The question that is most frequently asked of me, particularly as of late, is "how’s the market?" To which I usually respond, "Can you believe how well those New England Patriots are doing?" That "how’s the market" question is increasingly more difficult to answer as it totally depends on my sources of information (I could spin the market in any way I chose by selecting supporting evidence from any number of media sources) and the anecdotal evidence of my business as well as that of the colleagues who sit in close proximity to me. So based on those factors, here’s my answer:
It’s SUPER quiet right now! The best article that I have read lately that most accurately portrays the current market is Between Buyers and Sellers, a Stalemate written by Christine Haughney for The New York Times (and I’m not just saying that because I was quoted in the piece).
Manhattan is apparently full of sellers who think foreign buyers, or bankers who might still get big bonuses, are ready to pay full price for their apartments. These sellers do have recent history on their side. For the first three quarters of this year, Manhattan apartments over all continued to sell at record prices.
Now, brokers say, they see a stalemate developing between buyers and sellers in Manhattan, especially for apartments in the $1 million to $5 million range. Sales in this range made up more than half of the total dollar volume in the market in the third quarter of this year, according to data tracked by Radar Logic.
Brokers say it is the buyers in this sector of the market who are now growing concerned about the impact of the weak national housing market and the effect that Wall Street losses might have on Manhattan apartment prices. So they’re lowering their bidding or stopping their searches altogether until they have more confidence in the market.
Buyers and sellers alike are indeed digging in their heels. Having said that, I’m seeing more motivated sellers on the market right now than those who "test" the market to see if they can get their price (inflated usually). I have also experienced many sellers pulling property off of the market as they have made the decision to stay where they are and "ride out the storm." If there is going to be a storm, and that remains to be seen, then perhaps this is the calm that precedes it? As I eluded to in the article, most of my Wall Street buyers (all of them now since the article was printed) are patiently awaiting signs of market direction in Q1 2008 before proceeding with their purchases.
So what do I see happening in 2008? Based on the plethora of economic data that I have been watching, certain segments of the Manhattan market may see the current imbalance of inventory and buyers tip slightly more toward the buyer’s favor. In other segments (i.e. the Classic 6 and 7 markets in prime Upper West and Upper East side locations) it will remain business as usual with buyers frustrated with the minuscule amount of product to choose from. In the condo market, I’m not sure that I believe that the increases in inventory will be offset by increasing numbers of foreign buyers but as long as Manhattan remains relatively clean with low crime stats, I imagine the worst case as being a stabilization or even modest decrease (as much as 10%) in prices. So here is my advice:
- The days of picking a price from thin air and letting the market dictate selling price seem to be behind us. Pricing is more important in today’s market than it has been in the past 10 years. If you really want to sell your current home, price it aggressively but leave some room for negotiation. Buyers aren’t eager to pay asking prices right now regardless of how you may support it.
- Keep in mind that if you are trading up in a stable or declining market that you may actually do better from an equity perspective. (ex. If you sell a home at a 10% decrease at $1M and you purchase a larger home at a 10% decrease for $2M, you have gained $100k in equity in the new home.)
- Don’t bother "testing" the market. It’s a waste of your and your agent’s time.
- Be Patient. If you are fortunate to have more than one property that interests you then you should have more leverage to get a deal done at a reasonable price point on at least one of those properties. I say "should" because we still have many sellers who think that someone with a pocket full of Euros is going to snap up their home. History shows that the learning curve for sellers can be long and painful.
- Determine your time line for ownership. If you’re buying for long term (5-7+ years) you have a much better chance of doing well than someone with a 3 year time line.
- Analyze your current situation. Do you rent? How does it compare to cost of ownership? Consider tax benefits as well. Speak to your accountant and a reputable mortgage broker regarding your financial picture.
Overall, I think there are a lot of buyers waiting patiently on the sidelines who will jump as soon as they see an opportunity and feel comfortable with the real estate market, the economy, and their own job security going forward. Q1 2008 is going to answer a lot of questions and as an agent sitting in a very quiet office right now I say, "bring on 2008!"