The number of new offering plans for new apartments in New York City has slowed for the first time in almost ten years.
Analysts see the decline as more than just a confirmation of the current slowdown, however. The 2nd quarter numbers from the US census bureau showed a 46% drop in building permits within city lines, and that led some to fear that the drop off in the number of new offering plans would be worse than it was.
In the end, the state government received 663 new offering plans containing a total of 25,271 new units for the city. While that is still a large number, it represents a 4.5% drop from the previous year. The state as a whole experienced a more severe drop-off, falling roughly 19% from its year-over-year quarterly equivalent. That makes for an annual drop off of roughly 11% if seasonal patterns hold.
In regards to the city numbers, though, it is important to remember that these numbers in part reflect the rush to get permits in before the expiration of the 421-a tax exemption. The sunsetting of such a significant tax provision could well move these figures more than supply and demand developments in the market itself.
Perhaps more importantly, the smaller number of market plans will protect the market from any longer-term price stagnation. Had builders continued to rush full steam ahead, and the economy slowed more than expected, than a notable decline in average prices would have been a distinct possibility.
Instead, the drop in new offering plans can be seen as insurance for the rest of the market against inventory numbers rising precipitously in several years.
The mid-eighties saw a significant decline in annual rates of new offers being processed that lasted all the way until 1993. However, analysts suggest that we are currently nowhere near that type of long-term fall of in supply.
Over 300,000 jobs were lost in that significant decline, and even with the turmoil in the financial industry, New York City will likely not see anything close to that kind of damage done.
As one analyst said, “We’re entering a valley. How deep the valley will be and how wide it will be, nobody knows yet. But for sure, there’s a mountain on the other side.” More exact words for the New York
City Real Estate market could not be found.