Are we heading towards a recession?
I hope your year is off to an amazing start. I happy to report that both our economy and the NYC real estate market are off to a great start.
Goldman Sachs Research forecasts steady U.S. GDP growth of 2.3%, driven by easier financial conditions, dissipating trade tensions, and continued strength in consumer spending. As the U.S. economy continues its longest expansion on record, many market participants continue to worry about recession. However, our economists forecast just a 20% chance of a U.S. recession in the next 12 months, compared with the consensus view of 33%.
It's no secret that 2019 was a policy driven reset for the NYC real estate market.
The first quarter barely had a pulse, with only few transactions recorded. Q2 was the polar opposite as everyone rushed to close in anticipation of mansion taxes increases, which were due on closings after July 1. Those last few weeks of June is where the 2019 market peaked. As a result, the third quarter took an expected nosedive with the rush of Q2 transactions closed and we digested these new policies. By the end of the fourth quarter we began seeing signs of stabilization, with over 70 recorded transactions over $4M in December; the highest number of December transactions as of recent.
New developments product continued to linger on the market and the spot where buyers had and still have the most leverage. Anxious developers are got even more creative with incentives. For example, one developer rolled out a rent-to-buy option on his Lower East Side project. Although not all developers are feeling the pressure.
The exclusive and celebrity occupied 220 Central Park South was responsible for over half of NYC's top 20 most expensive 2019 home sales.
2020 is continuing to showing signs of stabilization and light is visible at the end of the tunnel. Although listing inventory continues to increase, so has the number of listings brought to contract, up 12% year-over-year. Price per square foot is down 4.3%, which provides clear indication of price stabilization since the mansion tax increase. With prices down 15 -25% since the 2015 peak and low interest rates, I feel that we have hit the bottom. Smart money has been active in the luxury segment and activity is back in the lower end.
The bottom line is that transactions are happening where properties are priced right and value is obvious. These opportunities are available across all sectors for those wise or brave enough to take advantage of them.