In our line of work, we hear and happily answer the same questions dozens of times in a month. So we thought we’d share some of those questions, along with their respective answers, to our readers, in hopes of shedding more light on this market.
Why is there so little inventory?
We believe there are three primary reasons for the very tight inventory that still plagues this market:
- First, people can’t trade up. Prices have climbed to such an extent that people who need more space or quality feel priced out of their next upgrade. Even though they can get a pretty penny for selling their current home, the next step up is out of their reach, so they stay put and make do with what they have.
- Second, financing remains very tight. Down-payment requirements haven’t fallen, nor have credit standards. Therefore, the 50% of buyers who look to financing have an uphill, laborious and rigorous battle in attaining the funds to get to that upgrade. One more reason they are staying put.
- Lastly, many sellers still incorrectly believe that real estate prices will continue to climb higher, making it worthwhile to them to hold on to their properties and squeeze an extra penny from a future sale.
What about new developments? Aren’t they coming to the rescue?
Let’s put to rest the “new developments will help inventory” myth right now. No, they’re not going to make any dent on current inventory levels. They represent the top segment of the property market. The price-points of most are very high for your average buyer, driven by rising land and construction prices. New developments fall far outside both the average and median prices of NYC properties, where the current demand actually thrives. Buyers who are waiting for inventory borne of new developments shouldn’t hold their breath. Instead, they should create a realistic property search strategy based on the inventory we have, not the inventory we wish we had.