Supply and Demand Getting Out of Whack?
The cover story in the real estate section of yesterday’s New York Times was about the impending glut of new condos in Manhattan, its impact on the market and how developers are reacting. With more than 28,000 units in the pipeline–about half of them under construction and half in the planning stages–many developers are switching…
The cover story in the real estate section of yesterday’s New York Times was about the impending glut of new condos in Manhattan, its impact on the market and how developers are reacting. With more than 28,000 units in the pipeline–about half of them under construction and half in the planning stages–many developers are switching to rentals or even other uses like hotels or commercial space. This got us thinking about Brooklyn. Dumbo and the area around McCarren Park seem like the only areas with a high concentration of condos coming online over the next year (not including the big plans for Coney Island). The Flatbush Avenue corridor projects are a little further out on the timeline and could be affected too, we guess. What’s interesting is that the Greenpoint projects are experiencing pressure but the Dumbo market appears to be holding up nicely. Any other areas that you think are vulnerable to oversupply?
Changing Course to Avert a Glut [NY Times]
Photo by Tony Cenicola for The New York Times
You’re all sideline players. Two units in my condo recently sold for a hair under the ask, and within maybe four or six weeks from the listing dates. There was a lot of buyer traffic in both cases, including a back-up offer.
That is the reality right now, happening in my own building in brooklyn, during what is traditionally the slowest time of year until after super bowl sunday.
get a grip.
The only region of the country not to show considerable weakness last month was the Northeast, where the construction of apartments in New York and New Jersey helped cause a 31 percent jump in residential building for the month. Everywhere else saw a decline…
The idea that oversupply is going to only effect one street (Ex. 4th Ave), one neighborhood (ex Dumbo) or even one boro (Manhattan) just isnt realistic.
If there is an oversupply induced price drop in Manhattan, its going to effect Dumbo and Brooklyn as a whole; and if you have an oversupply on 4th Ave then that will carry over as well.
Very few people looking to move w/in NYC are so set on a particular block or neighborhood that they wont adjust their destination by factors such as price, quality and size.
By way of example – if Dumbo doesnt (immediatly) fall in price, but Manhattan does, then a significant number of people who might have considered Dumbo may decide to stay in Manhattan and thereby (eventually) lower the price in Dumbo.
And say whatever you want but many more people would prefer to live in Manhattan then Brooklyn (if they could afford to), so any price drop in Manhattan will no doubt lower Brooklyn as a whole.
My question is this – do people think that the glut of condos will affect brownstone prices? Are potential brownstone buyers going to turn to condos IF the prices get low enough?
BTW, in the interest of full disclosure – I plan to jump in the market in the spring – with hopes of finding a brownstone in Park Slope or Fort Greene.
DowntownN!!! There is 110 Livingston 200=), Lookout Hill, Danny’s condos and two mystery buildings on Schermerhorn (one new and the one next to it being rennovated. Plus the Townshouses and State Schermerhorn affordable/market rate apts. Plus The Smith (100+), BellTel Lofts (200+) — and then One Hanson (200+)! What is that — 1,000 new units??? And not even counting what’s only on the drawing boards.
If you practice Faith-based economics, everything will be OK. Keep hope alive and maybe one day you’ll be raptured.
For those not it faith-based economics, you have your Supply and Demand Curves. Like Darwinism and evolution, this may be voodoo science to some.
Econ 101 goes a long way in explaining things. All this talk about supply totally ignores the demand side of the equation. Demand is falling. A negative shift in the demand curve results in a lower equilibrium price. This is what brooklyn is currently experience. The inventory hasnt even come out the pipeline and price are already falling.
Once we get a positive shift in the supply curve(increased inventory coming out of pipeline), the equilibrium price will again shift lower.
The only way this outcome can be averted is through an increase in demand(positive shift in demand curve). Where is this increased demand going to come from?
Agree about 4th Avenue, not 5th, however, because the same zoning that allowed the mega buildings on 4th limits the height of new buildings on 5th Avenue.
I hope this means less new building on 4th Avenue going ahead. I like that it’s becoming a little more residential, but this is insane.
What I wonder, though, is who will feel the hit. The two 12-story buildings going up on 4th Avenue are zoned for PS 321. (Whether you think that school is overrated or not, clearly there are many people who don’t.) So, will there be less demand for those new apartments, or–as their offering price potentially drops–will that leave less demand for other new developments in the surrounding area (e.g., the new construction in South Slope and Gowanus)?
“Now we see that building so much “luxury” inventory does nothing for those people hoping for a little affordable crumb from the overpriced condo cake.”
Not yet. It’s not bad enough yet. Maybe it never will be. But at some point, if there’s enough inventory and they are desperate enough to rid themselves of it, incentives and price cuts will naturally follow. Unlike individual sellers, builders are not trapped as much by their own egos and personal feelings – the bottom line is what they look at.
I remember talking to people a year ago who predicted that a glut of high end condo construction would eventually result somehow miraculously is lower, almost affordably pried, condos everywhere. Now we see that building so much “luxury” inventory does nothing for those people hoping for a little affordable crumb from the overpriced condo cake.
Let this be a lesson that an oversupply doesn’t mean that developers are going to start cutting prices in half. They’re not going to build, they’ll delay, they’ll do non-affordable rentals, they’ll do hotels. But it’s not going to be raining affordable condos anytime soon.