With the exception of well priced apartments under $2M which continue to attract multiple competitive bids and top sales dollars, price increases of Manhattan homes have abated. Sellers have relinquished their upper hand as buyers find more balanced footing in a market that seems to be heading back slowly to equilibrium. Throughout this year, new development options have come to market steadily yielding more than two and a half times as many choices for buyers than in 2014: approximately 6,500 units in 100 new buildings compared to roughly 2,500 units in 59 buildings last year. At the ultra high end, sales are stalled. In 2015, Manhattan’s residential real estate market shifted in more ways than one.

 

For the most part, developers have been building large family sized apartments because these command higher prices per square foot. Average prices jumped quickly in the past few years from $2,000 psf to $3,000 psf. The questions of the moment: Is there a glut of $5-6M properties? Is there a lingering oversaturation of properties over $30M? Have developers overestimated the depth of these distinct buyer pools? Will Harry Macklowe’s recent strategy at 432 Park Avenue of dividing in half five full floor units and reducing their price tags from $80M to $40M attract a buyer any quicker, since at the end of the day, the offering is still $8,000 psf? As absorption slows, will prices come down?

 

Foreign investment, spurred initially by weakening economies, political instability and currency devaluations, is no longer as robust as it was in 2013 and 2014. Countries like India and China have capped how much money can be taken out of the country; Russian investment has dried up completely; the Chinese have resumed their original playbook of buying multiple smaller $2M properties. A recent trade conference questioned: Is there a sweet spot for developers now? Will the prevailing practice of constructing large family sized apartments shift? Will smaller units sell more quickly? The latest project of developer Gary Barnett, sponsor of the super luxury 157 West 57 Street on “Billionaire’s Row,” is 252 South Street on the Lower East Side, an 80 story tower with 815 apartments priced between $1-3M that he is marketing first exclusively to Asian buyers.

 

At the close of 2015, international instability is more disconcerting than macroeconomics. Today’s US economy is more balanced than in recent years: October 2015 unemployment stats were at 4.8%, the lowest since pre-recession levels; the US dollar and Euro are on parity; interest rates remain historically low. As of this writing, the Fed has not increased rates, but from all sources it’s pretty clear that a bump up of 25-50 basis points is likely. I’ve seen more buyers lock in rates this fall than in earlier months. It’s safe to bet rates won’t go down.

 

While new development condo options have been expanding, resale stock has been dwindling. This is not new news. The resale shortage has been chronic for a good many years. Despite the low supply however, co-op sellers compete feverishly with new condominiums for buyer interest. Twenty years ago when condos were scarce, I’d only suggest a condo purchase to someone who was unlikely to pass muster with a co-op board or who lacked an appetite for financial disclosure. In sharp contrast, today’s buyers are considering both product categories, often favoring new construction or conversions with full amenity packages. Co-op apartments in need of renovation are struggling the most and are taking the longest to sell. Because of accountability issues, the review process for alterations is taking longer than ever, both at the board level which requires architect reviews and re-reviews and at the DOB which mandates permits for everything and where the backlog grows longer by the day. Today’s buyers are often too busy to renovate; they want either turnkey options that offer newly finished bathrooms and kitchens and state of the art heating and cooling systems, or they want steep discounts to renovate. They have little tolerance for improperly priced properties. Inflated asking prices not only divert bidder attention but fail to capture the possibilities presented in the first weeks of marketing.

 

Another major shift in the industry this year is the unprecedented number of agents who have moved from one company to another. In a career spanning 35 years, I was excited to move in July to Compass because I see it as a model for the future of real estate brokerage. Equally noteworthy is the growing network of NYRS® agents which comprises more than 400 Associate Brokers from 35 different brokerage firms. Full disclosure: for 4 years I served as co-chair of this elite program certified by the Real Estate Board of New York, and I remain an active member of its 12 person Executive Committee. Fewer than 3% of residential REBNY agents have earned the designation which identifies top performing agents  who value advanced education and professional excellence.

 

To me, our residential marketplace though changing feels pretty good, and I’m anticipating a strong winter and vibrant spring. Ongoing low resale inventory levels will keep values high and velocity strong. There will be challenges and opportunities in the months ahead for buyers, sellers and their agents. Here’s to a healthy 2016. Cheers!