July 2016 Market Update
We hope everyone is enjoying their summer and staying cool. The New York real estate market is experiencing a bit of a cool down of its own after a seven- year hot streak. We are still seeing close to record price levels and transactions are occurring at a decent rate but, at almost every price-point, there is a softening or correcting. That being said, we have recently experienced bidding wars at some of our well-priced properties, particularly in price-points under $2 Million.
It has been well documented that the high-end luxury market is experiencing the greatest downward shift of all the market segments. Will the ripple effects of Brexit help soften that blow? Some experts have made the case that London’s lowered position as a safe haven for international wealth will in turn aid Manhattan’s faltering luxury market. While uncertainty in the United Kingdom may lead to investments in the New York luxury market, it will not be enough to counteract the inherent cause of the decline, an overabundance of luxury supply and macroeconomic factors such as the strength of the U.S. dollar. As Jonathan Miller, CEO of appraisal firm Miller Samuel, pointed out, “This doesn’t offset the soft high end, but it is certainly helpful in terms of international demand- but you still have the core challenge of surplus of supply.”
Another predicted effect of Brexit is the continuation of low interest rates here in the U.S. The Fed was looking to raise rates but with the uncertainty caused by Brexit it seems unlikely to do so this year. The Fed was hoping to raise rates ahead of the next recession in order to have the ability to then cut rates to spur economic momentum. How will this play out in New York’s real estate market? Again, there are other factors at play but low interest rates are keeping many buyers interested in the market even as economic uncertainty looms.
How does all this effect New York property owners and those interested in getting into the market? The New York real estate market tends to have five to seven year cycles. We had seen year after year growth starting in 2009-2010 after we experienced an approximate dip in property values of 25% after 2008. We do not predict anything on that magnitude but a softening in the market is always a good time to buy in New York, since historically after the dip, we see another seven years of strong appreciation. Also, those looking to upsize can take advantage of the lower price on their larger unit purchase, mitigating the hit on their smaller lower priced property’s sale. New York has proven time and time again to be an incredible investment vehicle. As with anything, timing is key but the stability of New York’s real estate market as compared to the volatility of other investments, has always produced a positive effect for those investing here in periods of uncertainty.
Have a look at the attached articles, check out these incredibly interesting graphs and please, as always, reach out with any questions on how you can take advantage of these current trends or how to protect your real estate assets. Also, feel free to reach out with any questions regarding a specific trend or segment of the market. The LevinKong Team is available to serve all your New York City real estate needs and those of your friends, family and colleagues.