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There might be signs the red-hot New York City real estate market is cooling off. At least there might be for those seeking a new development at the high end of the market. There are reports surfacing that developers are offering potential buyers a nice bag of goodies as an enticement. We explain how you can use the current climate to save money.
New development market
Image by Paul Sableman / Flickr
There are a variety of real estate reports that show New York City’s real estate market, which had been ablaze, showed signs of stalling a bit in the fourth quarter. Miller Samuel showed new development sales falling 13.2% compared to a year ago, to 479 units, and the average number of days on the market increased about 21% to 181.
Overall, 12.9% of the total inventory was not involved in a bidding war. But it was just 2% for the luxury market and none for new developments. There were a couple of sales above $60 million at 432 Park Avenue and a more than $40 million price tag reached at One57, Baccarat Hotel & Residences, and 4 East 66th Street.
However, experts believe this was due to prior contracts being signed. As these roll off, the real estate market is expected to return to a more normal level, with fewer bidding wars. Mortgage rates have spiked upwards, which does not help fuel sales. The national average is now well above 4% compared with the mid-3% level a year ago.
This figures to continue as more supply enters the market. Although the weather may be deceiving, spring is right here. This means a greater number of units listed, including more than 40 developments.
Look beyond price
You may not see a more balanced supply/demand reflected in the price right away. Generally, developers are reluctant to drop the listing price since this reflects poorly. But, there are other ways you can benefit. Sometimes, you might have to merely ask for certain things.
Aside from price, there are other items you can negotiate. Keep in mind, developers obviously want to sell as many units as they can. Therefore, they may offer concessions such as paying the transfer tax, which is 1% of residential sales of $500,000 or less, and 1.425% if the value is more than $500,000. You may also ask the developer to pay your closing costs.
Watch the broker incentives
Developers have been offering special commission deals to brokers as an incentive to move the units. This includes a commission advance and special rates. The agent enriches himself or herself, but this means he/she may push a certain development that might not be right for you. Obviously, this does not benefit you, the buyer. With a buyer’s agent, you eliminate this conflict.
Watch the market
The economy is performing reasonably well, with the recent unemployment rate reading at 4.7%. Barring a significant change to the economy, it is hard to imagine sponsors looking to slice prices. But, things can change quickly. Therefore, it is important that you monitor market conditions, with the help of your buyer’s agent.