An August Brake?

August vacations may account for some of the market declines in inventory and contracts this month. With supply super scarce in outlying suburban markets, is it possible that Manhattan will mirror the shortages seen in Westchester, Connecticut and Long Island? As housing stock drifts lower each week this summer, the pressure is on for buyers who are competing for fewer properties. 

● Inventory has dropped steadily in weekly declines to the tune of 12.6% in 15 weeks from 9,017 to 7,876 from May 4th to August 9th.

● The number of signed contracts has scaled back by 15.7% from 1,640 to 1,382 pending deals during the same 15-week period. 

● New development condominiums, however, are reporting a significant uptick in their market, particularly the over $10M category. New dev sales have picked up nicely, many well in advance of full buildout or even showroom models. 

Two new trends are emerging--one on the marketing side and another in co-op board approvals. 

Is buying sight unseen a temporary phenomenon? Matterport photography, the 3D platform of 360 degree virtual property tours, which became the requisite marketing tool during lockdown, may be waning as many find the technology lacking and not terribly user friendly. FaceTime showings, however, are decidedly up, as agents embrace this new normal particularly for out-of-state buyers. 

We just went to contract on an Upper West Side property, where we represented the seller, and a buyer’s agent visited twice to do FaceTime tours: once for 45 minutes as the buyers sat at their kitchen table 3,000 miles away, and a second time for 90 minutes when the engineer they hired inspected every inch of the unit and had access with the building’s super to the co-op’s basement and roof. With a Zoom board interview ahead, one wonders whether the walkthrough will be the first actual in-person visit for this buyer. Many other Manhattanites who also abandoned the city during Covid are relying on the live, interactive feature of FaceTime which lets the agent walk with the buyer step by step from the elevator to the front door and through the space, stopping often to focus on particular details.

Co-op boards are beginning again to ask for years of maintenance to be held in escrow. For two years beginning July 2019 with the passing of the Housing Stability and Tenant Protection Act of 2019, boards were reluctant to ask prospective purchasers to put one or more years of maintenance in escrow. Since the new rent law specifically prohibits landlords from collecting more than one month of rent as security, and since co-ops are ruled by proprietary leases, it was thought better not to ask for money in escrow as no co-op wanted to be the first test case. With the passing on July 30th this year by NY State of Senate Bill SB 5105/AB 350, 

clarifying language to the 2019 rent law now underscores that no landlord-tenant relationship exists in cooperative apartments. Almost immediately, conditional co-op board approvals returned. In the last 10 days, we’ve had 3 instances where the board is requiring a year of maintenance to be held in escrow to allay misgivings about meeting financial obligations. 

Barring the unforeseen, the market won’t be slowing down by any significant measure anytime soon. In fact with price negotiability under 5%, knowledgeable pundits like Noah Rosenblatt are suggesting that price action will begin to shoot up in the fall. Low mortgage rates will continue well into the next calendar year, and we look forward to getting beyond the threat of the Delta variant to when we might be operating at full capacity when international travel restrictions dissipate and not only foreign travelers but foreign students and foreign investors return. Enjoy these last days of summer. 😎

Shirley Hackel, NYRS®

shirley.hackel@compass.com | (914) 980-0371