Issue 34, January 2012: Where Is the Money Coming From?

The year 2012 has arrived and we are all waiting to see how this will evolve. What we do know is what played out last year. Overall, 2011 closed with a slow down in sales after an unusual surge in the third quarter driven by very compelling low mortgage rates coupled with a weak dollar that created advantage for foreign buyers who were looking to diversify their portfolio. This comes after S&P trimmed the US credit rating.

Manhattan’s luxury real estate remains rather robust with activity and pricing on the high end still impressive. Some new developments, i.e., One57, have been very well received with more scheduled to come online. These are fetching high prices with sales consummated at a brisk speed regardless of the wait to move in. Surprisingly, unabated real estate taxes are not affecting pricing or the will to commit by buyers.

Interestingly, there is a “come back” in the lower end of the market with the studio and one-bedroom sectors finally starting to move again after languishing for several quarters. I find this an important and good barometer of the market as this sector has the least amount of liquidity and thus the most to lose, so when one bedroom and studios start to move this shows market confidence.

It doesn’t hurt to have lower interest rates helping to be an incentive for deals, money wise.

We are seeing the market share of new development dropping to 14.5% as construction has slowed due to the credit crunch since 2008. The good news is this offsets the fact that the price per square foot has increased to the highest level in two and one half years with an 11.7% increase over the three-year average of aprox. $1,250/sf. This does not mean that you do not see staggering p/sf purchases with records shattered by impressive sales consummated at the end of 2011; for example, 15 Central Park West PH at a whopping $13,000/sf. This should not be considered the average.

New development is driven in large part by international buyers, including the Russians and Asians, who have a more global perspective of luxury and want properties loaded with the latest in quality amenities.

This puts pressure on older buildings, which need upgrading to compete with the new luxury properties. These properties must be willing to make the investment in public areas and modernize to maintain the value of the apartments themselves.

Highlights of our 4th Quarter Report are:

  • The median sales price increased to $855,000, up 1.2% from the fourth quarter in 2010.
  • Average Price per sf price increased 5.6% to $1,117.
  • Average sale price declined 2.5% to $1,445,484.
  • All three indicators showed seasonal declines versus the third quarter.
  • Days on the market has increased to 130 days.
  • Ask to sold showed strength by discount dropping from 8% to 4.9%
  • The price per sf for Downtown, the East Side and West Side units was approximately the same, a bit below $1,000 a foot.
  • Sales were down 16% in the co-op market and 8.5% for condos.

As Europe suffers and our government officials remain focused on elections, we the people are going to have to hold very firm on what we value in order to keep a semblance of normalcy throughout this year. This year can be very opportunistic if one knows how to play their cards right. Stay tuned as we speak to this throughout 2012.