KW Report: All-Cash is Alright for Sellers in Competitive NYC Market
By Andrew King
As the inventory continues to tighten in New York City, buyers are loosening their purse strings and shelling out serious amounts of cash to scoop some of the hottest properties in America.
As we start the second half of 2014, this trend isn’t showing many signs of slowing down either. The result is more record-breaking all-cash deals; the continued influx of foreign buyers, mainly from China and Russia; and bidding wars that leave qualified would-be buyers out in the cold, especially those who have been hampered by restrictive lending policies and cannot get a mortgage above certain valuations even though they have near-perfect credit and a solid debt-to-loan ratio.
“All-cash deals are nothing new for the Big Apple, but several macro-economic trends have come together over the past few years to drive the New York City residential market to new heights,” said Eric Barron, CEO of Keller Williams New York City.
The all-cash craze was most recently outlined in the Keller William NYC Q2 report. Among the findings was that all-cash buyers comprise 40 percent of all purchases for the critical April-June period.
It’s a staggering number and it’s one that has held for several quarters now.
Prices are remaining high as well. Though some products dipped slightly, the median sales price for a one-bedroom condo surpassed the $1 million threshold in Manhattan for the first time in recent history, according to the report.
It’s no coincidence that these increasing prices have coincided with the move toward all-cash deals. While all-cash buyers have historically been given discounts for what would be deemed a smooth closing process, the opposite trend has been playing out across the United States for the past year. According to RealtyTrac, a national real estate data-tracking service, properties bought with cash have been selling for higher prices across the board for several quarters now.
“People are sitting on cash, creating bidding wars, and it’s not all coming from overseas.” Barron said. “Let’s also not ignore how well equities have performed the past few years. Many people are taking profits and shifting to other investments.”
With condos becoming too hot to handle for many mortgage-seeking buyers, one of the results has been a surge in demand for cooperative apartments.
“With their strict policies, coops have historically turned off many potential suitors,” Barron says in the KW NYC report. “However, increased affordability compared to its condominium counterpart and guidelines making it near impossible for foreign buyers to pass the coop board’s approval process, have made cooperative units increasingly attractive to the local buyer.”
High demand and low inventory means two things in Manhattan. One is a rash of record-setting real estate deals. The other, which can be even more competitive than a residential bidding war, is the new breed of battles being fought by New York City builders. According to the Keller Williams report, building permits were up a whopping 80 percent in the second quarter of 2014, and land acquisition prices have “skyrocketed.”
Prospective homebuyers are running out of places to hide. Brooklyn, traditionally a safe haven for the fatigued homebuyer, has been undergoing a massive housing recovery of its own, fueled by a stunning wave of new development in hot neighborhoods such as DUMBO and BAM, where developers can’t seem to build enough luxury units. What used to be the “safety school” of New York City real estate has turned into another Ivy League powerhouse, and those getting priced out of Manhattan are getting priced way out of Manhattan – all the way to the suburbs of New Jersey, Long Island and Westchester.
For them, the good news is that this can’t keep going forever. According to Barron, there will be more condos coming onto the market in the second half of the year and 2015, so the extra inventory could stabilize things in the near turn.
For sellers, though, it’s a good time to have a property on the market in old New York.