Dear Friends,

Happy (almost) spring!

As the busy seasons approach for both the sale and rental markets, we have already noticed an uptick in activity for our sellers and landlords. Buyers appear to be coming out of winter hibernation to catch a low mortgage interest rate before they climb any higher, while renters are trying to grab onto a final winter rental concession

Some factors to consider:

• AN AFFORDABLE NEW YORK? According to the U.S. Census Bureau, there are indications that New Yorkers are spending less of their income on housing costs. Over the past three years, rents rose by 8.2% while household income has risen 11%. This, coupled with a strong economy, job growth, and the third highest vacancy rate since 1965 (3.63% citywide and 4.73% in Manhattan), has given city residents a slight reprieve.

• RENTAL MARKET BECOMING MORE ACTIVE Rental prices in Manhattan remained relatively flat in February, increasing by just 0.24 percent year-on-year to $3,903 per month. The segment that saw the biggest price drop were non-doorman Tribeca one-beds (down 12.8% at $4,428) and non-doorman one-beds in Gramercy (down 12.5% to $3,097). Having said that, we have noticed exponentially more activity on our listings as we approach the busy rental season. Most renters are making offers below the asking rental price, which many landlords are entertaining.

• CONTRACT ACTIVITY There were 805 contracts signed in Manhattan from February 5th to March 4th. Out of those, 407 deals were for co-ops, followed by 361 for condos, 22 for condops and 15 for townhouses. The most active price segment was the $1 million – $2 million range, which accounted for 223 transactions. The Upper West Side was the busiest neighborhood during this period, where there were 92 signed contracts.

• LUXURY MARKET IGNITES Manhattan’s luxury market, which was relatively stagnant to end 2017, saw 21 contracts signed last week. This was the sixth week in a row activity at $4 million and above topped the 20-deal mark. The threat of higher interest rates has perhaps created urgency with buyers. We have seen an uptick in activity on all of our listings priced $3M+ and have witnessed buyers in the 4M+ range get outbid to higher offers.

As always, should you have any questions about the Manhattan real estate market, please don’t hesitate to reach out.

Dear Friends,

Happy Valentine’s Day!

We wanted to give you an update on some of the trends we are seeing in the market today.

• THINKING OUTSIDE THE BOX TO FIND MORE INVENTORY  According to UrbanDigs, there have been 10,605 apartments listed in Manhattan over the last six months. Of those, nearly 50% (5,056) are active and currently on the market. A little more than 25% (2,742) have gone into contract or closed, and close to 33% (2,807) have been pulled off the market. If you are a buyer and you’re not finding the product you are looking for, there’s a large pool of sellers that are not currently listed but do have the intention to sell. With the right contacts and strategy, you can open the pool options available to you.

• PREMIUMS FOR TURN KEY  We are finding that buyers are willing to pay a premium for turn-key properties and are more hesitant to do renovations. For those looking to sell, it could be in your benefit to upgrade your unit before coming to market to achieve the highest price possible. For those looking to buy, there is a lot of opportunity to be had if you take on a project.

• INTEREST RATES ON THE RISE  Encouraging economic data including decreasing unemployment, rising wages, and growing bond yields are leading to an increase in interest rates. Last month the 30-year fixed was at approximately 3.75%. This month it’s hovering around 4.375%. These rates are continuing to rise. For those thinking about buying, it’s a good idea to lock in your rate sooner rather than later.

• RENTAL SEASONS MATTER  For renters, your window is closing to still get a winter steal. RentHop is reporting that for a one bedroom, renters will pay about 5.4% more if they rent in July rather than February. For landlords, it’s important to try and keep your tenants in a spring/summer renewal. We’re advising our landlord clients to use concessions to bring their winter renewals in to more desirable summer months.

As 2017 came to a close, the overriding theme for Manhattan real estate was that performance was specific to price point. “The Luxury Sector”, properties that sold for more than $4M, was softer than lower price points. In the overall market, median sale prices climbed 4.32% to $1,095,319 from $1,050,000 on a year-over-year basis. In addition, days on market held steady at 64 compared to last year’s 63, and the median listing discount declined to 5.88% from 6.07% last year, which suggests market stability. However, due to prices being pushed up in one segment of the market and pulled down in another, the quarter-to-quarter numbers show a decline for both average price and price per square foot. We do expect median prices to remain on trend as we begin 2018.

Read our full Q4 market report here.

Factors to consider in 2018:

• TAX OVERHAUL GOES INTO EFFECT
  – State and local taxes: New cap of $10,000 on SALT (State and Local Taxes) deductions from federal taxes.
  – Mortgage interest deduction: Homeowners can now only deduct their mortgage interest up to $750,000, reduced from $1,000,000.
  – Home equity loans: No longer able to deduct interest on a HELOC (Home Equity Line Of Credit).
  – Estate tax: The estate tax has doubled to $11.2M.
• RENTAL MARKET  Rental prices in Manhattan remained flat on a month-to-month basis, dropping by only 0.1 percent in December to $3,915. The segment with the biggest drop was non-doorman studios in Tribeca (down 12.1% to $3,748) and 2 bedroom doorman units in Harlem (down 9.1% to $4,300). Despite the December drop, Harlem posted an 8.71% increase in rental rates on the year, driven by heightened new development activity. Keep in mind, most landlords are offering concessions to artificially keep rents higher.
• LUXURY MARKET REMAINS COLD  Only 12 deals asking over $4 million went into contract last week, compared to 24 deals during the same week in 2017. The week before only saw 11 contracts signed. These numbers suggest a softening in the luxury market, a trend we expect to continue into the new year. We also expect concessions to rise and better negotiation leverage amongst buyers in the luxury new development sector.
• CONDO VS. CO-OP  It remains a co-op seller’s market, as median sale prices increased year-over-year from $763,000 to $775,000 and days on market remained relatively unchanged at 58 days, up from 54 days last year. We anticipate properly priced co-op units to sell quickly. In the condo market median sales prices grew slightly to $1,630,975, a 0.42% increase, while the median price per square foot decreased 1.04% to $1,602/per foot. The beginning of 2018 should see a continuation of condo market stability.

2017 was a tale of two markets. The overall condo market remained relatively flat over the course of 2017, with units trading at an average price of $3.1M. On the other hand, the coop market showed growth, with the average sales price rising to $1.4M from $1.3M in 2016. The high end ($10M+) of the market saw the average price per sale go up from $18M to $20M, but there was a 20% drop in contract activity in 2017.

Takeaways from the year and predictions for 2018 include:

BIGGEST WINNERS AND LOSERS OF THE YEAR

• Highest Closed Sale: $65 million unit at 432 Park Ave
• Most Expensive Condo Building: 15 CPW with six sales averaging $7,350/sq ft
• Sales Volume: 56 Leonard, where 65 units sold for a total of $636 million or an average price of $9.8M per unit.
• Largest Price Fall: Trump International where prices fell 27% to $5.2M per unit. 11 Trump properties fell below Manhattan’s average for the first time

2017 AND BEYOND

• TRANSIT TO DRIVE DEMAND   Areas to keep an eye on in 2018 are those near the East River Ferry expansion and L train shutdown. They will be likely targets for buyers looking for an easy commute or a bargain. The upcoming L-Train shutdown will likely have a large effect on surrounding properties next year. On the other hand, East River Ferry service is set to expand further in 2018, which should open up new opportunities in Manhattan and in outer boroughs.
• LUXURY VS ENTRY MARKET   New development condos were the weakest segment in this year’s condo market, showing a 13% drop in sales volume relative to 2016 while the rest of the market remained mostly flat. We’re expecting luxury prices to hit new lows next year, with competition between first-time home buyers remaining fierce under $1 million.
• RENTAL MARKET CONTINUES DIP  In November, Manhattan rents were down 1.9% year-over-year, falling in line with a nationwide trend of dropping prices in expensive markets. Keep in mind, the percentage decrease in price is really much larger however, it’s masked by the fact that landlords are offering major concessions (1-3 months free). The decline in rents is due to continued inventory expansion. More than 11,000 units are under construction in Manhattan, and another 24,000 are in the planning and permit stages. For those looking to lease in luxury price points in 2018, expect concessions.

We wish you a very happy holiday season and a great new year!

We’re sure by now the Trump administration’s potential tax reform proposal has caught your attention, but what does it all really mean? This potentially impactful tax plan could considerably shake up the real estate market. It’s definitely something to pay attention to if you’re a potential home owner or considering selling in the near future.  Both the House and the Senate have their owns bills, and we wanted to break down the differences in monthly payments and purchasing power for potential buyers should one of the bills pass.

To put this into perspective, if you were an individual making $250,000 and wanted to purchase a $1.25M home with 20% down the following would happen:

• Monthly Payment
  –    Your net payments would go up by approximately $2,940.00 – $6,562.56 over the course of your first year depending on which bill passes.
• Purchasing Power
  –    If the house bill passed, a buyer would need to change his down payment from $250,000 to $367,000 to have the same net monthly payment OR the price of a $1,250,000 home would have to come down to $1,083,000.
  –    If the Senate bill passed, a buyer would have to put down $319,000 vs. $250,000 OR the price of a home would have to come down to $1,181,000 vs. $1,250,000 for the net monthly payment to stay the same.

Confused? Let us run you through some math:

As it stands now a home owner can deduct 100% of their State and Local Taxes along with $1,000,000 in interest payments on their mortgage.  In the current state of the market the monthly deductions on our example above would be $3,825 ($700 in State & Local R.E. Tax & $3,125 in interest payments).  For example, if you are in the $200K-$500K tax bracket (35%) your current estimated savings would be $1,338.75 ($3,825 x 35%).  Your estimated net monthly payment (Monthly Payment – Estimated Savings) would be $4,992.25.

With the proposed House bill only $500K in mortgage amount would be deductible and up to $10,000 in state and local taxes would be allowed to be deducted. As a result your net monthly payment in the same scenario would be $5,539.13 (10.95% higher).

With the proposed Senate bill you would still be able to deduct the interest on $1,000,000 of your mortgage but no local or state taxes would be deductible. As a result, your net monthly payment in the same scenario would be $5,237.25 (4.90% higher).

This bill is currently being negotiated and there are even more factors to consider than what’s listed above. It’s not all bad news, as the standard deduction in both bills is being proposed to be doubled. We are hearing speculators say these bills won’t pass. Whether it passes or not, it’s an historic moment and something not to be taken lightly while making your real estate investment decisions.

Still confused? Please don’t hesitate to reach out should you want any further clarification and have a very happy Thanksgiving!

PS – We’d like to give a special thanks to Elise Leve of Citizens Bank for her help with our analysis.

Third quarter market reports are in and median sales prices are up 11% compared to the same time last year. In addition, the number of days it takes to sell an apartment has dropped from 58 to 54 days and the discount from list price to sale price has also dropped from 6.4% to 5%. These statistics represent the continued market strength for the higher volume, non-luxury price segment of the market. Heading into a typically active season, we expect general price trends to continue, with market dynamics favoring accurately priced units.

Full market report here

Some other factors to consider:

• GROWTH CONTINUES For the second consecutive quarter Manhattan residential sales saw annual growth in the number of closed sales. This is a result of improved contract activity during the first six months of 2017 vs 2016. In Q3 2017, we saw closings rise by 3% year-over-year to 3,703. This can be attributed to healthy performances in the new development and resale co-op markets.
• MANHATTAN’S PRICIEST NEIGHBORHOOD The Flatiron District became the priciest neighborhood in NYC during Q3, with a 220% increase in median sales price from this time last year to $4,399,375. The massive growth is largely attributed to 39 condos that sold at 41-43 E 22nd St, ranging from $2.6M-$9.4M. TriBeCa took a 9% drop and ended up in 2nd place, while Central Park South made a 103% increase to take third.
• FORECLOSURES SURGE The number of foreclosures in Manhattan rose 79% year-over-year in Q3 2017 – 859 homes were scheduled, compared to 481 in Q3 2016. After a peak in foreclosure activity in Q2 2017, Q3 2017 brought a slowdown in the number of cases. By property type, single and two-family homes have seen the highest increases in Q3 2017. The Bronx saw foreclosures soar by 145%.
• RECORD BREAKING YEAR FOR CO-OPS The median sales price of co-ops reached a 28 year high in Q3. While the significantly higher median sale price of a condominium in Manhattan increased 6.3% to $1.7m, the co-op market saw a moderately larger jump of 8.3%, to $850,000.
• CONCESSIONS CAN’T STOP SLIPPING RENTAL MARKET Prevalent rental concessions aren’t working as effectively as they have in past years. Last month the Manhattan vacancy rate hit 2.6 percent, the highest level it’s been all year. The median net effective rent slipped slightly to $3,334, while the share of new leases with concessions hit 27%, up from 15% last year. It’s a good time to be a renter.

After a relatively quiet summer, we expect to see an increase in contract activity as the fall season approaches. We’ve already noticed an uptick in inventory to hit the market from owners waiting to list after Labor Day, and expect a very busy season.

Some other factors to consider:

• GAP BETWEEN RESALE AND NEW DEVELOPMENT NARROWS The price difference between resale and new-development condos narrowed for the fourth consecutive month, to $314/sq. ft., and the price per-foot in new developments dropped 18% year-over-year. New development condo prices averaged $2,074/sq. ft. this month, compared to $1,760/sq. ft. for non-new development condominium sales. We attribute this to the recent influx of affordable new luxury  developments to hit the market over the last 12 months.
• RENTAL PRICES FALL  Manhattan rents fell by 2% in August year-over-year, the fourth largest decrease in the nation. Brooklyn came in seventh, with a decrease of 1.3%. Having said this, certain neighborhoods have been performing very well. SoHo saw the largest year-over-year increase, at 7.1%, and in Brooklyn it was Greenpoint with 4.8% growth.
• NEW DEVELOPMENT DRIVES UP RENTAL INVENTORY  The number of new leases signed in Manhattan reached 7,061 in August, a 12% increase over the last year. However, vacancy has gone up as well. This is due to a surplus of new development inventory and concessions, leading tenants to give pushback on renewals. It’s not uncommon for tenants to request no increase or even a decrease in rent in this market. Many landlords won’t agree to this and end up listing their apartment for rent.  They later see they would be getting net effectively less, between vacancy and rent, than what their tenant was requesting.
• LUXURY LULL CONTINUES   Coming off of the holiday weekend we only saw 14 contracts signed at $4 million and above. This marked the 11th straight week with less than 20 luxury contracts signed, which is the weakest stretch since 2012. The total asking dollar volume was $111 million.

We typically see a lull in sales activity during the summer, but an important topic has the industry rumbling. A proposed tax overhaul could drastically affect home owners, with the discussion including the removal of popular deductions like mortgage interest, state and local taxes, as well as property taxes. This will be a key factor to watch throughout the rest of 2017 and we will keep you updated on the progress of this new Trump tax bill.

Some other factors to consider:

• TOWNHOUSE CONTRACTS FALL BUT PRICES RISE Townhouse prices showed signs of recovery in Q2. While the number of contracts fell by 30%, the median price rose by over 9%. As far as where you can find the priciest townhouses in Manhattan, Greenwich Village commanded the highest average price in 2016, at $14.3 million, 70% higher than in 2011. Chelsea and Midtown East tied for lowest average price at $3.8 million, a 51% and 35% increase respectively over a five-year period.
• RENTAL VACANCY EXPECTED TO SPIKE According to a new market analysis By Ten-X, the vacancy rates for rental apartments could soar from a current 3.8% to more than 11% by the end of 2018. The reasoning is a surge in new construction. It’s also predicted that rents will fall as more and more new apartments hit the market. In August we saw median rents increase .03 percent relative to the previous month and 1.2 percent year-over-year.
• NEW DEVELOPMENT STAYS FLAT The average price for new development units stayed relatively flat, moving from $4.7 million in July to $4.6 million in August, continuing the downward trend since May. A total of 156 contracts were signed, 72 of which were Downtown.
• LUXURY MARKET CONTINUES COOL DOWN The first week of August saw only 14 contracts signed at $4M or more. The previous week saw 18 contracts signed, with an average of a 20% discount from asking price. This marked the 6^th week in a row that the number of luxury contracts has fallen below 20. While sales in this segment picked up earlier in the year, the pace slowed significantly at the start of the summer. Over the past five weeks, there were 86 contracts signed above $4M. This is similar to the same five-week period last year, but 32% below the 127 that were signed in the same period of 2015.

The NYC real estate market held steady during Q2 despite signs of softness in the pace of contract activity and days on market. Median sale prices increased 6.03% to $1,220,000 from a year ago and improved 5.02% from Q1. While year-over-year price improvements suggest current values are sustainable, a significant year-over-year increase in days on market from 56 to 75, combined with an earlier than usual slowdown for Q2 contract activity indicates that softness still exists, especially in higher price sectors. Barring any market shocks, we expect prices to remain stable as we head into Q3.

See the full market report here

Some factors to consider:

• NEW DEV DILEMMA  The number of new condos on the market hit 5,936 units during the second quarter, up 35% year-over-year. Even with the gush of inventory, there were just 350 contracts signed on new development condos during the quarter, a 23% drop from the prior year. With new inventory on the rise, coupled with the number of signed contracts falling, developers aiming for high-priced sales may find that the cycle has passed them by. We expect to see more negotiation and price drops than we’ve seen in the past in this sector.
• RARE DROP IN RESALE  Listing inventory for Manhattan dropped in Q2, with the steepest drop at the high end of the market. Resale inventory, which represents 83% of the Manhattan market, dropped by more than 1%. This is the first decline since early 2014. In the luxury market (above $4.8M), inventory dropped by 11%, with resale inventory in that sector falling by nearly 23%. We’re attributing the drop in inventory to overpriced listings expiring and being removed from the market.
• CONDOS  The Manhattan condo market generated strong, but occasionally mixed, results from both a quarter-to-quarter and year-over-year viewpoint. Viewed on a yearly basis to filter out seasonality, the median price per square foot improved 2.73% to $1,626. On a quarterly basis, the median price per square foot rose 2.03%. While days on market improved on a quarterly basis, decreasing to 85 from 93, it now takes over three weeks longer to sell a condo than it did a year ago.
• CO-OPS  The traditionally stable co-op market saw modest median price growth on both a quarterly and year-over-year basis. The median price for a Manhattan co-op in Q2 was $816,475, which represents a 7.57% gain from Q1 and a 4.79% gain from last year. Similar to the overall market, days on market increased during the quarter, with approximately 69 days needed for a co-op sale. Transaction volume also increased across all price ranges over the year, most notably in the $1M-$2M and $5M-$10M sectors.

In Manhattan, the average sale price and number of closings both remained largely unchanged over the last month. The average price for an apartment, including both condos and coops, was $2.3 million, nearly the same as it was the prior month. The number of recorded sales month-over-month took a very slight dip, from 817 to 807.

Some factors to consider:

• ABSORPTION RATES Absorption rates show how many months it would take to sell all active listings in a given market. It’s calculated by dividing the number of listings by the average number of closings over the prior 6 months. An absorption rate that falls between 6-9 months typically indicates a balanced market. In May, the absorption rate for condos was 7.7 and 5.3 for coops. Studios had the lowest absorption rate, at 5.7 for condos and 2.6 for coops, indicating they sell faster than all other unit sizes.
• NEW DEVELOPMENT Inventory in Manhattan has risen at an average of 17% year-over-year for the past five quarters while the median asking price has declined over the same period. This is a result of price adjustments at the top-end ($5M+) of the market and a new supply of moderately priced units. From 2015 to mid 2016 we saw a dip in the average final list price of new developments that entered into contract. However, in 2017 we have so far seen a rebound, with an average final list price of just under $3M.
• THE LUXURY MARKET Thirty-one contracts were signed in the first week of June at $4 million and above, making it the fourth week in a row of 30+ deals signed in this price segment. 21 were condos, 7 were co-ops and 3 were townhouses. One notable sale was Justin Timberlake and Jessica Biel closing on PHG at 443 Greenwich Street for $20,185,527, down -26.6% from the asking price of $27.5 million which has become more common in this price range.