Our housing market is undergoing major change

Inventory has nowhere to go but up, but don’t expect a surge. Click to expand. (Source: Miller Samuel Inc.)

The word all of us have been using to describe the housing market in Manhattan is “stable.”

Well, as any prospective buyer of a well-priced apartment will tell you, much of the market has changed in a big way.  Open houses of new listings are jammed, and that is just part of the evidence.

The chief reason is inventory that is sharply down from previous years.

Respected appraiser/data hound Jonathan Miller has pulled together some astounding numbers.  From the first week in December to the last week of January, the seasonal decline in supply was 2.2 percent in 2010, 2.9 percent in 2011 and 4.9 percent in 2012. This year: 8.3 percent!

At the same time, buyers have been soaking up supply with renewed vigor, at the fastest pace in 12 years, Miller’s figures demonstrate.

According to Noah Rosenblatt, whose UrbanDigs.com site is filled with up-to-date data, the number of signed contracts was in the mid-600s in the three Januarys prior to the last one.  This past January is worthy of another exclamation point: 859!

He additionally reported that the number of new listings in January dropped to 1,538, one shy of last year but far fewer than in 2009-2011.

Not only are many sellers said to be holding out for prices to go still higher, but they can’t find a suitable new home anyway — because there is so little desirable supply.  Nor can many of them trade up because mortgages are so hard to get.

Thus a return to multiple bidding.

Three of my clients have faced what they’d call bidding wars in the last few weeks.  One who offered the asking price faced 10 other bidders, and lost.  Another couldn’t best an offer that a seller already had accepted.

On Tuesday, my buyers who looked at a brand-new listing on Sunday now have to beat three other competitors plus a fourth, whose full-price offer already has been accepted.

A broker I know has noted how a $4.595 million Park Avenue apartment is said to be going to contract for 20 percent over its asking price — that is, for another $1 million.  A Tribeca loft received the first of several full-price offers during the first hour of the first open house, she says.

Buyers are scrambling to nail down loan approvals so they can eliminate financing or any other contingencies in their contract, shifting risk from sellers to buyers.  Cash, as we have been saying since lenders went overboard on setting loan standards, is king.

Forget about low-ball offers, except for overvalued properties that have languished unloved for months. 

They are largely the leftovers, the dregs with low light, poor condition, unpopular locations or otherwise limited appeal.

Their presence is what keeps the number of listings from cratering below the 4,749 that Miller reported for the end of last year — 34.2 percent fewer than the prior year, 21.9 percent below the 2003 total and the lowest level in 12 years.

Now, we are in an environment where the stock market is rising, members of Congress are beginning to compromise, prospects for the national and global economies are improving, consumer confidence is strengthening and mortgage rates remain near all-time lows.

With buyers who have financial resources leaping off the fence, sellers who can find a new place to live are in the catbird seat.  They can demand what the market will bear.  And they can get it.  Jonathan Miller put is this way:

Not only did the December-to-January 2013 inventory rate fall at nearly 2x the rate of 2012, but inventory also did not rise in January.  That will be a big factor in the spring market if we somehow don’t see more supply enter in February.  Frankly, I can’t see any tangible reason for a large uptick in supply, which means upward pressure on prices in 2013.

Everything can change, of course, but I don’t see how anything but a sudden economic, natural or globally significant disaster is likely to alter the present situation.

Memories linger of the bubble that swelled and burst.  In addition, tight credit is discouraging numerous prospective borrowers even from searching for a new home.

Consequently, we’re not going to see panic buying that is widespread, the sort that pumped up that bubblle and characterized the purchase of real estate in Manhattan prior to Lehman Brothers’ collapse in 2008.

We may be stable after a fashion, but let me be crystal clear: A sellers’ market is back.

Tomorrow: Weekly Roundup

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Malcolm Carter
Licensed Associate Real Estate Broker
Senior Vice President
Charles Rutenberg Realty
127 E. 56th Street
New York, NY 10022

M: 347-886-0248
F: 347-438-3201

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