This morning Ben Bernanke spoke on the subject of the economy: his conclusion was that the improving employment and growth figures were a product of CATCH-UP. We can see the same thing clearly happening in the luxury Manhattan real estate market.
The above picture shows a line of prospective buyers (no this photo was not taken in 2007!) waiting to get in to an open house at 422 West 22nd Street over the weekend. The new building is one of very few new buildings offering ‘affordable’ price points for buyers eager to be in a top location and a brand new building. These price-points have been largely ignored in the past few years and even more so going forward as developers are mostly focused on the very high end of the market. More importantly this showcases how many buyers waiting for the ‘bottom’ of the market now feel they may have missed that. I spoke to some buyers over the weekend who regret not buying a unit I was selling at 245 Tenth Avenue…..it went to contract at the end of December 2011, and a very similar unit just went to contract…..3 months later……for about 12% more.
So the real estate market’s energy is probably just like the overall economy…. playing catch-up. Its always easiest to see the best time to buy or sell in the rear view mirror. So what does the future hold? Several thousand new apartments are currently in the development stages, and already the sleeping giant that was new construction has awoken. Around the city fences are being erected around construction sites, and the roar of concrete trucks is being heard throughout the city….this is just the beginning. I think the result will be a surge in construction-related employment. Imagine just the downtown market alone where I am personally familiar with about 2,000 units that will be built over the next 2-3 years: thats lots of concrete, wood, windows, steel, bath fixtures, appliances, plumbing, electrical, cabinetry, security, engineers, architects, etc, etc. And once they are completed, all these properties will require furniture, electronics, movers, transfer taxes….what I am really trying to say is that when a sleeping giant awakens, the earth moves and we will see an unprecedented hive of economic activity in New York very soon.
One area that Bernanke addressed was those un-employed who could not find work because they did not possess the new skills the market is looking for. If you compare this factor to real estate, many home owners are disturbed how their apartments are not selling at the record prices they read about in the N ew York Times and Post….or worse, not selling at all. Often these apartments exist in buildings that are out of touch with what the consumer of today wants and expects. I own an investment apartment in a building that had the most hideous lobby and entrance: it looked like a border crossing. The lobby renovation is almost completed, and all of a sudden the pricing in the building just bounced upwards: its a lesson that just like those in need of learning new skills to function in todays new economy, apartmentss and buildings have to upgrade and evolve to compete.