We are seeing the mid luxury sector of Manhattan (2-5 million) take a major reduction in traffic and sales. We project a drop in prices.
On March 31st of 2016 there was 1348 active properties on the market in this price sector. On March 31st of 2017 there was 1507 active sales, giving us a 10.5% increase over the past year. Sales in this sector are relatively late with 217 this March compared to 224 last year which is only a 3% drop. When you combine the supply with sales volume, we see a 13.4% increase in saturation or market consumption. NYC is currently at a 3.9% absorption rate, this sector though is currently at a 6.94% rate which is well above Manhattan standards.
These factors continue to get worse in this sector. We are steadily seeing availabilities rise while demands stay flat or slightly decrease. There are no major reasons to support these trends. The job market is strong in NYC and the country, interest rates have risen but not substantially enough to effect this market. The stock market remains strong. It’s giving potential purchaser buying power where market profits are not large enough to sideline buyers from using equity on real estate purchases rather then keeping it in the stock market. The only reasons we see that effect this market is overall saturation of supply and market confidence.
Many buyers we talk to (we speak with 100’s of buyers each month) are holding off the market solely because they feel that prices maybe better in 6-12 months rather then today. A market with a push back from buyers like we see today could prove a potential problem for sellers. If the buyer pool is stubborn enough, they will eventually overtake values as the sellers will eventually drop their prices and give into demand. When that happens enough times ,a new price point will be set and market comps will keep prices at their new value.
I project the 2-5 million dollar market will see a 5% value depression by the forth quarter of this year. No crash or major upset but we will see a 5% change. I don’t advise buyers to sit on there sidelines now. With interest rates rising in the third quarter, a 5% price reduction may cost you more on a monthly basis with even a slightly increased rate. Once prices drop we will see a strong increase in demand and competition. Buyers do better when they are first to take advantage of a trend. I advise buyers to leverage this current weakening sector and just negotiate strong to get that 5% slur adjustment now rather then end up fighting against the masses for the same price difference with higher rates in a tougher buyers market.
Be smart and buy smart always.