26%. Inventory is rising, but it’s skewed by new construction, with listings under $1mm sticking to a scarce 3-4 months, between 1-2mm bouncing around 7 months and 2-3mm at the long term average of 8 months. In addition, developers have slowed down new construction projects. Economic and employment prospects are good for NYC.