Written by: Robert Varvara at The Corcoran Group
One question we get asked frequently as Real Estate professionals is, “what is the state of the market”? The truth is we are in reset mode, where buyers and sellers are trying to discover what value really is. The downturn has hit every facet of the market from $500,000 Co-ops to $10,000,000 Condos and it is unknown how long it will take to surpass the peaks of 3-to-4 years ago. We are in one of the most resilient real estate markets in the world and based on historical performance it will recover. Let’s take a quick look at how we got here, what we are seeing day-to-day, and where we are going.
StreetEasy reported the number of homes listed on their site reached an all-time high during 2018, yet recorded sales in the city fell. Price decreases of small, incremental adjustments weren’t enough to attract buyers, and the strategy didn’t play out well. Sellers became reluctant to lower prices, unwilling to accept the market changed, and buyers sat on the sidelines. The arrival of a buyer’s market came in 2018 – a shift towards a pricing plateau as prices began to drop, and buyers responded to the more tangible market. Buyers were gaining the power of bargaining, but demand didn’t seem to be there; sales were slumping.
2018 also took a beating on the stock market, while high interest rates and trade war created a cloudy economic outlook for 2019. New York real estate found itself navigating through muddy waters during this time of economic uncertainty. The buyer shift in sentiment is noticeable in the luxury residential market, where buyers seem wearier with slowing markets, and need persuasion of the benefits of purchasing property when stocks are unpredictable. When stock market returns are less certain, investors sometimes turn to tangible options like Real Estate, so they don’t have to sit on their cash. Taking advantage of low competition in a buyer’s market is a favorable time for buyers to make a move towards this tangible option. Interest rates also remain at historically low levels, so it’s reasonable to say that buyers could use this as encouragement – lower rates coupled with lower prices – the perfect storm.
Inventory remains a massive factor in the slowing of the NYC Market – units are constantly hitting the market at a steady pace every quarter, and continue to linger with the number of days on the market reaching in to the hundreds. With the increase in inventory that occurred between 2016 and 2018, NYC has the most supply it’s ever had. Sellers are now lowering prices 10 to 20% from the hopeful numbers they originally aspired to. Seeing the value in purchasing now is a huge reason why buyers have stepped up, and that’s a large part of the optimistic view for the future – value sells.
The remaining Spring months will likely continue to experience
the aforementioned plateau, where prices seem to decline enough to stimulate
demand. Sellers are starting to accept the realities of the new marketplace,
and although January started off slow, February and March pushed the market
towards equilibrium. Once demand goes up, we can see the market accept modest
price increases.Some say it takes roughly two years to adjust and adapt to a market
shift, and during that time we may see sellers come to terms with pricing and
selling their units for less than they paid five years earlier. It’s hard for
people to accept their home is worth less than they believe; it’s an emotional
connection. However, it’s important to look at where the market is currently,
analyze, and adjust. Buyers then need to be able to get off the fence when they
realize they’ve found value, seizing what they want and being able to get it –
whether that is price, quality, or whatever value means to them.