The Manhattan market continued to stabilize in the third quarter with prices up slightly due to increased sales of larger apartments, though overall sales were down from the second quarter. In effect, a reset has allowed for a steadier market in the past couple of months. Buyers are looking for value and believe they can get it. Sellers, who purchased their apartments before prices skyrocketed, are comfortable with the return they can get on their investments. However, even with a strong rebound from a year ago, much uncertainty lurks before us as we move into the fourth quarter and 2011.
Some of my recent transactions give insight into factors affecting sales. While price has always been key, aggressive pricing has become a pivotal component to sales traffic.
For example, we offered a two-bedroom condo downtown at market price resulting in three offers driving the price $70,000 above ask. The ability to do this depends on the seller’s willingness to work with this market psychology. In today’s market, it is an effective way to position and drive a deal. Attracting bidding wars is a great result in a down market and offers value for both the buyer and seller.
Major lending institutions continue to enforce increasingly stringent guidelines with systemic issues being driven by Fannie Mae’s conforming loans. Banks are keeping the buyer in suspense literally right up until the closing. Recently, a lending institution decided to back out of a loan after they approved the sale due to a last minute requirement stating “too much commercial space in the building”. While we recognize caution is important, the major lenders are taking this to extreme levels. This situation is starting to create a cap on the amount of sales that are transacted.
Savings banks are becoming a viable option more than ever. The U.S. economic rebound is still a question that we are awaiting an answer on even while the New York market holds the most confidence in the U.S. We are witnessing a restructuring of our economy with corporations becoming leaner and more efficient while jettising jobs, outsourcing overseas or not hiring. Many earnings reports in the past year show profits resulting from reduced expenses, not increased revenues.
Secondly, the question remains about the world economy. Will Europe stabilize and support the weaker economies in countries such as Greece, Spain and Ireland? What will China do; will its purchase of our debt continue, or will it force an increase in the T-bill rates and will that increase the value of our currency?
Finally, what changes will the fast-approaching election bring? Will a reduced Democratic majority or Republican control of the House or Senate bring government to a virtual halt with conflicting legislation and vitriol? What impact will this have on the economic fluctuations in the real estate market? How will foreign nations view this?
Right now, we have stability and optimism in the New York market. It could be outside forces that forestall continued improvement.