January in the Books -- Manhattan stays Hot -- Tips for Buyers & Sellers
A: With January in the books lets take a look at the monthly Contract Activity and New Supply and see how we performed when compared to January production in years past. In seasonal markets, its best to measure monthly performance on a year-over-year basis so as to filter out the noise of seasonality.
January 2013 saw Manhattan produce 859 new deals signed into contract. For perspective, please consider this Monthly Chart of Manhattan Contract Activity:
The past 3 years saw January deal vol in the mid 600s, so when I see this January's print at 859 it's further confirmation of the strong activity that is currently enveloping the inventory laden Manhattan marketplace. It's safe to assume that buyers are quickly snapping up new supply that comes to market; a stat we will be able to quantify once the new urbandigs.com site goes live by April.
Lets move on to supply trends. January 2013 saw Manhattan bring 1,538 new listings to market -- that is 1 shy of last year and noticeably lower than what we typically see come to market for this time of year. To visualize this, please consider this Monthly Chart of Manhattan New Supply trends:
Add it up and we continue to see buyers outbid each other for new listings offering desirable features that are priced right. When I say desirable features I am mostly talking about full renovations & views/exposures; low or mid floor cookie cutter apartments with little to no natural sunlight and has little to no view is not experiencing the 'activity' that the data suggests. With inventory the tightest its been in years, apartments with that 'wow' factor or unique feature (think outdoor space or fireplace, etc) can really take advantage of the shift in leverage to the sell-side right now.
In the field, my team is experiencing several best and final situations across the city, in various price points. The constant being that the products offer desirable open city views and are in move in condition.
Some tips for Sellers
1. Leverage has definitely shifted to your favor so it would be wise to take advantage of current demand and the lack of competition by pricing right! The quickest way to be behind the curve and miss it is to overprice and not listen to what the market is telling you. In the end, it's all about the price.
2. If you have been on market for 3+ weeks (assume 3 open houses thus far) with less than 20 visitors and no bids, your price is wrong. The main reasons your price may be wrong are:
a) the comps analysis to price the apartment was too euphoric. This could be because the listing broker that pitched to get the exclusive promised a 'high price' knowing a price cut will have to come at a later time. Or it can be because the seller is testing the market with the understanding the price will be chopped after a month or so.
b) your hyper-local submarket is currently performing below market trend. The UrbanDigs chart system lets you dig into real-time pending sales and inventory trends to see which sectors of Manhattan are under/over-performing; for example, the Upper East Side under $1M market is not seeing the tick up in new contract activity that the high end price point is seeing. You can unlock all the real-time Manhattan tools here.
Some tips for Buyers
1. Manage your expectations. Know the market that you are bidding into right now and tweak your strategy when you find the right apartment. Present your offer in writing via email/fax clearly detailing your employment situation, financial condition, financing plans, attorney contact details, and closing terms.
2. Do a comparable sales analysis using relevant in-bldg sales and adjusting for time, views, condition, etc. to come up with a fair market opinion (which is usually a part of your buyer broker services). Since most buyers go into a bidding process with some knowledge of where they are willing to go to get the deal, I am here to tell you to skip 'the dance' of negotiations and put your best foot forward right off the bat. I am not saying to overpay given opinions from a comps analysis, I am simply saying not to employ a low-ball bidding strategy when you find 'the one' in this marketplace.
3. Consider taking out less of a mortgage if its feasible to do so. I am not saying to stretch yourself too thin, rather, if you can afford to put 30%-35% down that may separate you a bit from other financed offers
4. If you find yourself in a multiple offer situation and you are highly confident in your ability to secure financing, consider sending in the offer without the financing contingency; I strongly recommend that you discuss this approach with your attorney first so that you fully understand all the risks. The only way for a financed offer to match up against a cash offer is:
a) be 2%-3% or more higher than the cash offer, and
b) remove the financing contingency in the contract.
Having two similar offers at $2M, one cash and one financed but removing the contingency, is really a no-brainer for the seller. The cash deal wins every time as the comfort of skipping the whole financing process is too difficult to overlook. However, if that financed offer without the contingency was $2,060,000, then the seller has a decision to make.
5. Know the signs that a deal may be running away from you; a good read for any broker or buyer that is new to Manhattan real estate.