Last week, we published our Q2 predictions for the Manhattan condo market in advance of Douglas Elliman's Q2 2019 Manhattan sales report which were released yesterday. We were pretty spot on! (It made us want to hop on a plane to Vegas to place some real action.)
As we mentioned last week, Q2 was a little strange in that you had two major pieces of real estate legislation come into play: the new mansion tax structure and the new rent stabilization laws. Mortgage rates also dropped by more than 75 bps from earlier in the year.
Here are a few of our takeaways on the condo market from the report:
1. The number of condos sold in Q2 2019 was 72% greater than Q1 2019 and 26% greater than Q2 2018.
Impressive numbers, but we will have to see what Q3 numbers look like to fully understand how much of this increase was due to closings being pushed before the mansion tax came online July 1st.
2. In Q2 2019, the average sales discount was 5.3%, down from 8.2% in Q1 2019.
We expected this number to remain high, and it’s still well above the long term average. New developments represented 37% of condo sales in Q2 (18% in Q1) which likely reduced the average discount as many of those sales were put into contract two to three years ago.
3. Despite the increase in sales, listing inventory rose by 11.5%.
This is where it gets interesting. If the increase in sales was truly due to a rush to beat the mansion tax, Q3 could be a rough quarter with even more inventory on the market. If Q2 was actually a signal of increasing demand, the absorption rate could continue to be in the 8-10 month range.
What It All Means For Manhattan
Investor sentiment can change on a dime. If buyers believe that prices are rising (or going to rise), they will become a lot more active and less patient than they have been the past few years. We won’t be able to tell whether Q2 was a function of a rush to close before July or if it was truly an increase in demand. Taking all of the numbers at face value, it’s certainly still a buyer’s market with relatively high supply, listing discounts, and absorption rates.
We started tracking Q3 sales this week and will be following closely to see if there’s real momentum moving forward or if Q2 was just a "dead cat bounce."