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For real estate professionals and prospective buyers alike, it can be hard to make sense of all the data circulating headlines each week analyzing the 2019 real estate market and what’s to come for 2020. If you’re looking to get in the game or for a refresh on where the market stands, here is your cheat sheet on New York City development in 2020:
1. Last year was a challenging year to be selling new development in Manhattan. Ultra-luxury penthouses and other residences at the very top end of the market took major price cuts, some up to 25% off their original — and often unrealistic — asking prices. Stories about concessions like closing cost increases for buyers and sellers were aplenty, and we could see inventory rising. The city’s “mansion tax” increased from 1% of the sale price for sales over $1 million to as much as 3.9% for sales over $25 million (with progressive increases in between). The New York State transfer tax rates increased from .4% of the purchase price to .65% of the purchase price for homes selling for over $3 million.
2. Yet despite all of this, we are also seeing strength in the market as we embark on 2020. At Halstead Development Marketing, we coined the term “real inventory” in our “2019 Year-End Manhattan New Development Report.” Real inventory is comprised of active units on the market plus unreleased “shadow inventory,” defined as inventory expected to be released at some later date. What it has shown us is that although new development inventory is rising, the absorption rate of that inventory has remained almost unchanged. We calculated that its high was in 2013, at 94 units per month, and its current average is 89 units per month, meaning that sales have far from halted, and virtually the same number of consumers are in the market.
3. Instead, where the shift is happening is in pricing. The average price per square foot and median price for new development condominiums both remained flat from 2018 to 2019, although dollar volume was down 2% and the median sales price was down 13% from 2018 and 4% from the third quarter for closed units, but the median price was up 4% on signed contracts in the third quarter of 2019.
4. A few neighborhoods to look at when trying to find a good value are those with the highest shadow inventory. According to our research, this includes Lower Manhattan and Downtown East and West, which include the areas between 14th Street and Houston Street. These areas saw a great deal of development over the past seven years and still have significant inventory to absorb, creating an opportunity for savvy buyers.
Although 2020 is only just beginning, we have already seen a dramatic uptick in both buyer interest and contract activity at development projects citywide, particularly in the $1 million to $3 million market. Indications are that buyers feel ready to purchase, they have a number of options and developers have adjusted to today’s market.
In my 30-plus years in New York City real estate, I can tell you that, as Frank Sinatra so eloquently stated, New York is truly the city that never sleeps. The New York City real estate market follows that same motto. There are peaks and valleys, yet the current absorption rate is still quite healthy. Manhattan residential real estate remains in high demand and consumers see the value in ownership and are savvy enough to realize that when the headlines are negative, it’s a great time to buy or upgrade their housing needs.