Now is the time to buy if you are a first time home buyer due to seasonality and potentially slightly higher rates soon to come. In general, the market remains at elevated levels, and one should proceed with caution – so if you are going to buy a home, you’re best to do it before the end of the winter quite period. Conversely if looking for investment property now is the time to tread carefully. As always choosing the right property and buying it at the right price is critical.
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What’s driving prices up
The Manhattan, real estate market, continues to outperform due to the health of the local economy, incoming skilled labor force, stock market stability and continued interest from the foreign buyers. International interest remains despite the strong dollar, and subdued capital flows from the countries such as the UK and some EU countries.
The outperformance continues because of:
- Economic headwinds in Europe
- Brexit (and the revelation of a ‘hard Brexit’ in early October)
- The reduced attraction of other traditional foreign investment property markets due to higher valuations
Add to increased international interest, local interest from first time home buyers is also contributing to above-average prices. Many baby boomers and empty nesters are moving back to the city and downsizing by selling their larger homes in the suburbs. Also Millennials, a significant market segment are also contributing to the overall strength and should continue to be monitored as an indicator of market health.
The result is that activity remains well above long-term averages, and in September 2016, 40% of transactions were at the full asking price or above.
What’s driving prices down
Continued low-interest rates have fueled aggressive construction spending and now due to over-supply in some neighborhoods prices are correcting in particular for luxury new developments. The price reductions for luxury properties $5 million and above will likely last 6-12 months approx.
New developments hold a keen interest, and as New Yorker’s continue to upgrade, resale housing prices showed modest increases while the market share of bidding wars slowed from last year’s record to more sustainable conditions making it easier for new buyers to step in.
How’s it’s looking compared to last year
Compared to last year, the market has continued to hold high overall however some segments are underperforming and some are outperforming.
According to Miller Samuel, the median sales price of a Manhattan apartment was up 7.6% year over year to $1.73 million making it the fourth quarter with a median price over $1 million.
However, the resale market (87.7% of sales) was more reflective of current market conditions, with a median price of existing homes only up 2.6% year on year to $950,000. This increase is in line with other market indicators like listing discount (the percentage difference between the list price at the time of sale and the selling price) which increased from 2.2% in Q3 to 2.9% Q3 this year.
Reflective of these small gains in sale value, it took houses six days longer to sell on average, increasing to 79 days on the market.
What’s coming in the next 6-12 months
I believe the growing inventory of new construction will be absorbed over the next 12 months and more buyers will enter the market once the Presidential Election has passed and the typical New York “bonus” season begins in the first quarter of 2017. Combined with price adjustments and continued unstable international markets, New York City property is likely to become more competitive starting early next year, despite luxury new construction headwinds.
What it means for buyers
The market consolidation presents an excellent opportunity for potential buyers given the increased ability to negotiate. As the holidays approach, sales volume slows down providing a window of opportunity for new buyers.
Despite luxury oversupply market desirable, affordable apartments and homes remain in short supply thus it is prudent to act when finding the right home which meets or exceeds at least 80% of your wish list and is fairly priced or course.
If you want to buy your first home now is the time to do it.