NYC Sales and Rentals Correct Last Year’s Anomalies

Posted on 15. Oct, 2010 by Alana Casanova in Uncategorized

Those looking for a definitive sign on how the New York City real estate market has been doing found contradictory signals last week. Reports showed that the rentals soared while sales crawled in the third quarter – but a look at last year’s figures suggest the markets are actually deeply connected.

Both markets are reacting to last year’s anomalies, according to Jonathan Miller, president and CEO of the appraisal firm Miller Samuel Inc.

In 2009, tenants were lured into leases with concessions from eager landlords who were desperate to rent out apartments. According to the appraisal firm, rentals tripled – from 2,549 in 2009 to 8,593 – this year. Landlords stood firm in the last quarter, and no longer offered concessions like free months of rent and waving brokers fees. Tenants decided to move.

The numbers back that up, according to Gary Malin, president of Citi Habitats. Roughly 60 percent of their deals last year had incentives for tenants, compared with 20 percent this year.

At the same time, most of the growth in the sales market in 2009 was from what analysts call “entry level” – cheaper real estate bought by first-time buyers who were taking advantage of interest levels. They were, for the most part, buyers coming from the rental market.

There have been fewer sales this year, but they are more evenly distributed in the market, said Miller.

“Now we have a normal distribution of sales activity,” Miller said. “The sales market has stabilized in the sense that it has been moving sideways.”

The sting of the recession also has yet to pass. Buyers are still wary of big purchases like real estate, and loans are not readily available.

The key to the sales market in New York City now, said Malin of Citi Habitats, is affordability. “Appropriately priced apartments at any price point are moving,” he said.

Slow sales aren’t necessarily a good measure of how New York City’s real estate market is faring anyway, said both men.

Rentals are a more reliable indicator, and the surge in growth may be cooling off in the fourth quarter.

Apartments not rented by November, Malin noted, may sit empty until January. And those lease sweeteners landlords refused to give in the last quarter might return during the coming slow season.

“I’ve already seen landlords bring incentives back,” Malin said.

But those who declared that rentals were finally shifting from a tenant’s market to a landlord’s market are jumping the gun, Miller said.

“It’s hard to make the argument that this will be a bullish market for landlords going forward, but it will be stronger than it was in 2009.”