State of the Market: Identity Crisis
The big-picture take-away for us from The Times’ state-of-the-market piece this weekend is that real estate in New York City right now is in a state of purgatory. There’s a collective breath-holding going on while everyone tries to come to grips with the big x-factor: interest rates. On the one hand, inventory and days-on-market figures…
The big-picture take-away for us from The Times’ state-of-the-market piece this weekend is that real estate in New York City right now is in a state of purgatory. There’s a collective breath-holding going on while everyone tries to come to grips with the big x-factor: interest rates. On the one hand, inventory and days-on-market figures are up; on the other, brokers note a tangible pick-up in the last couple of months over the end of last year, in part because of the flow of bonus checks into the high end of the market. Some new construction is flying off the shelf–others can’t be given away. With more and more inventory coming on line, “sales are inconsistent and properties that lack the essential combination of location, amenities and attractive price will not sell.” The flip side for property owners is that demand for rentals is rising, which means incentives are starting to disappear. As long as inflation is a threat, though, it appears that more marginal and first-time buyers may continue to tread water on the sidelines.
Rentals Strong, Rich Keep Buying [NY Times]
Ed, are you aware of the disparity between the cost of owning and renting now? Even if rents went up $500 a month, for a majority it would still be cheaper to rent than own. You also ignore market psychology – if prices start to drop, there may be some people to hop in, but like the way the herd mentality drove people to buy, it can drive people away.
I don’t think anyone could reasonably argue that NY is ever going to be cheap like North Carolina. But that’s been true forever. There is nothing to justify the extreme increase in the rent/own disparity.
Here’s my prediction: rentals are going to go up in value while sales dip a little bit (especially, since so many people are putting their places on the market). Then, once the gap between cost of renting vs. cost of buying starts to close and supply returns to normal, all those waiting on the sidelines will start to buy again. I don’t think there will be a huge drop – more like a lull. I also think that unless people start moving in droves (e.g., due to a terrorist attack), we’re all going to have to get use to the fact that housing will occupy a larger percentage of our budgets than it used to. I think what people aren’t realizing is that Brooklyn has been relatively cheap for a long, long time. The party’s over.
When rental prices rise and developers can’t sell new condos at price they expected, buildings might become rentals.
The number of new units on market and coming on market seems large and if can’t fetch the selling price – they could become rentals.
Look at number of units at 1 Hanson Pl. about to be marketed and all the other new construction lined up in the area.