Many new condo developments that launched sales over the past few years will begin to see closings, new rental buildings will continue to hit the market in both Brooklyn and Manhattan, and progress in their lease-ups, and a shifting macro-economic climate — from interest rate hikes to stock market jitters — will have an effect on real estate.
To dive a little deeper, here are my top-line market predictions for 2016:
1. Interest rates will gradually rise with a corresponding cooling in prices.
After the threat of rising interest rates for many years, they will finally creep up in 2016. As rates rise, buyer demand will cool, putting downward pressure on prices.
Furthermore, rising interest rates combined with lower prices will result in weaker buyer confidence, which will only serve to reinforce this cycle.
2. Deals will happen but will be harder to put together and more complicated to close.
We will see more buyers asking for deal contingencies, reviewing contracts longer and making more demands of sellers.
3. Buyers will take longer to make decisions.
The days of selling after the first open house are largely behind us. Buyers will require several visits to a property, take two to three weeks (as opposed to one week) with contracts before signing, and/or seek the opinion of several trusted advisers before signing.
4. The gap between realistic and unrealistic sellers will grow.
Serious, realistic and motivated sellers will react to the new market reality by pricing accordingly.
Unrealistic sellers who are stuck in 2015 will miss the market and slowly follow it down with a series of price cuts.
5. Buyers will focus more on prime locations.
In a softening market, one of the first changes we see is that buyers focus more on prime neighborhoods and blocks. Secondary and tertiary neighborhoods, which were pulled up by the bootstraps of the primary neighborhoods in the recent cycle, will struggle a bit more.
6. Baby boomers will continue to be an important segment of the buying market – moving back into the city to downsize permanently and/or be near grandchildren.
Baby boomers, oftentimes cash buyers, will continue to play an important role in our market in two main ways: as purchasers of primary residences after downsizing from a home in the suburbs, and as purchasers of a secondary residence to be near their children and grandchildren.
7. Prospective buyers in Brooklyn will be tempted by new rental buildings offering incentives.
The wave of thousands of new rentals coming to Brooklyn, particularly in Williamsburg and Downtown Brooklyn, will cause prospective buyers to carefully consider whether they should rent or buy as new rental buildings offer a number of incentives (reduced rents, one or two months free, no application fee, no brokers fee, etc.), which can be very tempting.
8. The inventory of luxury condos (typically considered to be $10 million and up) in Manhattan will continue to grow as more and more buildings come to market and the current for sale product will tend to linger.
Conversely, the demand for “entry level” luxury, meaning condos priced from $1 million to $3million, will continue to witness strong absorption driven by low inventory and high demand.
Ari Harkov is a real estate broker with Halstead Property and heads up the Harkov Lewis Team, one of the top teams in the nation as ranked by the Wall Street Journal. The team, which focuses on residential sales in Manhattan and Brooklyn, works with both individual buyers and sellers and developers. Ari holds an MBA with honors from Columbia University and currently resides in Park Slope, Brooklyn.