2018 was very much a buyers market. The trifecta of increased availability, more ability to negotiate and a decrease in buyer demand led to a softening in price across all price points.
Transactional Market
Despite this classification of a “buyers’ market”, it is important to know that not all buyers markets are created the same. This one we would also categorize as a “transactional” buyers market. What does that actually mean? Despite all the typical signs of being in the midst of a buyers market and having been here for awhile now , plenty of people are still buying. When an apartment is well priced people WILL show up, you will not see the numbers of buyers looking that we did in the peak of 2014-2015 and you will likely have fewer offers to look at, but the best apartments are selling.
What is different in this buyers market than the one we experienced in 2008? This one did not happen all at once, like we saw in 2008. In 2008, the stock market crashed, the great recession hit and prices fell sharply (about 35%). Buyer demand pretty much dried up completely. Even if a seller adjusted their price dramatically, it was still very hard to do anything. Banks did not really want to lend, the stock market had a massive correction, liquidity dried up along with any buyer confidence.
Slow Drip Correction
This buyers market was like a slow drip correction. Looking back now, most people agree that this real estate cycle peaked in 2015. In 2015, we saw bidding wars, barely any new inventory coming on the market and new construction was hot. Then in 2016, we saw this transition that buyers started to feel more uncertainty in the market, it was an election year and those bidding wars from 2015 started to disappear, the fever of a hot market had definitely worn off. Then transitioning into 2017, lots of uncertainty seemed to be the name of the game, with changes to tax laws. We saw that inventory was creeping up, the high end of the market was starting to shift and buyer demand was continuing to cool.
So why is this buyers market a “Slow Drip” Correction? There is a couple of reasons, first reason is more of how the NYC market works, it takes a long time for listings to typically close even once a contract is signed, there was a lot of new construction condos that had contracts that were signed in 2013 and 2014 that close years later, so we are constantly looking in the rear view mirror to get an idea of the actual market. Even today, when something closes, it probably went into contract 90 days ago, and it might have first come on the market anywhere from 90-180 days ago. Comparing to the market today to what it was 6 months ago, is not going to help you. Basically, it takes a longer time to see what is actually happening, spreading out the decline over time.
The other major reason that this was a slow drip correction is that most Real Estate correction are tied to a stimulus from their local economy or a national recession. In 2008, we experienced the great recession, the local economy in NYC was shedding lots of finance jobs and the Real Estate market suffered. Back then it was easy for sellers to look around and see why they should adjust their prices, it was beyond obvious that if you wanted to sell you needed to entice the buyer with a lower price.
Mixed Signals?
This time, while the Real Estate market has been correcting over the last 18-24 months, the stock market was going in the opposite direction. For many sellers it just didn’t make any sense, why drop your price, when all you see is strong unemployment numbers, stock market records, and larger bonuses. We get that, though what we were seeing on the ground was that you’d have fewer people show up at the open houses, multiple bids in the first two weeks were pretty much gone, and only the best priced and nicest apartments were getting the action. The feedback emails we’d receive were something like, “We are waiting to see if anything else comes on the market.”
The buyer demand side of the equation was shifting quickly, buyers were making it quite clear they didn’t feel like engaging in bidding wars anymore and the escalation of prices had gone too far.
It wasn’t until this year in 2018, when the headlines about the local Real Estate market seemed to finally catch up to the reality of the market.
Looking into 2019
As a seller, just understand that buyers are pricing in future uncertainty when they make their bids. This is a market where buyers are going to be very careful and they are going to take their time. They will take their time in making offers, coming back to the apartment on multiple occasions before making an offer and the due diligence process is taking longer as well.
We feel it is important to note that even though we talk of a buyer’s market, we see plenty of transactions taking place, if you price well the buyers will show up. As a seller, having realistic expectations to the pricing and how long it will take to secure a buyer need to be considered.
As a buyer, definitely one of the best times to be looking for a home. You have more choices, you will have fewer people bidding on the same properties and prices are very attractive.
We welcome you to have a discussion with us based on your needs so we can develop a personalized Real Estate plan for you in this market place.
Read about our 2019 Upper West side one bedroom condo report