Breaking News: The inventory on the Upper West Side will only last 5 ½ months! (Cue the Psycho shower scene music).
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Speed Reading the Tea Leaves

Breaking News: The inventory on the Upper West Side will only last 5 ½ months! (Cue the Psycho shower scene music).

For those of us involved in the recent self-imposed insanity otherwise known as "year-end" closings, it was with interest that I read the analysis of Q4 by my favorite soothsayers, Mattingly, Miller and Rosenblatt. Was it fear of the fiscal cliff, with the likelihood of capital gains increasing? Perhaps the driver was the expected expiration of the $5,000,000.00 Federal gift exemption (which has actually been made permanent post-cliff). Yes, both of those factors played a role, together with seller capitulation, but at the end of the day, the tail wind for the more than 2,500 transactions that were completed in the fourth quarter, was the diminishing number of apartments available for the increasing numbers of buyers. The glut of too many homes for sale had morphed into the famine of too few. It was the buyer panic of 2012...

The False Urgency of Now

Nothing ratchets up the anxiety level of a buyer more than the scarcity of housing when a purchase is anticipated. The equation usually works as follows: as inventory increases, the value of homes decreases. The corollary is often true as well. Once a real estate market recovers from a crash, as inventory is absorbed, prices start the journey back to frothy and the whole process of peaks and valleys begins anew. Manhattan's climb back from the bottom has not exactly followed that pattern. Although sales volume increased, the prices of apartments remained depressed for a number of reasons (see soothsayers referred to above). Finally, however, as 2013 begins, the lack of inventory causing jigginess in the brokerage community, will no doubt lead to an increase in the cost of apartments. For long suffering sellers, there is actually light at the of the tunnel.

What Are We Talking About...

Fact: If an apartment sells for $800,000.00, rather than $900,000.00, it has very little impact on the broker (each 100K reduction costs the broker $6,000.00, give or take). But to the seller, the price difference is enormous. As sales volume increased dramatically over the past two years, there was a significant recovery for real estate brokerage, but not so much for sellers. For many on the sell side, who could wait no longer, it was time to take their medicine and sell at painful discounts. A lack of inventory may be frustrating for brokers in search of new listings, but it is a godsend for sellers. Finally, the ongoing recovery should translate into better pricing. Not exactly 2007, but better days are ahead for those looking to sell.

Residential Reality: We Shall Survive Low Inventory

As the local real estate economy gains momentum, it is inevitable that available housing will shift from too many to too few. With the larger national economy strengthening, low interest rates still available for the foreseeable future, employment prospects improving, together with a number of other metrics all on the positive side of the meter, factors point to a very good year ahead for New York City residential real estate.

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