The year 2013 is sure to go down in the annals of NYC real estateas a stellar time. What were some of the dominant trends? Let’s take a look.


(1) Housing stock shrinks further. An overriding and ongoing lack of inventory defines the 2013 market. All analytics point to the lowest level of supply in more than a decade. The shortage has heightened competition among buyers and driven up price levels. Demand has remained consistently strong and is expected to be sustained.


(2) Absorption is hastening. Properties in all price ranges are being absorbed at a faster rate than new properties are coming to market. Absorption rate, calculated by taking the total number of active listings and dividing by the average number of closed sales over a six month period, is significantly low, clearly confirming a seller’s market. According to a report by Michael Vargas, President of Vanderbilt Appraisal Company, the Manhattan market overall was at 4.1 months absorption rate in October 2013. A balanced market historically hovers at six months. All neighborhoods and all price ranges experienced supply shortages, but some neighborhoods had lower absorption rates than others:  Upper West Side absorption is 2.9 months, the lowest of all areas, with less than 600 listings as of the October report.  Upper Manhattan (Harlem and north) is at 3 months absorption rate.  Downtown (Gramercy and south) stands at 3.2 months.  Upper East Side is 3.8 months.  The Midtown market is 4 months.


(3) Prices and transaction numbers continue to rise. In the 3rd quarter, sales reached a 6 year high in dollar volume. REBNY’s NYC Residential Sales Report which analyzed data from all 5 boroughs reported that the total consideration for all residential sales in New York City during the third quarter of 2013 was $11.3 billion, up 31.63% from the third quarter of last year and 38.06% from 2013 Q2. The total volume of transactions in the third quarter was 14,073, up 28% from the third quarter of 2012 and 33% from the 2013Q2.


(4) Competitive bidding has become commonplace. When a well priced offering comes to market, inventory starved buyers and their agents rush to view. Within days, sellers’ agents’ are collecting multiple bids, reviewing terms and evaluating financial profiles of prospective purchasers. The environment is particularly challenging for buyers who are new to the market and for those who require financing. Often it takes losing a property to understand the market’s speed and strength. One year ago, we were advising buyers to bid as high as 5% over ask; today offering 10% may not ensure a win if the property is priced properly. For buyers who require financing when competing with cash buyers, it’s essential to consider waiving a financing contingency, securing an advance appraisal or financing post closing.


(5) The ultra luxury market is booming. Buyer appetite for high end new development appears insatiable. Developers are building larger spaces at higher prices for this uber category driven only partly by foreign money. Purchasing apartments from plans for units that won’t be ready for another 12-24 months, these buyers are rushing to be “first in” before developers raise prices with new amendments to the Attorney General’s Office. To cite a noteworthy few:  It’s tough to even get an appointment at Greenwich Lane, the Rudin family St. Vincent's Hospital condo conversion which will feature 5 buildings and 5 single family homes along West 11th and 12th Streets between 6th and 7th Avenues where prices average $3,500 psf for mostly two bedrooms from $2-20M.  A new crop of skyscrapers so tall they need approval from the Federal Aviation Administration has been emerging. The one that’s gotten the most press is Extell’s One57 which will have the 5 star Park Hyatt Hotel occupying the first 30 floors. Referred to as the “Billionaire’s Club” by the NY Times, One57 reports that 70% of its 90 residences have sold at $11,000 psf. Standing 1,004’ tall, this glass curtained tower will be the highest residential building until its southeastern neighbor 432 Park Avenue is completed. At the former site of the Drake Hotel, 432 Park, Macklowe’s ground up 1,400’ high tower is rising with 90 stories and 129 residences above a retail and office complex. Slated to open by April 2015, it offers 10 full floor 8,000 sf homes starting at $64M and smaller 1,400 sf units at $6,894 psf. A 8,255 sf unit is reportedly in contract for $95M or $11,500 psf.  18 Gramercy Park holds the downtown record so far for a $42M sale but that will soon be topped by Tribeca’s 56 Leonard Street when the 60th floor Penthouse closes at $47M.


(6) Brooklyn is exploding. Beyond all expectations, Brooklyn prices have gone through the roof. Nearly every listing in Kings County goes to a bidding war. Prices are accelerating almost daily with 20-25% year over year appreciation.


(7) Chinese developers are competing with NY based rivals for high profile properties. As China lifts its sanctions against overseas investments, we are seeing more new developments from Chinese investors. According to a recent Crain’s article, Xinyuan Real Estate has broken ground on a Williamsburg residential development of 216 condo units. Other major Chinese developers—Greenland Holdings has invested $3B for a 70% stake in Brooklyn’s Atlantic Yards where 6,430 units are planned; Fosun Group secured the winning bid of $725M for the landmarked downtown office tower 1 Chase Manhattan Plaza; Zhang Xin paid an estimated $700M for The General Motors Building at 5th and 59th Street in May. In 2014, we’re likely to see more of the same central trends continue as buyers, sellers and their agents transact business in the Big Apple.