I hate to say...I told You So.
There are (roughly) 800,000 housing units in Manhattan. 600,000 are rental units, 200,000 are condo and coop units. About 4% of condo and coops turn over yearly. The absorption rate is 4%.
Basic Rule of Markets: Supply and Demand. Supply and Demand determine price and the direction of the market.
What is Manhattan Absorption? According to Miller Samuel 82,801 units over the past 10 years, 8,200 units yearly, last year about 7,780.
Supply is determined by conversions of rentals to coop or condos, re-sales of existing units and new construction. Miller Samuel says: Inventory is up 60% to 7000 units from new construction on the market. Days on market is up 48% and listing to sale discount is up 2.8% from 1.3%
Inventory might keep rising, prices might level or drop, sales will take longer. A Buyer's market. Best opportunity to buy since 1991. In the mid to late 80's there was a construction boom and coop conversion that led to a glut of apartments in the early 90's. It was a buyers market. Any one who bought back then and held for 10 years or still own made huge profits or accumulated huge equity.
While the best time to buy a home is when you have the money and you need a place to live, as markets go the best time to buy is when everyone else isn't. Markets are driven by fundamentals. Many fundamentals support the NYC market.
The Manhattan market is less interest rate sensitive since half the Manhattan buyers pay all cash or no contingencies. Many coops only allow 50% to 75% financing, the best buildings on 5th Ave and Park Avenue are all cash.
The NYC market is a classic over supply situation, after "inventory adjustment" fundamentals will reassert themselves. 15 year cycle asserting itself.
New York City will always be a world class city and one of the greatest cities in the world to live.
Immigration is responsible for 42% of first time home buyers replacing baby boomers and unlocking the lower end of market. Immigrants save more, have larger down payments and are better qualified than average non homeowners in the USA and they support the boom in the cities outer boroughs.
Demographics reversed in the 80's, population is growing, not just immigrants coming to NYC, boomers moving to retire, empty nesters moving to the city from the suburbs, echo boomers love urban living, second homes are up 41% over 1990, up 50% more in 2004 over 2000.
Higher oil prices helps cities with good transit systems. Life is livable without a car, 2 hours commutation is unsustainable. The dollars decline is NYC's gain. NYC is cheap internationally, NYC is much cheaper than other international cities, huge support for the market from international buyers.
The glut will be gone. Markets go up and down but over the long term there is no better investment than real estate. Real estate is the only investment with a tax free gain of $250,000 to $500,000 every 2 years. Real Estate is a place to live and enjoy.
The short term glut is a buyers market right now with long term opportunity, the best time to buy since 1991.
David Michonski, CIPS CEO CBHK