As anticipated, the 3rd quarter housing report was reflective of an unprecedented three months in New York real estate. Various statistics for this quarter provide us with a snapshot of different segments of activity within the market, presenting information that supports the general consensus of the city’s impressive growth this year. For instance, the inventory of active listings has dropped to approximately 4,500, down nearly 5% from last quarter and the lowest recorded since 2005. The market as a whole has also reached its highest average price-per-square-foot since 2008. As records continue to be broken, it is important to reflect on these developments to better anticipate the changes ahead.
Shown in this quarter’s CORE Real Time Report, one of the biggest deviations we have witnessed was the almost 30% reduction in contracts signed. At first glance, this may seem like a cause for concern, but after analyzing the factors that influence this market, it is actually a testament to how strong the market continues to be. The following points are four key components that have contributed to the low inventory levels seen throughout the New York City market this quarter:
1. New development – Several new development buildings where introduced in Q1 and Q2 such as 56 Leonard, 150 Charles Street and 241 Fifth Avenue. As nearly all of the new development inventory was absorbed, the third quarter did not introduce enough new development projects to the market to replenish what went into contract.
2. Luxury market – In the 2nd quarter, there were 255 properties above $5 million sold compared to the same time last year when only 126 were sold. The $5 million+ market has struggled since 2009 but inventory over the last three quarters has dropped drastically within this segment, denoting an uptick in sales. This figure contributes to 3rd quarter inventory numbers, as not enough luxury product was introduced to the market to compensate for this activity.
3. Lending – Interest rates have remained low which continue to drive traffic among potential buyers. The federal government threatening a taper and an increase in mortgage rates propelled people to buy in the 2nd quarter, thus absorbing more inventory than normal. Additionally, many home owners are not selling their homes, as they are unable to make a lateral move or upgrade due to tight lending restrictions.
4. Seasonal decline – All of the factors above, combined with a seasonal decline as expected in Q3, have attributed to less properties being listed in general, affecting overall activity.
Whether statistics reflect an increase or a decrease in activity, together, they represent a sign of the continued strength of our industry. Moving forward, just over 1,100 new development units are slated to enter the market in the year’s final quarter, sure to add some much needed relief to this constricted market. All of these developments and growth opportunities will make for an active and exciting Fall/Winter selling season.