Manhattan has roughly 6,500 available apartments. But for John Gomes’ client, there’s only one, at 443 Greenwich Street in the West Village.
“I have basically been hounding everyone in that building,” the Douglas Elliman agent said. “Everyone knows, ‘John Gomes is looking for a four-bedroom in this building.’”
Currently, the building has no public listings, and Gomes says this experience is representative of the state of the market — everybody wants what they can’t have, and nobody wants what they can have.
“It’s not just the fact that there’s low inventory,” Gomes said. “There’s a limited supply of inventory that’s not even worthy of people considering.” At the same time, he said he’s never seen such a dramatic desire from his clients to be in a handful of specific buildings.
Brokers around the city have echoed Gomes’ complaints about anemic supply, and pointed to inventory as the city’s biggest roadblock for a market comeback.
“I would say inventory, we’re just not finding what a lot of clients are looking for,” said Douglas Elliman’s Lindsay Barton Barrett.
And the homes that aren’t finding clients are overpriced, she said.
This puts them slightly at odds with some of New York’s premier number crunchers, who point to inventory figures that don’t seem wholly out of line with historical norms.
But untangling the web of supply and demand can be tricky: supply often trails demand, but buyers are also constrained by available listings. And certain geographies, property types and buildings may have a glut of availability while others seem to suck up all the incoming demand.
New York’s supply issues also look downright trivial compared to the rest of the country, where Covid-era demand surges burned off all the available supply and the dominant headline running along national chyrons is that the country has a dearth of available housing.
But how true is that low-supply narrative in the city?
What the numbers say
While brokers pounding the pavement in search of quality listings bemoan the lack of inventory, certain metrics — and the folks who tend to them — point to a market that is not so far out of equilibrium.
According to data on Manhattan from UrbanDigs, months of supply — which measures how long it would take current demand to eat up the available listings — sat at just over seven in October.
That’s slightly above long-term norms for the month, and supply has been steadily increasing over the course of the year.
There are also more than a few development apartments for every buyer, according to Brown Harris Stevens Development Marketing’s Jason Thomas.
“The way I look at things empirically, how can that be tight? Every buyer has not one apartment, they have three — actually more than three. That’s not tight to me,” he said.
UrbanDigs co-founder John Walkup said that listings in Manhattan were down around 8 percent from the previous year. But he doesn’t see that as cause for concern, unlike the brokers around the city who are antsy to wheel and deal.
“It’s not just the fact that there’s low inventory. There’s a limited supply of inventory that’s not even worthy of people considering.”
Walkup said that demand, which appears closer to long-term averages, is slightly outpacing supply in a way that “points toward a healthier market than an unhealthier market.
“The market is functioning as you would expect it to function, just at a lower level,” Walkup added. “It’s like a balloon. The whole thing just deflated, but it still looks like a balloon. It didn’t pop.”
Part of the divergent opinions can be attributed to the differences in what makes a “healthy” market versus what makes a “strong” market. This is especially true in real estate.
Six months has long been a rule of thumb for a “healthy” months-of-supply metric (although Miller Samuel CEO Jonathan Miller speculates that’s likely because it’s a nice, round number), and this year has hovered just slightly north of that desired mark.
But in what have historically been considered strong markets, like 2013 to 2015 and a stretch of 2021 and 2022, months of supply never cracked five.
In 2013, a boom time in the city, months of supply went from 4.4 to start the year to three by December 2013. “We had the lowest inventory on record, yet we did our highest volume of sales,” Corcoran CEO Pam Liebman said at the time.
And after supply hit an all-time high in 2020, the subsequent burnoff left Manhattan under four months’ of supply entering 2022.
That paradox explains, to a certain degree, why healthy supply numbers also means a disgruntled brokerage community.
But it doesn’t explain why agents are lamenting supply when there are thousands of perfectly good apartments waiting to be sold … right?
Fuss factor
What’s different this time is that lackluster demand isn’t to blame for a slower market, according to some. Instead, buyers want to spend their money on a shiny new condo or a historic townhouse, but there’s not enough “good” inventory to go around.
“The numbers are not low even though when you talk to many brokers, it feels low to them,” Miller said. “The reason it feels low is that a lot of the supply that has come in over the last few years to Manhattan has been priced like 2021 which was sort of peak frenzy.”
Gomes went a step further, adding that while overpricing is an issue, a quality issue has also emerged.
“There’s really bad inventory out there,” Gomes said. “There’s old inventory that people don’t want. There are things that need major renovations. There are buildings that were created that were just bad that people simply don’t want.”
“There’s just stuff out there that, I’m like, ‘Oh my gosh, there is no price for me to buy that’,” he added. “Like none.”
The new development market provides a good example of the difference between what the numbers show and what brokers see on the ground.
As of the middle of October, there were roughly 4,800 available units in Manhattan, but BHSDM managing director Robin Schneiderman said that he carves out One Wall Street, the Waldorf Astoria conversion, 125 Greenwich Street, One Manhattan Square and The Monogram on 47th Street, which account for 1,500 units alone.
Extell’s One Manhattan Square has been selling well since it launched sales in 2016, but the mammoth 800-plus-unit building still has hundreds of units to go before it sells out. The Monogram has been reporting roughly four sales a month recently but still has around 140 of its 190 units available, according to Marketproof.
But One Wall Street has been on the market for years and made slow progress on its 566 condo units. Meanwhile, the Waldorf Astoria has yet to report a contract for its 371 available condos.
“The idea with those two is, if somebody’s not a buyer in those buildings, then truly, the inventory is reduced by that amount,” Thomas added.
Schneiderman also pointed to 53 West 53rd Street, MoMA Tower, which hit the market around nine years ago and still has roughly half of its 160 units available.
“Those are not even really in the mix,” Schneiderman said. “Because they’re aspirationally priced, or they’re old. Now the finishes are even becoming old, because it’s been on for a decade.”
Gomes spoke of “a tale of two markets,” where desirable locations and buildings can feel like an entirely different universe.
In Brooklyn, where pricing has continued to reach new highs nearly every quarter, one in four apartment sales ended up in a bidding war in the third quarter, the highest market share in nearly two years, according to Miller.
“You can walk down 20 city blocks past 10 empty restaurants, and at the end of the walk, you’ll come to a restaurant where there’s a crowd outside waiting to get in,” said Compass’ Leonard Steinberg. “That’s the story of New York City, and I think the same applies to real estate. You have a lot of people wanting one type of thing, and then certain things just sit and die.”
Only in New York
Much of the disconnect in the city still traces back to the pandemic, which affected The Big Apple differently from nearly any other market in the country.
While the rest of the country fled to open-aired suburban homes beginning in 2020, demand in the city hit a standstill for nearly a year and a half.
When it came roaring back in 2021, buyers started scooping up homes at record prices, only for the sales frenzy to be halted in its tracks by elevated mortgage rates.
The result has led to a dual-effect to dampen the resale market.
The sellers who are trying to unload their homes are finding they can’t get the return they might have imagined when they bought, according to William Kroos-Tadas of Keller Williams.
“Sellers are having a hard time either understanding, or their willingness to sell at market value is lower than it is,” he said. “They have to sell, but they don’t want to give it away, and because property values haven’t appreciated the last four or five years, you see more expires than usual.”
At the same time, the condensed period of activity eliminated many potential sellers from the market who are content with their new home.
“It just feels like that’s other than some small percentage of people that need to sell, or people that have enough equity, where a sales price of this makes sense, you just have a lot of people kind of riding it out,” said Compass’ Eugene Litvak.
Litvak thinks that ultimately it’s not sellers’ prices that will come down, but buyers’ willingness to spend once rates drop another point or two that will re-inflate the market balloon.
Even then, New York City is facing nowhere near the inventory shortage that has beset the rest of the country because its recovery was cut short by rate hikes, according to Miller.
Together, this all paints a very confusing picture, where city buyers are champing at the bit for fresh listings, while a seemingly healthy supply continues to languish.
Miller does have a somewhat positive long-term outlook, however. “Probably five to seven, or five to 10 years from now is where we can see inventory normalize. It just seems like it’s going to be a big challenge.”