Three years ago, several weeks into the start of 2013, I reflected on the Wall Street adage “As January goes, so goes the year.” At the time, impressive financial gains were scored with both the S&P 500 and the Dow which were up in the month of January 2013 by 5.05% and 5.77% respectively, signaling the best start to the year since 1987. In residential Manhattan real estate, January 2013 witnessed a jump of nearly 28% in signed contracts over January 2012 (2,888 vs. 2,265). Sofia Song, at the time StreetEasy’s Head of Research, called it “The Year of the Frustrated Buyer.” I termed it “The Year of the Smart Seller.”   

In sharp contrast, in the first weeks of 2016, Wall Street has zigged and zagged, keenly sensitive to negative news and reacting largely to continued turmoil in China’s markets and to cheap oil. With oil prices plummeting to below $30 a barrel for the first time in 12 years—good for the consumer at the gas pump but problematic for oil producers and competing energy companies—just days ago, the Dow and S&P dropped nearly 6%, contributing to Wall Street’s worst week since 2011. Volatility in the financial markets today reigns supreme, and financial pundits are expecting a roller coaster ride for 2016. 

Nonetheless the U.S. remains an economic world powerhouse despite news of weakening GDP numbers for 4Q2015. Job growth is encouraging and unemployment numbers are better than they have been since 2008; in NYC, unemployment is at its lowest rate in 9 years; however while corporate profits are up, wages still lag behind.

So what about Manhattan real estate this year? 
 

In a 35-year career, I’ve worked up markets, down markets and everything in between. Last year more transactions were closed industry wide than in 2014 but fewer than in 2013. Record breaking new development sales skewed the numbers, and in the fourth quarter of 2015, the median price for a Manhattan property surged to $1.2M. My crystal ball is as round as any, but medians and averages this year are likely to remain high, skewed again by closings occurring at luxury developments for contracts that were signed as much as two years ago.  

All will be watching to see how developers handle the pause/reset moment affecting the luxury ultra end of the market where supply exceeds current demand. Clearly apartment sales in the super tall amenity rich towers with astonishing views and equally amazing price tags are stalled. As costs for land, construction and insurance premiums climbed exponentially, high end property developers set stratospheric prices on their products, but in 2015 these values plateaued. Which developers will have enough patient money to wait out the softening of this market? 

In other sub markets, conditions still favor sellers who price on target. With inventory short, these sellers retain the negotiating edge fostering an extremely competitive climate for buyers. With less than a 4 month supply of inventory in many cases, it’s unlikely that we will drift from a seller’smarket to a buyer’s environment any time soon.  

Less is always more

Target pricing remains the key ingredient of any marketing campaign. It’s been my experience that less is more always. Sellers are cautioned to use discipline and restraint to set achievable values on their properties. Themarket has zero tolerance for improperly priced properties. Inflated asking prices not only divert bidder attention but also fail to capture the possibilities presented in the first weeks of marketing when the savviest brokers and most informed buyers visit. When high buyer demand and low inventory converge, it’s the well priced offering that gets bidding activity. When price is perceived as value, multiple offers follow yielding closing prices that exceed the ask.

Most transactions today are driven by life events such as birth and death, marriage and divorce, job relocation and job loss. Homeowners are staying in their homes longer. I recall early in my career, New Yorkers moved on average every seven years. Last week when I mentioned that to a first time buyer, she shuddered and said her intention was to purchase a property that would be her home for 10 years or longer. It’s especially challenging for millennials who form a new buying  audience: 70% of an estimated seventy million millennials in the U.S. say home ownership is important, but they face difficult challenges because of limited job prospects, high student loan debt, and insufficient funds for down payments and post closing liquidity.  

This year although there will be increasing noise as we get closer to elections, politics is unlikely to impact residential real estate. Inventory is forecast to remain in short supply, and demand will be high from buyers conscious of value and slightly rising rates. Despite financial uncertainty and global geopolitical turbulence, this year buyers both domestic and foreign will continue to lust for bites of the big apple. Barring the unforeseen, smart sellers who are guided by experienced brokers will retain their advantage in 2016.