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Source: Miller Samuel

 

Over the past few years, the combination of low rates and tight inventory has helped bid housing prices up nationally. That situation is easing as more and more inventory hits the market. As Bloomberg News reported yesterday, it looks like the days of bidding wars are waning as the supply of homes for sale rises.

Unless you are shopping for a co-op or condo in Manhattan (or parts of Brooklyn). As the accompanying chart shows, housing inventory listed for sale in New York are at the lowest levels we have seen since, well, last year. It’s the tightest supply of housing stock since 2000.

Jonathan Miller, president of Miller Samuel Inc., said, “the lack of supply is what is driving the housing market, not fundamentals. The dearth of inventory is especially exaggerated in Manhattan.” Miller noted that the top of the market is where new development is entering housing stock. The limited new supply in the low-priced markets is a function of Manhattan land prices.

Entry-level homes in Manhattan are studios and one bedrooms, and price under $750,000. While this is not exactly entry level in the rest of the country, Manhattan real estate is unique. It is largely homogenized, with less and less low-income housing. Nearly all of Manhattan has gentrified, and this trend is spreading: hence Brooklyn’s rapid price growth. Miller noted that “Queens is the new Brooklyn,” as people seeking affordability are priced out of Brooklyn.

If sales tail off, we could see an uptick in inventory in 2014. But for now, Manhattan real estate is tight, and prices are elevated. If you want better values, you have to shop elsewhere.

 

Bloomberg View

Category: Credit, Real Estate

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5 Responses to “I’ll Take Manhattan (No You Won’t)”

  1. BuildingCom says:

    Inventory “management”.

  2. daniel friedman says:

    I think that the sentence that reads: “The limited new supply in the low-priced markets is a function of Manhattan land prices.” would be more accurately stated as: “The limited new supply in the low-priced markets is a function of the high demand for high-priced apartments”.

  3. lucas says:

    A comment by a real estate broker in the linked Bloomberg article is telling. See the thing is, framing matters. The broker said house prices in most parts of the country “overshot the bottom.” The bottom in most parts of the housing market was not a real bottom, but simply a pause before the patient with a sick fever starting having a relapse. The patient has yet to recover to healthy price levels in most parts of the country. Healthy would be where a LOCAL median wage can afford a LOCAL median move-in ready 3/2 house.

    HOMEbuyers with cash (I do not mean the cash proceeds from a loan on another property–the so-called “cash” investors bring to the table, but real cash) cannot outbid the investors, and still offer a financially viable price, so smart or luck is irrelevant.

    The broker’s point about the middle range is well-taken. Still in my town it is difficult to find an affordable house in the middle range. I am not using “affordable” as a euphemism for distressed, or a house that is part of an affordability program. I mean a house that the median wage can afford to to buy.

    Finally, the 25% increase in interest rates the broker mentions sound scary, but honestly, even the 50% increase from 3% to 4.5% is only a scary number because real estate agents say so to push reluctant buyers into buying a house that is still over-priced. Ten years ago, 4,5% was an historic low that motivated many owners to refinance. We need higher interest rates to act act as an aspirin to help housing recover from its sick fever, and if those rates are accompanied by an increase in savings interest, that would be the most equitable for all concerned,

  4. Brian says:

    I would also like to add that the Jersey City & Hoboken area are getting a good amount of spill over, same as Brooklyn and Queens. There is a low level of inventory and a lack of units available on the market in this area and Hoboken has turning more into an upper middle class neighborhood with working professionals everyday.