Nationally, two significant stories are affecting the real estate market right now. Three, if you count the general economic malaise. But two stories specific to the real estate industry. Of course, the subprime crisis is still the most important story out there. Business writers have practically worn down the s, u, b, p, r, i, m and e buttons on their keyboards by this point. On the other end of the market – regarding average prices – there are issues relating to the over-supply of recently built condos.
In some markets, like Miami, that story has become the story; and it is clear that the market isn’t going to be heading into any positive territory until the almost gluttonous behavior of condo developers is eventually dealt with by those seeking bargain-priced deals and renters willing to move from old apartments to similarly bargain-priced condo rentals.
In the New York City real estate market, of course, condo development has been much more restrained. The physical limits of the densely populated city have been mostly responsible for this, but so has the co-op dominated regulatory structure and market preferences.
Nonetheless, the significant long-term trend in the city before the recent downturn was the slow movement of the NYC apartment market away from co-ops and to the condo format that has found so much favorability throughout the rest of the country.
So, it comes to an as little surprise that the New York City real estate market is dealing with its condo glut. Indeed, it is probably the single most acute weakness in the market. It didn’t seem like a danger, but then demand started to fall of its historic highs, and – surprise, surprise – market fundamentals still exist, even in the famous New York City residential real estate market.
This means both good and bad things for those involved with the market. For developers, it may mean taking a severe hit on profits – even, perhaps, a loss on some of the less prudently planned outbuildings. For the market as a whole, it means a source of weakness that will continue at least until the middle of 2009, if not the end of the year.
For buyers, however, it is a good thing. Because weakness in the market is not just spread vaguely and indiscriminately over the market as a whole, that means there are pockets of real estate to be found that are full of good deals. That is, because condos, in general, have become a weak spot in the NYC apartment market, bargain hunters should start their search in this market segment, where they are likely to find many owners who are disproportionately willing to strike deals that they otherwise wouldn’t be willing to agree to.
Columbia University recently took advantage of this dynamic and bought a large condo building in the Bronx that they otherwise probably would not have ended up purchasing.
Indeed, taking more than 100 condo units off the market is no small favor, and brokers everywhere should be thanking Columbia for doing so – as the final quarter of 2008 and the first quarter of 2009 begin, there might be little else to be thankful for… unless, of course, you are a buyer looking for meager prices.