We hope that everyone is enjoying the beginning of Spring. While it does not feel quite like what we expect from Spring in New York City yet, we are excited for what lies around the corner. The days get longer, the sun shines brighter, everything is in bloom, and the city’s real estate market heats up as buyers and sellers both make their respective push into the market. The lead up to the Spring Market has been active and March continued this trend.
A few trends and shifts have dominated the collective NY real estate consciousness thus far this year and, in general, what we have seen is a relatively active market. Of course, this activity has varied by price-point and location. Rising interest rates, the continued surge in interest in Queens and Brooklyn, constrained inventory in the lower priced segments of the market, rental concessions, and the rise of the millennial buyer pool have so far been the focus.
Since the great recession and subsequent housing collapse a decade ago, loose lending policies and low interest rates have been the norm. Recently, however, we have seen interest rates move up and it is believed that we will see this trend continue. The 30 year fixed interest rate, which was sub-4%, has moved closer to 4.5%. While this current rate does not have a profound impact on buyer motivation, the expectation of further rate increases has given a sense of urgency to many buyers. This is especially true in regards to first time home buyers, who are often financing a larger portion of their purchase. This environment coupled with constrained inventory levels in lower price-points has led to a segment of the market that is still characterized by high buyer competition. When you add the ever-increasing Millennial buyer pool into the mix it's clear that the sub-$1,500,000 market is showing no signs of slow down. Anecdotally, over the last three weeks, The LevinKong Team has, through strategic pricing and marketing; put several sub-$1,500,000 apartments into contract above asking price in less than two weeks on the market.
As we move up the market, inventory level increases in relation to demand and pricing has continued to soften. This is particularly true of the luxury and super-luxury market segments. Those looking to purchase in higher price-points may be able to take advantage of longer days on market and competition among sellers to attract the smaller buyer pool. That being said, high-ticket properties are still selling, albeit at lower prices than a few years ago, but at a faster rate than last year. We just saw a record-breaking contract signing on a $180,000,000 penthouse at the Crown Building. This eclipses the prior most expensive sale of Michael Dell’s $100,500,000 penthouse atop One57.
There are several neighborhoods that savvy buyers are looking towards to take advantage of changing conditions and anticipation of significant appreciation. The first is the Yorkville area of Manhattan’s Upper East Side. As we have been mentioning, the addition of the Second Avenue Subway line has made this area a target for many investors looking at higher rents and end-users, attracted to the newfound convenience and improving area amenities. The multi-family home markets in Bushwick and Bed Stuy are also seeing significant interest. Low property taxes and an upwardly shifting neighborhood has led to high demand. The average purchase price of $1,400,000 in these neighborhoods signals further opportunity for appreciation, as compared to an average purchase price on a multi-family home of approximately $2,500,000 in Williamsburg and $3,500,000 in Brooklyn Heights and Cobble Hill. The same is true for the Queens neighborhoods of Sunnyside, Woodside, Elmhurst and Forest Hills. Conveniently located on the subway line, each is experiencing a transformation characterized by the emergence of hip restaurants, new condo developments and an influx of Manhattan professionals. Priced significantly less than Long Island City and Astoria, many would-be Brooklyn and Manhattan buyers are looking at this section of Queens for immense growth opportunity.
Finally, while landlord rental concessions have become the norm in Manhattan, Brooklyn and Queens, there are some positive indicators emerging for landlords and investors. Median rate for doorman buildings in Manhattan are far outpacing non-doorman buildings. In Brooklyn, conversely, non-doorman buildings have recently experienced a median rent increase, and in Queens net leases surged as new inventory has entered the market.
We will continue to keep you up to date on recent happenings and trends in the market. We hope that you find this informative and useful 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.