Manhattan Real Estate De-Mystified

We have all assumed a few things about the New York real estate market.  But just how true are our assumptions?  Please read on!

The market has been busy, coming off a fresh injection of energy from the equity rally.  However, the fundamental backdrop remains intact: rising rates, luxury end still sluggish and a rental market that is still struggling.

Mystery #1 – Did The Presidential Election Actually Make A Difference?  YES.

According to Compass Research, in the 4 weeks leading up to the election, 677 contracts were signed (-33% YoY) but in the 4 weeks following the election 837 contracts were signed (-5% YoY).  First two weeks of December, total contract activity was +29% compared to a year ago, driven by contracts signed above $3mm.

Mystery #2 – Is The Luxury End Of The Market Out Of Touch With Reality?  YES

The luxury inventory continues to be disconnected from the demands of the market as inventory priced above $3mm made up 29% of the total inventory but only 15% of total contracts signed.  In contrast, coop inventory demand is higher than supply (55% of contract signed vs. 47% total inventory).  Consumers are price-driven!

Mystery #3 – Did The Second Avenue Subway Push Up Prices For UES?  YES

Among all the neighborhoods in Manhattan, the UES saw the greatest price appreciation in 4th quarter 2016.   Median price of active listings in Manhattan increased just 3% in 4Q16, driven by 6% on the UES and 5% in Upper Manhattan, offsetting a decrease of 2% in Midtown.

Mystery #4 – Is The Rental Market Really Bad?  YES

According to Axiometrics, the average number of new rental apartments finished in each of the next few quarters is expected to climb to 102,000 from 82,000 in late 2016 and early 2017.  This will continue to apply downward pressure on rents.  The rental market is down easily 10% YoY.


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