Low inventory, bidding wars and record-setting prices were recurring themes for New York’s residential real estate market in 2013.
In 2014, rising mortgage rates, a new mayor and administration and a surge in new construction could be the factors that spark major changes in real estate. DNAinfo asked the experts for their forecasts.
1. Rising mortgage rates will likely dampen price growth by mid 2014
Concern over rising mortgage rates pushed some prospective buyers to seal the deal in 2013. In Manhattan’s third quarter, for instance, the number of sales spiked 30 percent compared with the year before — the most transactions since the recession began — according to a report released by Douglas Elliman, the city’s largest residential brokerage.
But with rates expected to rise, resulting in higher monthly costs, buying may no longer be an option for some, which may make for a less frenzied market.
“2014 is going to be the year of ‘slow and steady,'” said Dottie Herman, president and CEO of Douglas Elliman, “With interest rates inching up, that should help level things off to a more sustainable level of housing price growth.”
Frances Katzen, one of Elliman’s top brokers, agreed: “I also believe 2014 will reflect an adjustment in purchase power due to mortgage rate hikes, and I do expect the mid-year to mellow down with respect to heated prices.”
2. Inventory will expand … just a bit
In terms of new construction, Manhattan will see more condos and Brooklyn will see more rentals, real estate expert Jonathan Miller said.
“I do see inventory edging higher, but not sharply,” Miller said. “That will keep prices making modest gains.”
He added: “I don’t see 2014 as a bad market, but I view it as a little disappointment relative to the euphoria in 2013.”
3. Manhattan will see a wave of ultra-luxury condos opening
A slew of new buildings are slated to open, according to Jeff Schleider, founder of Miron Properties. He noted that nearly every developer his firm represents has a few projects in progress that will hit the market in 2014.
Because land costs have soared in Manhattan, with some areas commanding more than $700 a foot, these projects are primarily luxury: priced at more than $2,500 a square foot and above in order to be profitable — which means they won’t ease the housing shortage, brokers said.
4. But the prices of these high-end projects may not be sustainable
“It will be interesting to see if the market demand for this product will be strong enough to absorb this volume of units,” Schleider said.
Many brokers aren’t convinced these prices can be sustained beyond the first wave of these buildings.
“The new construction is so over-luxurious,” Elliman’s Katzen said. “It comes down to the quality of what you’re looking for — a lot of them are like hotel rooms. [But] I think there are a few of us who appreciate more classical homes.”
Kirk Henckels, director of Stribling Private Brokerage’s division that focuses on luxury sales above $5 million, said, “Smart developers are reassessing. Some prices will go up and some will go down.”