Big Money Is On Pause: What Do They Know That We Don’t?
Summer can be slow for the upper end of the real estate market in Manhattan. But this year, it’s been especially — I mean really, really — slow for the past four months. Was it because all the big buyer deals closed before July 1 to avoid the new mansion tax escalation? That certainly is part of it. But still, it’s unusually and suspiciously quiet. So much so it’s causing buyers in other segments of the market pause or pull out altogether.
According to a weekly tracker of signed contracts over $4 million (considered the luxury market threshold), there has only been $1.3 billion in sales of luxury market product so far this year compared to $1.9 billion this time last year. We have also seen 13 consecutive weeks with fewer than 20 contracts signed over the $4 million threshold (20 contracts per week is considered a healthy benchmark, according to the report). Broken down by the number of units sold, the research goes on to note that, compared to this time last year, unit sales are down 57 deals.
Even Compass Chief Evangelist Leonard Steinberg, when asked where luxury market buyers are putting their money if not in Manhattan property, reported that the rich have been squirreling away savings, with those savings reportedly doubling over the past couple years. Leonard also noted that not only are the wealthy not buying, they are actively selling. They are selling second homes and investment properties, supposedly to free up cash and position themselves for a continued decline in real estate over the next month or even years.
Could a report from Smart Insider showing that insider stock sales have risen to a two-decade high in the U.S. be related? According to their data, corporate insiders — top executives and board members — sold a combined $19 billion of stock in their own companies through to mid-September. That puts them on track to hit about $26 billion for the year, which would mark the most active year since 2000.
All this stagnation at the top has not helped the middle and low end of the markets, either. Yes, it’s true that the middle- and lower-end buyers are much more affected by interest rates. Plus they typically buy and sell real estate more out of necessity than for investment, so they have no choice but to push ahead in all markets: buyer, seller or stagnant. The middle to lower end of the market looks to the luxury market as a barometer to both real estate and the overall economy. When the upper end slows or drops, it permeates throughout the rest of the market and has a deep impact on buyer psyche. And we’re seeing that today. Right now, buyers are taking longer to sign contracts and negotiate deals or they’re just dropping out of the market entirely. That’s largely because they look to the ultra-wealthy as bellwethers of what lies ahead in the global marketplace — and not a lot of it seems very good. Add to that market uncertainty around an impeachment process and upcoming presidential election year, and only time will tell.
Local October Events
New York City Wine & Food Festival
New York City’s biggest wine and food festival is back for its 12th year! Enjoy events, wine tastings, intimate dinners, hands-on classes, demos from culinary personalities, and more. 100% of the net proceeds benefit Food Bank For New York City and the No Kid Hungry campaign to end childhood hunger in America and in the five boroughs of NYC. Learn more here.
Artisanal Sweet Treats Bazaar
Celebrate Dessert Month on October 20th and discover our city's best artisanal sweet-makers! You’ll find experimental donuts, handmade macaroons, creative peanut-butter cups, small-batch fudge, fresh cookies and cupcakes, and much more! Click here for more mouthwatering details.