Are we approaching a turning point in Manhattan’s housing market? Are prices nearing the bottom? Only with the benefit of hindsight can we determine highs and lows, but it feels very much like 2009 when home prices sank and remained flat until regaining traction and climbing past the peaks of 2007 to new highs seven years later in 2014.


Much has been made of the apparent disconnect between a generally strong economy, a softening housing market and a turbulent stock market. The current decade-long economic expansion is expected to slow down in the coming years. While GDP growth was 4.2% in 2Q2018 and 3.5% in the 3Q2018, the Federal Reserve forecasts that the economy will grow more modestly at 2.5% in 2019, 2% in 2020 and 1.8% in 2021.

When one cycle transitions into another, sometimes you can catch a wave in a declining market or a hiccup in an accelerating market.

The receding residential trend which began at least two years ago initially only affected properties priced at the upper end and was caused at first by an overabundance of supply. The top-heavy market was overpriced and overbuilt. Then the number of foreign buyers diminished, deductions for taxpayers were limited, mortgage interest rates were raised and concerns heightened about unresolved trade disputes in an unpredictable White House. By this year, the decline had spread to the middle and then to entry level markets.

Sellers have been adjusting to a weakening market for the past 18-24 months, but price reductions were sporadic in the early months of 2018; since the summer, deep price drops are occurring in waves with greater frequency from the uber category to properties priced under $1M with reductions of 10-20% and even higher in the segment above $20M. In many instances a standoff remains between buyers for whom some prices are still beyond reach and sellers who are holding out to achieve what their neighbors may have realized 6-12 months ago.   


So what have I learned in a 38-year career about residential real estate cycles? Prices go up and they go down, they peak and bottom out. Sometimes they go sideways. As you live through the cycles, you don’t really think of a beginning, middle and an end. When one cycle transitions into another, sometimes you can catch a wave in a declining market or a hiccup in an accelerating market. Each cycle creates opportunities; you just have to evaluate the angles and the reasons motivating the trades.  

If you’re a buyer, don’t try to time the market as that can be paralyzing and more often than not, you’ll miss opportunities; don’t be a bottom fisher either as you’ll only make it easier for the next bidder. We’ve neared the bottom, so if you see the property that you’ve been waiting for, don’t hesitate to begin the negotiating dialogue. Let go of “paralysis analysis” and put aside fears of further price softening. Buy for “long life,” as my immigrant father used to say, and you won’t go wrong. Plus or minus 10% means less if you’re buying for your long term shelter, lifestyle and enjoyment. Always consider resale value, and buy quality. Be disciplined and buy what you can afford today and don’t overleverage.

For sellers, it’s even more challenging to time the market. It’s unlikely that the market will improve in the short term, and most sellers are not in a position to wait out down cycle years. My team and I will help you to understand what will drive buyers to your property. I’ve never been a proponent of testing the market with a high price as it misses the burst of energy that a new listing brings. The initial marketing period attracts the most attention, and once the first three to four weeks pass, these can’t be reclaimed.

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Most bids warrant a counter, because two months down the road, offers may be even lower. While well-priced specialty products might fetch multiple interest quickly, there is an inventory pile-up where scores of similar products compete. When the product is interchangeable with the rest, only price can make the property compelling.

Wall Street’s volatility is unsettling for buyers. It’s no mystery that consumers feel better about spending when stock prices rise. When stocks plummet, buyers retreat and have second thoughts about signing contracts. Come mid-April, we’ll have a better idea of how recent tax reforms will affect the pocket books of homeowners. Despite some extraordinary purchases by Saudi and Turkish buyers, transactions by foreigners are down.

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As we navigate these last weeks of 2018, more of the same seems to be on tap for the new year. Absorption rates have climbed way past the six-month mark of a balanced market and feel as if they have doubled. Interest rates are expected to increase, albeit gradually, remaining nonetheless at historically low levels. Developers who have to answer to their lenders, will continue to offer buyer incentives and concessions. Those offering to pay for 3-5 years of common charges for contracts signed before year end, will find similar ways to make deals happen in 2019. The buyers’ market is actually segueing into a brokers’ market, where it’s taking a combination of skill, strategic resources and patience to get buyers and sellers to the closing table. Bottoms up!