Our economy is improving: inflation is low, consumer confidence and spending are up, and corporate earnings are exceeding expectations. However, unemployment remains high, and we’re still at war. Nonetheless, the mood on Wall Street and the streets of Manhattan is buoyant. In these first few weeks of 2004, buyers are competing for a short supply of apartments, and they are stepping up to pay asking price or better—in sharp contrast to last January when Wall Streeters were worried about losing their jobs, and real estate buyers were watching from the sidelines, waiting for the other proverbial shoe to drop. It never did. At the start of this first quarter, things are looking positive, and the impact on demand from hardy and impatient New Yorkers is palpable. Additionally, interest rates are staying at low levels longer than expected. The 30-year mortgage is projected to average 6.4% this year, up modestly from 5.8% in 2003. However the supply of apartments, which has been short for the last 9 months, is shrinking even further. The declining inventory is giving sellers the advantage.
Record-breaking numbers of buyers are arriving at Sunday open houses with scores of Internet listing printouts in hand, and loan pre-approvals in their pockets. One bedrooms are being snapped up by first-time purchasers in days. Similarly, buyers of two bedrooms starting at $800,000 are racing to contract. For those seeking larger family apartments on Manhattan’s east and west sides, however, there are fewer choices. As of this writing, there are only a handful of new prewar listings on either side of the park for the family 7 or 8 priced between $2.5 and $4 million. Demand for ultra luxury properties is robust, but pickings are slim—barely a dozen apartments at premium prices between $7 to $14 million.
The short inventory coupled with the market’s fast pace may in fact be contributing to the declining number of apartments for sale. Without a doubt, it’s easier to sell a well-priced property than to buy. Apartment owners who may be crowded in their classic 6’s and who must sell before they can trade up are hesitant for good reason. They are waiting until they can identify their next move, before they put their own apartments on the market, or they’ll find themselves homeless and forced to rent, subjecting their families to the trauma of two moves.
What’s a seller to do? Choose a broker with experience who’s been through this cycle before and can guide you wisely through the process. Listen to your broker—especially if you are a seller who’s not getting any offers in this current HOT market. Heed the advice of your broker: if your apartment hasn’t sold after three month’s of active marketing, there’s good reason for a price adjustment.