3 Reasons the NYC Multifamily Market Is More Active Than Predicted

4/12/2017

So far, the 2017 NYC multifamily market has been the opposite of what the experts predicted.  When compared to one year ago, our team’s inventory and transaction volume is substantially higher.

Why? With the new government and rate increases, wasn’t the market supposed to be slower? Let’s explore what is actually happening.

Trend #1: More Inventory 

The first major trend emerging in 2017 is that more multifamily properties are coming to market. We see more potential sellers asking for “opinions of values,” and our listing inventory is up approximately 35%.

To understand why, consider the mindset of the sellers. Five months ago, interest rates moved up for the first time in many years. This spooked owners into thinking we were entering a new market phase where interest rates would continually increase. Whether rates move higher or not is anybody’s guess. However, given the current circumstances, rates have been relatively steady after the initial jump. This means that sellers who were thinking of selling sometime in the next 24 to 36 have decided to move to market now.

Trend #2: Realistic Expectations

The second trend is that the sellers who are coming to market today are more motivated, sometimes for a very specific reason. This translates into realistic pricing.

You often hear questions about where we are in the real estate cycle and how that relates to current pricing. The data clearly indicates that the peak of the last market was reached in the fourth quarter of 2015. With this understanding, sellers are not hurting themselves by “over-stretching” and pricing their properties too far out of the market. This has created a fertile environment for transactions. In fact, even though other brokers may not agree, we have seen the most realistic pricing expectations from the selling community in 2 to 3 years.

Trend #3: Connecting Capital with Opportunities

The third trend that has increased transactions is a result of our team’s growing capabilities.  Our ability to match different capital sources with new opportunities has been our jet fuel.

More than any time in the city’s history, buyers are willing to move from borough to borough and neighborhood to neighborhood. A seller from the Bronx is buying in Manhattan, Brooklyn owners are looking in the Bronx, Manhattan owners (who were buying in Brooklyn) are now looking at Queens, and so on and so on. Without territory restrictions, our team provides a perspective on the market owners cannot find anywhere else.

A Surprise Ahead for the rest of this year? 

Looking forward, please watch as changes to the tax code may also cause a significant jump in inventory coming to the market. Every time an administration changes the tax code, like lowering capital gains taxes, the following 24 months have produced higher than normal sales velocity.

Of course, no one knows what will happen next. We will have to wait and see.