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What a “Soft Landing” Means for NYC Real Estate
Manhattan Luxury Market Pulse: Navigating Economic Shifts and Interest Rate Impacts in NYC's High-End Real Estate
Thomas Moran
November 16, 2023
Market Pulse
Last week in Manhattan's luxury real estate market, activity remained strong with twenty contracts signed for properties priced at $4 million and above, marking a slight decrease of four contracts from the previous week. Condominiums continued to lead the sales, accounting for 14 of these contracts, underscoring their persistent demand in the luxury segment. Co-ops also maintained a presence with 3 signed contracts, alongside a diverse mix that included 1 condop and 2 townhouses. Geographically, Downtown Manhattan stood out as the most sought-after area, boasting 10 of the week's high-end contracts, The Upper East Side followed suit, securing 5 contracts, The Upper West Side and Midtown contributed to the market's vibrancy with 3 and 2 contracts respectively.
Key Statistics for Last Week's Luxury Real Estate Contracts:
Total Weekly Asking Price Sales Volume: $174,750,990
Average Asking Price: $7,939,800
Median Asking Price: $5,395,000
Average Discount from Original Ask to Last Asking Price: 9%
Average Days on Market: 614
Source: UrbanDigs
Top Sale
118 West 12th Street
The standout sale of the week was a stunning townhouse located at 118 West 12th Street, which commanded an asking price of $19,950,000. This figure represents a significant reduction from its initial listing price of $29,950,000 in June 2022. The property has journeyed through the hands of three brokerage firms before arriving at this sale price. This impressive 24.5-foot wide, 4-story residence boasts a generous 6,600 square feet of living space. It is thoughtfully designed with 5 bedrooms, 3 bathrooms, and 2 powder rooms. One of the house's most enchanting features is its expansive, beautifully landscaped garden, providing a serene urban oasis. Additionally, a charming terrace off the top floor offers an elevated outdoor experience. The townhouse's interior is in excellent condition, offering both luxury and comfort. While it currently does not have an elevator, the property's spacious layout and elegant design more than compensate for this. The sale is notable as the seller had previously purchased the house in 2021 for $14,940,000, highlighting the property's substantial appreciation over a relatively short period.
Federal Investigation of Mayor Eric Adams
In a significant development in New York City's political and real estate landscape, federal authorities are currently investigating Mayor Eric Adams for alleged misconduct related to his intervention in the approval process of the Turkish government's new high-rise consulate in Manhattan. This inquiry focuses on Adams' supposed pressure on New York Fire Department officials to greenlight the building's occupancy despite existing safety concerns raised by fire officials, as reported by the New York Times.
The mayor's involvement in this matter reportedly occurred weeks before his election two years ago. After winning the Democratic mayoral primary in July, Adams is said to have contacted then-Fire Commissioner Daniel A. Nigro in late summer 2021, urging the approval of the Turkish government’s occupancy of the Turkevi Center. This intervention allegedly facilitated the grand opening of the $300 million, 35-story tower in September 2021, presided over by Turkish President Recep Tayyip Erdogan, despite known flaws in the building's fire safety system.
Furthermore, the federal inquiry is examining whether Adams’s 2021 campaign collaborated with the Turkish government to illegally funnel foreign money into its funds. The investigation also delves into the role of KSK Construction, a Brooklyn-based company owned by Turkish immigrants, which organized a fundraising event for Adams in May 2021. The FBI’s search warrant for the home of the mayor’s chief fundraiser, Brianna Suggs, indicates a focus on whether Adams’ campaign received benefits from the Turkish government in exchange for contributions.
Adding to the complexity, Adams, who served as Brooklyn borough president before becoming mayor, had established connections with the Turkish consulate general, with records indicating that the consulate funded part of his 2015 trip to Turkey. The investigation is also exploring contributions from Bay Atlantic employees, another entity mentioned in the search warrant.
Despite these allegations, Adams and his campaign maintain their innocence, emphasizing their cooperation with investigators. City records reveal ongoing issues with the Turkevi Center months before Erdogan’s visit, including a rejected fire protection plan and a building violation after a glass panel fell. The building still operates under a temporary certificate of occupancy due to reported deficiencies in smoke detectors, elevators, fans, and other areas.
This investigation adds a layer of intrigue to the New York City real estate and political scene, highlighting the complex interplay between international relations, local politics, and urban development.
What a “Soft Landing” Means for NYC Real Estate
The economic landscape has undergone significant shifts lately. After peaking at 9.1% in June 2022, inflation has broadly slowed down through October 2022, hinting at a possible halt to the Federal Reserve's historic streak of interest rate hikes. Last month, consumer prices barely budged, increasing only 3.2% from the previous year, a more moderate pace than in September. Core inflation, which excludes the often erratic food and energy items, has dropped to an annual rate of 2.8% from 5.1% earlier in the year. This slowdown in inflation, particularly noticeable in sectors like housing, is a key indicator suggesting a more stable future inflation trajectory.
Source: TradingEconomics.com
Manhattan Real Estate Market Response
In response to these economic shifts, the Manhattan real estate market has demonstrated remarkable resilience. The Federal Reserve's decision to push interest rates to a 22-year high, as a countermeasure against inflation, has led to increased borrowing costs. However, contrary to what might be expected in such scenarios, Manhattan's real estate activities have not shown a significant decline. Instead, the market has sustained its momentum, a testament to the unique appeal of Manhattan's real estate as a high-value investment destination.
This resilience is more pronounced in the luxury segment of the market. Despite the broader economic indicators suggesting a potential slowdown, high-end transactions in Manhattan continue at a steady pace, with property prices holding firm. This trend indicates that the luxury market in Manhattan operates on a different wavelength, somewhat independently of broader economic fluctuations. This independence is driven by unique factors such as international investment and a high proportion of cash purchases, which make this segment less sensitive to changes in mortgage rates.
Source: Rockethomes.com
However, the market has seen a slight increase in supply and a mild softening in prices, but these shifts are not as drastic as those observed nationally. Manhattan still contends with a supply challenge, which continues to support its residential market. The recent increase in supply, signaling a less competitive market environment, has led to the emergence of a buyer's market for the first time since the onset of the pandemic—a shift that has been long overdue.
Source: Rockethomes.com
Looking ahead, the path of Manhattan's real estate market will closely align with broader economic trends and the Federal Reserve's monetary policies. The prospect of achieving a 'soft landing' for the economy, where inflation returns to normal levels without triggering a major recession, offers a glimmer of hope. Yet, the long-term impacts of a high-interest rate environment on consumer spending and borrowing costs remain significant factors to consider. The resilience of Manhattan's real estate market amidst these economic shifts is notable, but its future trajectory will depend on a mix of local market dynamics and broader economic conditions. As inflation rates show signs of stabilizing and the Federal Reserve weighs its next steps, the Manhattan real estate market will continue to adapt, presenting both challenges and opportunities for investors and buyers.
Pick Of The Week
For those of you who might not know, beyond the bustling world of real estate, I'm quite the NFL fan! As we dive deeper into the season, I thought, why not sprinkle a little fun into our newsletter? Every week, I'll share my "Pick of the Week" for sports betting. While my expertise is firmly in real estate, I think this will be an enjoyable twist for our readers. But remember, it's all in good fun and purely for entertainment – always wager responsibly!
Let’s keep the momentum going! My choice for this week's pick is the Kansas City Chiefs at -160 against the Philadelphia Eagles. I recognize that laying the -160 might seem steep for some, especially in a matchup that's quite evenly matched on paper. However, my confidence leans heavily towards the Chiefs. Betting against Patrick Mahomes often feels like a risky move given his remarkable track record and ability to perform under pressure. Secondly, the Chiefs' defense, in my opinion, is significantly underrated and could be a decisive factor in this game.
Chiefs -160 vs Eagles
Record 7-2
For some bonus action, let's look at the College Football National Championship Odds. I recently placed a future on Alabama to win the National Championship at +800. While I understand this is a long shot as currently Alabama is not even in the playoffs I think they offer tremendous value. If Alabama is able to win their remaining two games and beat Georgia in the SEC Championship I think they will be the favorite to win the title. Getting past Georgia in the SEC Championship game will be no easy task but I think Nick Saban will have the Crimson Tide playing their best ball when it matters the most. For that reason give me Alabama +800 to win it all.
Bonus: Alabama National Championship +800
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