Continuing the second quarter trend, sales velocity in the third quarter of ‘09 continued to accelerate in New York City, at least for resale activity if not for new developments. Does this reflect a firming of prices? Who knows?
I think that more than prices having reached the bottom, the reason is that enough time has passed so that many of those committed sellers who are committed to selling (for whatever the reason) have begun to acclimate, accept market realities and adjust their asking prices accordingly. The market analyses of three major New York brokerages report that the 3rd quarter average apartment was priced 10% – 16% lower than the average for last year’s 3rd quarter. As well, more than 30% of sellers cut their initial asking prices after testing the market and finding resistance. The consequence was a decrease from the 2nd quarter of time -on-the-market and a 14% decline in salable inventory from what was on the New York Market last spring.
While some of the inventory decline was undoubtedly due to a number of units being taken off the market and perhaps as well to a slowing in the pace of new listings, it nevertheless tells me that seller realism is settling in.
Buyers, not quite sure if the bottom has yet been reached, nevertheless seem to recognize at least a partial return to value (admittedly, an entirely subjective evaluation), particularly when enhanced by historically low interest rates for those who need financing and can qualify for it. As attested to by the National Association of Realtors’ Pending Home sales Index (which measures month-to-month hosing contract activity) buyers are indeed cautiously finding their way back into the market.
The picture is somewhat less clear for the sale of units in new Manhattan developments because of the paucity of closings which, by virtue of the scant numbers, can distort the data. Inventory is high compared with historicals, and, in my view, asking prices are still above what the market dictates. According to the Pru Douglas Elliman Report the average time on the market for units in new developments was close toa whoping 300 days. A number of closing which occurred in the 3rd quarter were likely contracted for during the construction phases when the market was at or near the top, so average prices (down since last quarter) and median prices (up since last quarter) for these units should not be relied on as reflective of current conditions. But one thing we are sure of in this environment is that developers are experiencing the difficulty of their potential purchasers’ capacity to obtain mortgage financing for units in new buildings where sales have not reached 70%. As well, some (most?) developers find themselves in a bind by being unable to freely meet market demand because of the restrictions posed by their construction lenders on the minimum “release prices” for each unit.
So, is this a good time to buy? I think so. But, of course, I’m a broker and a buyer’s broker at that. What we can all agree on, I think, is that it’s a better time to buy than to sell. And if you’re a buyer for whom market timing is not the ultimate dterminative it’s certainly a good time to look.
Check out the reports for yourself:
