Manhattan Real Estate Market Report
Today's Manhattan real estate market is a challenging, tough, and truly 'weird' marketplace. Probably the worst market we have seen since the financial crisis ten years ago. Some would say worse.
This may seem antithetical to the strong economy we have today - where financial markets are close to all-time highs, mortgage rates are practically at all-time lows, and we have one of the strongest job markets we have ever seen. Shouldn't the market be strong?
But what we are seeing is a complete reset of Manhattan real estate values, driven mainly by policy. Changes in the federal tax laws have made it more expensive to live in high-tax states, foreign countries have restricted capital that can be taken out by foreign buyers, and new laws requiring buyer disclosure for all cash purchases previously hidden by LLCs, have combined to hurt our market.
Other fundamental economic forces have hurt seller pricing power, including a greater supply of apartments on the market and the rising dollar has made Manhattan real estate more expensive for foreigners. Non-stop talk of an upcoming recession, coupled with confusing and often chaotic rhetoric and policy regarding trade and immigration, out of Washington DC, has sapped consumer confidence. And new higher property taxes like the increases in the Mansion tax certainly don't help.
Transactions are taking longer to get done, from listing to attracting interest to signing contracts. This market is nuanced. It is very property specific. Buyers need more coaxing than ever before, forcing sellers to negotiate or risk sitting unsold. Buyers are nervous about pricing. Will the market be down 5% next year? What is fair value? Whenever markets are at extremes (very hot, or very cold), buyers do not feel confident in making bids, preferring to take a patient "wait and see" approach.
Some sellers are stuck in a past market, anchored to prices they saw in 2015, 2016, and 2017. Refusing to acknowledge a market that has slowly been declining over the past 2 years. Other sellers are waking up and understanding that what they get today, is probably better than what they will get tomorrow. Once the pricing gap between what sellers are asking and what buyers are willing to pay diminishes, the rate of sales will pick up and the market will recover.
That said, for a market like New York City, there is always money on the sidelines looking for opportunities. When homes are priced right at the market or even slightly below the market, you can still see bidding wars and prices above asking. At the right price, everything trades. But buyers refuse to overpay in this market. Looking for value and buying only if they need a home.
If you're thinking about buying, about upgrading to a larger home, or buying your first home ever, this is the market you want to buy in, with more choices and less competition, great opportunities abound. There is a famous quote by Warren Buffet, "Be fearful when others are greedy and be greedy when others are fearful." We may not have reached a bottom, but if you have a longer time horizon, you will one day say "I am so glad I bought in 2019-2020."
If you're thinking about selling, effective pricing and marketing strategy are vital now to get homes sold. Utilizing our Compass programs like Coming Soon which exposes listings to the brokerage community without accruing "days on market" is an effective tool to gauge interest and check pricing before going "live" to the public. Compass Concierge provides payment for upfront costs related to renovations, staging, and other simple aesthetic changes to help you sell faster and for more money. Hiring the right broker and the right firm is more important than ever to help you succeed in an ever challenging landscape.
Ultimately, I am bullish on this market, as even in 2009, the year that financial markets hit their lows, and we were in the midst of a financial crisis --- 9000 transactions took place in New York City. Deals still get done in every market. There is opportunity out there. Real estate in New York, arguably the world's greatest international city, is still a good long term investment.