If you’re a Manhattan buyer who’s been sitting on the sidelines hoping for a summer markdown, you may be hanging on pointlessly. Much like the two characters of Samuel Beckett’s existential play Waiting for Godot, who wait for someone named Godot, you may be hoping for something that doesn’t come. The waiting in Beckett’s play turns out to be aimless, because Godot never shows up.
Diametrically opposed to the experiences of the rest of the nation, the Manhattan market is strong and robust. Everywhere else but Manhattan, it seems there’s a huge inventory pile up with sluggish sales and downward prices. Everywhere else but New York, the housing market has been slowing down. In a weak and lackluster environment, national home builders like D R Horton, Beazer Homes USA and K Hovnanian are reporting sharp losses amid high inventories. Across the country, as the ripples from the subprime debacle spread, some buyers are finding it harder to qualify for loans, new homes sales are dropping, and foreclosures are rising. A volatile stock market is riding the see-saw, losing ground one day, and climbing the next.
But in Manhattan, real estate is alive and well, thanks in large part to the outstanding growth and resiliency of the city’s financial sector. Nearly every housing market category is thriving: from parents buying one bedroom apartments for children to captains of industry acquiring trophy properties. With a bonanza of hedge fund profits and reported earnings up from 50% to 80% at financial institutions like Morgan Stanley, Lehman, and Goldman Sachs, a surplus of discretionary funds is fueling a competitive real estate environment.
Throughout much of the second and into third quarter of 2007, competitive bidding has been occurring. Where there is perceived value, buyers are competing to purchase, and they are acting aggressively and quickly. Scores of examples around town demonstrate how the buyer must have a particular property, and many homes are getting asking price or significantly above the listing offer. Consider the 2-bedroom Lincoln Towers unit that sold in 3 days at 3% over asking; or the West 64th Street one bedroom loft that is in contract at 4% more than the offering price; or the Park Avenue 3 bedroom that went 16% over asking; or the upper Fifth Avenue 11 room apartment that achieved nearly 26% above ask.
The basic economics of supply and demand rules the day. Despite the inching up of interest rates, and the tightening of lending standards, deals are being made at consistently strong prices. Inventory from new developments and conversions is having a stabilizing effect on an already short housing supply. It remains to be seen, however, how long it will take for the new housing stock to be absorbed.
Generally, a seasonal deceleration in our marketplace is expected to begin in June. This year, however, summer’s early trading pace was as brisk as the tempo set this spring—in sharp contrast to last year when sales were decidedly slower and apartments stayed on the market longer, giving purchasers more time to evaluate choices.
If the price advantage you’ve been waiting for comes this month, it is recommended that you seize the buying opportunity, because industry experts forecast more of the same high prices and low inventory next season. And if you’re a seller whose property is languishing this summer, it’s a good idea to invite another professional into your home for a second opinion. Nothing is ever gained by overpricing. If your home is overvalued, you’ll be ignored. If your property is flawed by a lack of sunlight, poor condition, or a particularly fussy co-op board, your listing may sit on the market wallflower style unless you make a price accommodation. When a property fails to attract a bid, the asking price needs to be adjusted.
This August, when New Yorkers are vacationing elsewhere, it may be time to reel in foreigners looking for a stake in Manhattan real estate. New condo offerings are particularly appealing to Russian and Korean investors.
After the flurry of activity this spring and early summer, a seasonal August slowdown will be a welcome respite. Brokers will take advantage of an end-of-summer lull, if it comes. Maybe we’ll be able to catch our breaths this month and use it as the pause that refreshes. In the meantime, happy fishing! See you in September.