A while back, we took a look at NYC’s residential market and how it’s sharpening up in the last months of 2019. As we now approach the end of the year, it’s looking like prices are now at or very near to the bottom. Prices have fallen all across the board, and sellers are slowing coming around to this new buyer’s market reality. However, many buyers are choosing to dig their heels in and wait to see how low prices will go.
There’s also talk of a possible recession being on the horizon, which is making some buyers a bit skittish. But digging in for too long could risk losing out on an opportunity now. Some industry experts believe that prices have either reached the bottom or are very close to it, with the expectation being that this quarter will see stabilization and regrowth.
So what’s the best course of action – should you buy now or buy later? The answer, as with most things’ real estate, is that it depends on what you’re looking for. So let’s take a look at the different kinds of properties on the market now, what they’re going for, and how you can position yourself as a buyer to get the best deal possible.
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It is a Major Buyer’s Market
It is a Major Buyer’s Market Right Now for 2-Bedroom Apartments. In most markets, it would be absurd to call $1,515,000 for a two-bedroom apartment a bargain. But that number represents an 8% drop from the median price last year. The recently published Q3 report by Douglas Elliman found that Manhattan prices had fallen all across the board in the condo and co-op sector when compared to figures from the same period last year. Only the 4-bedroom-and-up market fell further with a 17% drop.
While this price is still out of reach for many New Yorkers, there are increasing options for first-time; move-up buyers at far lower prices than the median price suggests, historically low-interest rates are allowing buyers to stretch their dollars further, as seen in the fact that this quarter also saw more people than average purchase with the help of a mortgage. The glut of high-end properties that just aren’t selling is also putting 2-bedroom sellers in an awkward position. Being too small for affluent buyers and too expensive for move-up buyers, these sellers have to make some tough decisions to attract buyers.
To get a better idea of the potential bargains available now for two-bedroom buyers, let’s take a look at some of the juiciest options out there in the NYC buyer’s market.
First-time buyers should look out for the Housing Development Fund Corporation (HDFC) Co-ops. These kinds of properties are specifically designed to provide people with low incomes with affordable housing. A quick look at what’s available right now in the market shows HDFC listings at prices ranging from $250,000 to $700,000. However, the catch is that there are income limits for buyers (up to $57,000 for a family of two, $67,000 for three or more). There also aren’t many of these HDFC properties on the market, so you may need to exercise patience.
Co-op Resale Bargains
The glut in high-end properties has had a knock-on effect in the more comparatively modest co-op resale market that has seen prices sink. This is the first time in 13 straight quarters that the median co-op price has dropped. Sellers are beginning to notice and are making substantial price cuts in a desperate bid to beat their competitors. The most significant discounts were downtown, south of 14th Street, where the median price fell 15% to $1,568,750 compared to the same quarter last year. Midtown had the second-biggest drop, with the median price falling by 10% to $1,217,500.
While the market might be slow in Manhattan, it’s getting hot in the other boroughs. The Bronx, in particular, is going through a significant development boom that is seeing more and more market-rate properties go up for sale. Other boroughs have even seen a price increase. In Queens, the median sales price rose to $600,000, a year-over-year increase of 4.6%. In Brooklyn, the median co-op sales price was $485,000. The feeling among many brokers is that if the price is right, then it’s going to sell in the first week or so.
New Development Perks
Developers who are opposed to lowering their prices directly, due either to obligations to their lenders or fear of reducing the value of their remaining stock, are looking for other ways to attract buyers. Closing cost concessions offer to pay several years of common charges, and other back end discounts are now becoming the norm with new development purchases. It puts buyers in the medium to high-income bracket in a powerful position to negotiate for savings that can be spread out over several years.
The Townhouse and Brownstone Market is Opening Up
The third quarter this year was particularly hard on Townhouses. In Northern Manhattan, the median sales price fell by 34.9% to $1,826,250, according to the Douglas Elliman Report. In Brooklyn, the median sales price for brownstones was $2,240,000, an 18.5% drop from the same quarter last year. Much of this fall in sales has been attributed to the recent changes to the mansion tax. It saw an increase in the one-time fee from 1% to 4.15% depending on the sales price. Just before it went into effect on July 1, there was a rush of buyers to close, lead to the fall in sales activity for the high-end market this quarter.
But other factors are also plaguing the high-end townhouse market that is seeing a gradual reduction in prices. The state and local tax (SALT) deduction, which allows people in high-tax areas like New York to deduct local taxes from their federal returns, was capped at $10,000 in 2018. Previously it had no limit, and the change has meant many high-end buyers can no longer take advantage of it. The overabundance of high-end new developments over the last few years has also drawn many buyers away from townhouses. All of this has led to townhouses languishing on the market for longer with the result that sellers are now starting to make more competitive price cuts.
For high-end buyers that have been dreaming of owning a townhouse, now is the perfect time to start looking. But while prices have fallen, buyers must exercise caution. Make sure you have a broker that has extensive experience in the townhouse market and is willing to talk with other brokers about other houses in a signed contract. There’s a lot of side-talking going on right now with townhouses listed at a specific price. Buyers need to look at current sales prices and see what people are getting. Along with sales data, buyers also need to consider the individual pros and cons of each house of interest. No two townhouses are ever the same, which can make it difficult to find comps between them.
But, you need to do a lot of research before making an offer on a townhouse. Despite the recent cooling in prices, many sellers, especially at the high-end, are prepared to wait. If you’re hoping for bottom-end prices, then you won’t find it. But if you’re patient, methodical, and a little aggressive in your bidding, you can get a good deal now.
Buying Tip: Make the Most of the Winter Holidays
Spring tends to be the busiest time of the year for sales, but buyers can gain an edge if they can enter the market during winter. While this will mean less inventory to choose from, it will also mean fewer buyers to compete. Any seller that’s listing in winter is probably desperate to close soon. Usually, because they need to purchase something else, they have to relocate, or some other urgency. Look for properties with a high number of days-on-the-market (DOM), and try to see if your broker can figure out why they’re selling right now. If they’re on a time constraint, be more open to negotiations if you can promise them a quick closing.
Deciding on whether or not now is a good time to buy depends on your circumstances. Beyond the obvious financial considerations, you have to be sure you’re ready to settle down. Becoming a homeowner comes with a new level of responsibility and need to be sure you’re prepared for that. The fact that it’s a buyer’s market makes it more critical; stay informed and be prepared to act if you see an opportunity. If you feel confident that now is the right time to buy, or want to learn more about the current buyer’s market, schedule a meeting today with an Elika agent.