Various reports showed New York City’s real estate market continued to slow in the third quarter. Co-op and condo prices fell, while unit sales were weaker, and inventory increased, according to the Elliman Report. The Real Estate Board of New York (REBNY) issued a report that stated the total consideration fell 5% from the year-ago period. Volume, measured by unit sales, declined in the under $1 million and $1 million to $3 million categories. It increased by 1% in the $3 million to $5 million categories and was flat in the above $5 million, although the luxury segment has been in a slump for a long while, making it difficult to jump to any conclusions. Additionally, there is a New York City mansion tax that went into effect in July that has not helped demand.
With the national unemployment rate dipping to 3.5% and mortgage rates low (3.75% national average per FNMA), this could prove an optimal time to jump into the real estate market for the long term if you have confidence in your financial situation. The market is stagnant, with pockets of strength below $1 million and close to zero demand for properties in excess of $10 million.
A more balanced, or even buyer’s market means you do not have to rush into making a full price offer. There are options, and it is worth contemplating what sellers are accepting right now.
With the current softness, you need not fear that you must come in with a full price offer for the seller to take it seriously. In Manhattan, the median sales price was $935,000 versus the median list price of $1.3 million, according to Realtor.com. This works out to a roughly 72% sales-list price ratio. The group also declared Manhattan was a buyer’s market, with more homes for sale than there are buyers.
For all of New York City, the median $626,500 sales price was about 74% of the $845,000 median list price in September. One forecast from Zillow states the city’s home prices will fall 1% over the next year (September 2019 through August 2020).
Individual real estate experts consider below a 90% sales/list ratio as favorable to buyers, while anything above 100% indicates a seller’s market.
This means buyers should not fear to make a lower offer. Of course, you need to back it up with recent sales data. Depending on the situation (e.g. how long the seller has the property listed), you may offer 20% below the list price. Remember, it is different for co-ops. You not only have to get the seller’s approval, but the board must also sign off on the deal. A co-op board may prove hesitant in approving a lowball offer since it hurts the comparable building sales and potentially their own unit’s value.
Buyer closing cost estimates range from 2%-5% of your purchase price. These items include transfer taxes, attorney fees, title insurance, and various bank fees. During a housing slowdown, it is tempting to ask the seller to contribute part of these costs.
There are restrictions, depending on the type of loan that you should know, however. For an FHA loan, sellers can only contribute up to 6% of the purchase price, and it is limited to 4% for VA loans. There are limitations as to what the seller can pay for, too.
The amount the seller can pay towards your closing costs for conventional loans depends on the loan-to-value (LTV). It is 3% of the purchase price for an LTV above 90%; 6% for LTVs between 75% and 90%; 9% for LTVs less than 75%.
There are differing views on asking the seller to pay for part of your closing costs, and some will balk. However, it may find a co-op board more receptive to this avenue rather than approving a sale at a lower price. This occurred during the significant real estate downturn a decade ago. In other words, it cannot hurt to ask.
Earlier this year, there were reports that developers were more willing to throw in upgrades. These might include hardwood flooring or certain appliances. If it is an existing home sale, sellers still might offer certain items. By itself, these things may not move the needle for you. But, as part of a broader package of concessions, you may find these are enough to close the deal.
It is particularly challenging to come to terms on an apartment when the market is in a state of flux. Sellers are reluctant to face the reality that the market has softened and that they are not likely to receive the same offer that their neighbors did a short while ago.
Backing up your offer with facts will support your case. Your case becomes much more compelling if you can show that your offer is based on recent comparable sales data. Your exclusive buyer’s agent can help you formulate your bid, ensuring that you do not pay above the current fair market value.
On the other hand, you should base your offer on current market conditions. Your offer will have little weight if you lowball your bid on the basis that New York City’s housing market will continue to soften.
Schedule a call with an ELIKA agent to help you find a home.