Buyer Demand Greatly Outstripped Supply In March
Buyers and sellers take note: the Manhattan sales market is traveling in two different directions at once. According to a new market report, buyers signed 1,213 new contracts for Manhattan luxury apartments in March, the highest volume of new deal activity for luxury apartments in Manhattan since the recession. It’s also a 15.7% increase in new deal volume from March of 2011 (and a 39% increase from February 2012). Simultaneously, the trend of declining supply for new apartments for sale in Manhattan continued. Combine this with an unprecedented pace of demand, and it becomes clear that today’s buyers of Manhattan apartments are quick to recognize a deal when they see one, and, moreover, they’re quick to sign a contract for a property.
This data, compiled by urbandigs.com, is startling. We knew that demand was outpacing supply, but we didn’t fully realize how rapidly their paths were diverging. For instance, looking at declining supply in Manhattan luxury apartments from a seasonal perspective - a reliable measure in a seasonal business like Manhattan real estate - makes the severity of the trend clear. In March of 2009, just months after the infamous Lehman collapse in October 2008, 2,070 new units came on the market. In March of 2010 that number held steady at 2,040 new units. In March of 2011, a more significant drop took place; 1,932 new units came on the market that month. In March of this year, a mere 1,759 new units came on the market.
That’s not all though. Buyers who have been actively searching for a Manhattan apartment are well aware that, on a monthly basis, there are just fewer new Manhattan apartments to go around. February of this year marked the first time in almost a year-and-a-half that we witnessed a rise in month-to-month new supply of Manhattan luxury apartments. Total supply of Manhattan condos, co-ops, penthouses, and townhouses is down about 11% from a year ago.
Of the luxury apartments that are on the market, brokers are reporting that Manhattan buyers are paying more for private outdoor space, renovations, and views. It’s hard to know exactly how much they’re paying however, because new deal volume doesn’t include statistics about price – at the time of signing, the contract price is only known to the parties involved in the transaction. The price only becomes public after the closing takes place and the city publicly files the transaction, both of which usually occur about 4 – 6 months after signing.
This lag between new deal volume and official closings means that the first quarter and second quarter reports for sales of Manhattan luxury apartments won’t accurately reflect this activity, but it does give us reason to believe that the third quarter market report due to be released on October 1st will be very strong. Nonetheless, these divergent trends won’t last forever; supply will eventually rise once new construction in Manhattan begins to respond to the high demand, although that might take a few years. For the time being appears that buyers will continue to strike deals for the few luxury apartments available.