Manhattan - Is the Buyer’s Market coming to a close? Why?

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Although the New York Times just featured a story titled " The New Normal: It's a Buyer's Market" , is the Buyer's Market actually coming to a close? (article below) Some say yes. Why?  

Historically, in Manhattan, periods which have seemed favorable for buyers have been notoriously and extremely short-lived and the reversion back to "normal" has occurred abruptly. The reasons for those quick turnarounds were unique to the times; likewise, the reasons for the impending turnaround will be as well. But what will those reasons be?  

In the past buyers who patiently waited for "the bottom" missed out. Ironically, that same mind set is eerily familiar among buyers today. Combine that with the mindset of sellers who are simply mis-priced (overpriced) and then you can define the sluggish deal volume and poor sentiment we have been experiencing. That said, deals are happening. More and more sellers are understanding and accepting the new reality, which means they must demonstrate value. Prices are down. The sellers who got the memo are getting their properties into contract and moving on. As this trend continues the marketplace will gain momentum with increased deal volume. Further, the data from the most recent sold and closed properties are consistently trickling in and they are lower than before. These are now facts that sellers cannot ignore. The lower prices will generate activity and competition. 

Also, interest rates remain relatively low; the 30 year fixed jumbo loan is currently hovering between 4.25 - 4.5%. Consider that rates were at 6.5% just 10 years ago.*Right now, these low rates give buyers tremendous purchasing power. Generally, New Yorkers cannot sit on the sidelines forever. We are movers and shakers and life simply needs to move along and people will begin to just "get on with it." Again, this will generate activity and competition.  

Whereas there is a glut of inventory, primarily in new construction, it is methodically being absorbed. By and large, absorption rates have increased over the past year; I anticipate these figures will begin to tighten come February and March. Also by that time, most people will have realized their new tax liabilities due to the reduction in state and local deductions. Whether those numbers are grim or less so, the reality will no longer be a mystery. That certainty, good or bad, will generate renewed market activity. Again, properties are transacting and buyers are getting significant discounts now. As one of my respected industry colleagues mentioned to me, "Luxury is on Sale." And that means value... 

Value is the place where quality and price intersect. -Trader Joe's (I love this).  

It truly feels as if the market is laying the foundation of "the bottom". That does not mean that buying opportunities have, or will, disappear; to the contrary, there are ample deals to be made. It is simply that the direction we have been heading in is priming itself for a turnaround sooner, rather than later.  

Adding to the market malaise is the holiday season; so right now, the negative circumstances are even more exaggerated. This will pass in a mere few weeks and a renewed sense of opportunity will again emerge. Deal volume will increase and so will the sentiment, followed by the competitiveness for good properties. If you are sincerely interested in getting yours, well then, you need to sort . 

QUESTION: Are you prepared to dive in? You should always know what you are in a position to buy or sell at all times. If you don't know, reacquaint yourself with the marketplace. What is your property worth? What can you afford to buy? Anyone interested in buying or selling, should be rolling up their sleeves to determine whether the time is right to sell or if there's a home or investment property out there for them. Note: I am here to help you maneuver this process.  

Your best investment is often in the broker you choose. With Manhattan's palpable level of competitiveness, my clients have considered me their hidden-hand. My experience affords me the expertise to pull back the curtain and reveal the circumstances as they are and the possibilities that exist.

 * I am repeating this section (below) from my last newsletter, as this analysis and the subsequent understanding of this concept bears repeating: 

Interest Rates: 

Look at the difference in your purchasing power caused by an increase of just 1% in rates. Example below reflects 3.75% vs. 4.75% 

$1M borrowed at 3.75% = $4,631/month

$1M borrowed at 4.75% = $5,216/month

That is a difference of $585/month or $7,020/year.

Alternatively, we could look at it this way: 

At 3.75%, $4,631/month will afford you a $1M mortgage.

At 4.75%, $4,631/month will afford you only a $887,800 mortgage.   

Last year 30 year jumbo mortgages hovered around 3.75%; today they are commonly 4.5%. Interestingly, on October 7th of this year they actually popped up as high as 4.625% (see chart below). Rates have come back to 4.375% today. 

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