…So everyone’s asking, «What’s really going on?….for normal people?»

Three bedrooms gained most with 30% price increase from a year ago, this is Manhattan Real Estate.

The Luxonomist. 26/02/2015
Manhattan Bridge

Core New Yorkers are still fighting for the dearth of inventory that exists, or rather doesn’t exist. This pressure on buyers has yet to be alleviated and is not likely to change. Whereas inventory levels have been increasing, it is simply not enough to handle the demand. Note: by «core» New Yorkers, we mean the overwhelming majority of real working people who live and breathe the city every single day and are seeking to purchase that 1, 2 or 3 bedroom home ranging from $450K to $3M, respectively; we are not talking about the uber-wealthy, who we will discuss in a moment.

These «core NY’ers» struggle to have choices. The inventory for them is very lean and the demand for them is overwhelming (see the chart below). Again, although inventory is slightly increasing, you will see that it is still far below where it was back in 2008.

Source: UrbanDigs

Interest rates will be a key factor in shaping the future of residential real estate. It is true, they will eventually begin creeping up, typically creating a downward pressure on prices. This occurs because prospective purchasers cannot borrow as much, thus reducing their purchasing power. That said, and with so much demand in the market place for so few properties, it is hard though to predict a reduction in prices. So…the saga will continue…as long as New York continues to grow, not just by population, but with more services, better schools, continued safety etc., we are not likely to see a change in this pattern. Prices should remain quite stable.

Conversely, for the wealthy and uber-wealthy, who tend to compete for properties in the $6M and up range,  inventory levels of these apartments are increasing at a much faster pace (see the astonishing New Development chart below). The majority of these units are all new condominium construction or meticulously planned conversions of prior prewar structures or rental buildings. *Interestingly, the people in these categories, when witnessing the purchase of apartments even greater than they can afford, comment…without fail, «Who is buying these places? Who has that kind of money? Is it foreign?» Whereas about half of these purchasers are domestic, the other half has indeed been foreigners.

Source: XE

Today’s developers have been in a bit of a «hey day» capitalizing on the global geopolitical unrest seemingly everywhere. The safe-haven for these foreigners has been to place their money (cash) in a safety deposit boxes right here in New York….called condominium units. This influx has been helped by the weak dollar, which has now taken a turn. The Euro has lost over 18% to the US Dollar in the last nine months. Euro loses 18% to the US Dollar in 9 months.

New Development & Condo Conversion Inventory is expected to drastically increase in the coming years (from an average of approximately 250 new units per year from 2005 to 2012 to approximately 1200+ units between 2013-2016), see chart below.

Source: Corcoran Sunshine

Miller Samuels reported that in Manhattan, «the priciest sales per square foot concentrated toward the southern end of Central Park, as well as West Chelsea, NoMad and points south. Three bedrooms gained most with 30% price increase from a year ago. 27% of all new development sales this quarter were in 3+ bedrooms. The Manhattan Luxury New Development Market is demonstrating strong advances in pricing and price per square foot. Q2 2014 average price for new development inventory rose 66.3% since Q2 2013 to $3,520,735 from $2,116,759. Q2 2014 average price per square foot for new development inventory is $1,900, up 33.1% since the same quarter last year».

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