Manhattan & The Hamptons - "Inventory & Interest Rates Will Define 2022"

Inventory & Interest Rates Will Define 2022

Greetings!,

Regardless of omicron, with a new mayor, record Wall Street bonuses and the return of foreign buyers, there's optimism in the air. As I said in December, I think 2022 will be a feast for properly priced properties. Strong demand will likely elevate these properties beyond face value.

The story in 2022 will be inventory and interest rates !!...the two “I’s” are back. As if with sunglasses though, we have yet to see how dilated they are. Soon enough the sun will rise on 2022 to reveal what is in store for us.

In 2021 we saw copious quantities of apartments come on the market, but because of extraordinary demand, we witnessed a methodical drop in overall inventory. The year began with approximately 7,200 listings for sale and ended below 5,000; that is a 30+% drop in inventory. And THIS is how we enter 2022.

Demand is expected to remain strong, but how many apartments will there be to sell? Opinions are mixed on how many new and back-on-the-market homes will become available. I believe we will have more than anticipated; though it will be mixed, lots in certain sectors and less-so in others. I also feel demand will remain overwhelmingly strong, especially because of two factors:

1) Over the past 15 months we have seen tremendous deal volume and an evaporation of the price discounts which prevailed during the heights of the pandemic; however, we have yet to see a measurable spike in prices. This means that the opportunity to buy at a fair price still exists.

2) The “relative” low interest-rate environment persist…(remember what I said back in November) “for now.” Like prices, however, they are creeping up, but have yet to go on a run that could (and may well eventually) temper demand. When rates do indeed make a material move upward they will have a moderating effect on market activity, as the hikes will have a tremendous impact on purchasing power [See Purchasing Power Analysis in the Mortgage section below]. As more and more buyers recognize this negative impact, urgency will certainly boost short term demand.

Chart: Courtesy Urban Digs

We are also hearing a lot about a slowdown in activity; that should not be misinterpreted to mean that we are in a down market. The slowdown has been an easing from the record breaking, frenzied, pace we saw in the middle of 2021, a pace that obliterated anything we saw prior (see chart above). With fewer apartments on the market, there will inevitably be fewer sales.

According to Urban Digs current inventory is at 4730. The last time we saw inventory this low was four years ago, in January of 2018. The difference then, however, was far less demand. In January of 2018 there were approximately 2,356 pending deals while there were 4,732 units available for sale; meaning there was a “market pulse” of .49. Note: UrbanDigs defines market pulse as, “the ratio between pending sales (a measure of demand) and supply. An increase indicates a strengthening market. A decrease indicates a weakening market.” Right now the number of units available is virtually identical to 2018, at 4,730; however, the number of pending sales is 4,496. This translates to a market pulse of .95, which defines a very strong seller’s market (see chart below). We have not seen the market pulse metric this high since 2013, when supply had bottomed at around 3,000 homes for sale.

The good news for buyers in this cycle is that, we have likely bottomed for inventory. I believe we are going to see a fairly robust wave of property coming on the market; however, I also feel the competition for this product will be palpable. So as a buyer, you have to be prepared to engage; get pre-approved, secure an attorney and educate yourself by seeing every property you can. An experienced broker can help you assemble a team that fits “you” and can set a strategic agenda to get you home.

Sellers need to be equally equipped with an experienced broker who can properly position their property to get it sold efficiently. You want to come on the market and get it done expeditiously. Data repeatedly shows that time on the market erodes your value. The best deals, negotiated properly, yield the best results. See chart below.

Your best investment is often in the broker you choose. Find someone with experience, who you feel you can trust. Anyone interested in buying or selling, should be rolling up their sleeves to determine whether the time is right to sell or if there's a home/investment property out there for them.

* See the analysis below of what even a 1% difference in interest rates does to your purchasing power. Interest rates are expected to rise by mid-to-late 2022, this presents urgency for buyers to act sooner rather than later. Note: this is not just a buyers issue; sellers must realize that it affects what buyers can offer them as well.

Above charts: Courtesy Urban Digs

* M A N H A T T A N - M A R K E T N E W S *

Last Week in Research (Greg Heym - Chief Economist for BHS)

Manhattan Weekly Contract Signed Report

Real estate-friendly Eric Adams wins mayoral race (TRD)

Manhattan Luxury-Home Sales Wrapped Up Biggest Year on Record (Bloomberg)

Buyers are willing to pay even more for NYC condos & coops with private outdoor space (Brick Underground)

Governor signs law S.1780-C, which fully legalizes the use of electronic notarization (REBNY)

* H A M P T O N S - M A R K E T N E W S *

Here the story's not dissimilar. Low inventory and high demand are buoying prices. Whereas Manhattan tends to be a very price sensitive market, Sellers here can command high prices and not worry. Many of these homes are discretionary (second homes) and there is no "must sell" pressure on them. If they get a big number, they will sell.

Renting, at the moment, is also a very tall order. If you are seeking to find a place for the summer, you better hop to it sooner rather than later, as there is very little available. You may have to consider off-season, which has become a bit more "mid-season", as Manhattanites are spending more and more time here.

Chart: Courtesy Miller Samuels Inc.

As a buyer, you need to know how to identify the right opportunity for you and when it makes sense to jump in...or not. Everyone's circumstances are unique. Like Manhattan, one needs good representation to successfully maneuver the nuances that exist in this unique marketplace. Let me know if you need help.

A weekly podcast on real estate in the tri-state area.

Thursday's from 4-5pm

Click here to join us

Click here to see our recent shows.

Neighborhood Blogs

These are great local resources, especially at times like these. Here are some of the best and most comprehensive neighborhood blogs that are helping to keep us informed. Click on each.

With Patch you can choose New York City; however, they also have more concentrated areas categorized as follows: Central Park, Upper West Side, Upper East Side, Midtown-Hell's Kitchen, Harlem, Astoria-Long Island City, Chelsea, Gramercy-Murray Hill, West Village and East Village.

For Additional Neighborhood Blogs click here.

* MORTGAGE & INTEREST RATES *

Courtesy: Wells Fargo as of 1/3/2022 @ 1:15pm EST

Historical Perspective

"Purchasing Power"

1% makes a big difference

Interest Rates:

Example below reflects the difference in purchasing power between:

3% vs. 4%

$1M borrowed at 3% = $4,216/month

$1M borrowed at 4% = $4,774/month

That is a difference of $558/month or $6,696/year.

Alternatively, we could look at it this way:

At 3%, $4,216/month will afford you a $1,000,000 mortgage.

At 4%, $4,216/month only affords you a $883,000 mortgage.

Chart Courtesy: Wells Fargo

* Most Recent MARKET REPORTS *

The Latest Market Reports - Sales:

Manhattan's 4th Quarter (2021): click here

Brooklyn's 3rd Quarter (2021): click here

Hamptons' & North Fork 3rd Quarter (2021): click here

Connecticut 3rd Quarter (2021): click here

December Inventory Report: click here

Last Week in Research: click here

Interactive Rent vs. Buy Calculator:

(courtesy NY Times) click here

Other Markets:

Miami's 3rd Quarter: click here

Palm Beach's 3rd Quarter: click here

* D I S C O V E R NYC *

Women & Abstraction

1930-1950

Two-part ONLINE course (via zoom) which explores how women artists contributed to the formal, technical, and conceptual evolution of abstract art.

Approaches to Abstraction: Women Artists 1930–1950

Description:

We will discuss the experimental and innovative works these artists created as well as the sexism they confronted and communities of support they formed. With a special focus on works on paper, the course offers participants an in-depth exploration into drawing and printmaking techniques while discussing the works of Lee Krasner, Louise Nevelson, June Wayne, and more.

One session features a virtual visit to the Whitney’s Sondra Gilman Study Center, which is devoted to the study of works on paper, offering a unique, behind-the-scenes look at rarely seen works from the collection.

Click here to register for zoom.

Jan 5, 2022 @ 06:00 PM EST

Jan 12, 2022 @ 06:00 PM EST

* D I N I N G *

The Hottest Restaurants

Open Right Now

Eater's Heat Map (click below) - Some of the Hottest Restaurants open right now:

This list will be updated monthly.

Eater editors get asked one question more than any other: Where should I eat right now? Here, we’ve put together a map of the latest Manhattan debuts drawing NYC’s dining obsessives.

New to the list in January: Commerce Inn (Jody Williams and Rita Sodi’s latest addition to their growing West Village empire), Mari (a Korean hand roll spot from the Michelin-starred Kochi team), and Random Access (a casual Thai restaurant near Penn Station).

New York’s Top 10 New Restaurants of 2021

Savory pancakes at the vegan East Village tasting counter Cadence. Stuffed flatbreads, hot out of the oven, at the exuberant Middle Eastern restaurant Shukette in Chelsea. Platters of oysters in the Victorian dining room at Gage & Tollner in Downtown Brooklyn.

To conclude a rough year that began with a ban on indoor dining, Pete Wells, our restaurant critic, is celebrating food that makes him say, “You have to try this.” Read more.

"Short Order Dad " by Robert Rosenthal

Get Dads to Cook More...

The Food Humorist©, is a Manhattan born man-about- town who writes, produces and hosts programs about food. I highly recommend his new book for Dads like myself. There is a new kind of dad, and he's doing far more domestic duty than at any time in history, including cooking. Although it's written with a sense of humor, this book is a serious resource for dads and anyone else interested in upping their game to make great tasting foo d bat home, even if they have never used a chef's knife or a roasting pan before.

Order: Short Order Dad ...A Great Gift for Dad!

Rob is also on iHeart Radio & SPOTIFY with his ALL YOU CAN EAT podcast about delicious food, cooking and luxury travel.

PRIVATE ONLINE COOKING CLASSES:

Ask Rob about his privates…by which he means that he offers customized cooking lessons to individuals and to groups. You learn, you laugh, and you eat well.

Now that ALL of us need to pitch in when it comes to feeding the family, I suggest picking up some serious tips from Rob. As he says, he went to cooking school so you don't have to. These sessions are fun and literally provide prized skills for upping your game. Enjoy. See Rob's intro here.

* G R A F F I T I *

Prepare Your Property for Market with BHS's new program

Curate provides you with the ability to prepare your home for sale

with no up-front costs,100% payable at closing.

Services include Cleaning/Decluttering, Renovation, Staging & Design

and more. Contact me and/or click here to learn more.

New York City * The Hamptons * Palm Beach

Connecticut * Miami

With Partnering Worldwide, Brown Harris Stevens continues to leverage its very productive relationships with top brokerages nationally and internationally by inviting partners to high- light key properties in their respective markets on BrownHarrisStevens.com, and to feature our important properties on their sites. Learn more.