We have been hit by bewildering economic events in recent months that have an impact on the world order as we know it as well as the New York real estate market.
Japan has endured a trifecta of earthquakes, devastating tsunamis and now nuclear meltdown. They have suffered more in a short period than any other country in recent history. It is still uncertain what impact the carnage in one of the world’s leading economies will have on global markets and the continued use of nuclear energy and possible increase in fossil fuels.
The “Democratic Spring” in North Africa and the Middle East has sent the current political order whirling out of control and unsettling the balance of power in the region while peace becomes an ever present topic between Israel and its neighbors. Yet, the Manhattan property market actually experienced an uptick this first quarter not seen in the past two years; we experienced a 10% increase in properties that sold above ask. There were more sales than in any first quarter since 2008 with increases of 0.4% and 4.3% over the prior year and quarter respectively. Pending sales increased 12.5% over the fourth quarter, though the pending price index slipped. Either buyers were frustrated and overzealous or product was limited (active listing inventory is at the lowest level for a first quarter since 2007), thus pushing up the threshold to meet demand and beyond.
In the U.S., nearly one of every 10 people is out of work. The number is deceiving if one considers those who have given up looking and / or who found jobs at lower pay than their previous job. While reports indicate inflation is not a near-term threat, the numbers used to calculate the statistics do not take into account what we are paying at the gas pump and the food checkout line.
The Dow Jones Average has climbed over 12,000; does this reflect a confidence that our economy is rebounding? Or will low interest rates offer investors the belief they can get a better return? The real estate market here in New York has become another arena for people to reinvest their equity. Lurking over this is the early summer deadline to raise the U.S. debt limit, a tug-of-war pushed by Tea Party activists and their cohorts. If the limit is not raised it could cause the U.S. to default, sending an already shaky world economy into the abyss.
The dollar continues to weaken against the Euro and other currencies, and it is down nearly 50% against the Australian dollar in the past several years. Yet, New York City is watching as foreign investors step in to procure US Soil, in particular, city soil. Condos, where foreigners buy, showed an increase while the co-op market was down. The median price for a condo was up 8% to $1,150,000, largely due to a sharp increase in the sale of two-bedroom apartments. The median sales price for a co-op dropped 6.2% to $642,000 from the first quarter of 2010.
The world events are having an impact on the real estate market in New York. I find that both buyers and sellers are unsettled and there is a disconnect between what is occurring on the worldwide stage and the individual lives. It is difficult to analyze the current market by putting everything into neat pigeonholes and making broad generalizations. Yet, I believe people are not acting out of a herd mentality as we see so often, but out of their own individual needs.