The housing market is unique for a number of reasons. The New York City housing market is unique for a whole additional set of reasons. Both of these statements are true in an emotive, general sense but they are also true in terms of cold, hard economics.
One factor that makes both of these statements true is the size of the product being sold in the housing market. By “size,” I mean size both in terms of actual size and the size of the buyer’s budget. With size comes importance and illiquidity. Both of these factors, in turn, bring about less consumer control over the market: Whatever the fluctuation in supply and demand, there will still be those buyers who will become first-time buyers simply because it makes sense for them in terms of where they are in their life-cycle.
Today, those first-time buyers that have been nudged into the New York City apartment market not by investment decisions, but by life-cycle effects are finding the market to be like shooting ducks in the barrel.
Not only have prices plunged, interest rates have also fallen. In the end, those two factors make up the bulk of the total price of an apartment – at least, from the buyer’s perspective. There’s a lot more, however, that’s changed about buying an apartment than just the price.
Instead of a process of pressured decisions, where an opportunity to get a halfway-decent deal pops up for a day or two and the buyer has to make up their mind in a rushed fashion, the shoe is now on the other foot. Buyers can make the offers that are retracted days later, as worsening news pressures the sellers to lower the price even further.
The reality of knocking a full 20% off the asking price is becoming more and more common. Countless other signing details have become subject to the demands of aggressive buyers.
How is this connected to first time home buyers? Because these trends are at their strongest not in established luxury markets, but in the middle value and marginal neighborhoods — markets that are especially attractive to first time home buyers.
Of course, all markets are taking a bit of a beating right now, but for the typical first-time buyer, the NYC apartment market is truly ripe for the plucking.