In this Thanksgiving week, I'd like to give thanks for one of the reasons that the NYC real estate market has rebounded so quickly: the condo market.
I wasn't in the business in the early 1990s, but I was told that the oversupply of commercial and residential developments made the recovery a prolonged and painful process.
We are lucky that after the correction in late 2008, we were not faced with this same challenge to overcome. One of the most interesting statistics I've seen is the new condo units filed by the New York State Attorney General's office.
In 2006, it should be no surprise that there were 23,879 new units filed citywide, but by 2007 that number was already quickly dropping to 13,990. Not surprisingly, that decline continued in 2008 and 2009 to 12,073 and 5,469 units respectively.
When this starts to get interesting is in 2010. With the market already recovering, the number of new units continued to sink to 4,870. However, what is most shocking to me is that the year-to-date filings are at 1,903.
Lack of construction financing explains 2009-2010, but this year I have little to account for this with the exception of lack of supply. There are very few prime sites in play.
After all this talk of shadow inventory, we might be facing a shortage of condos. The pricing is already showing this. According to Douglas Elliman's latest report, the average price per square foot is at $1,060, only slightly down from 2008's $1,251. Meanwhile, the average sales price of $1.457m is already above 2007, but still off of 2008's peak of $1.591m.
The record price points set this year for luxury condos is most noteworthy with units at 15 CPW trading for upwards of $10,000/SF and raw units in the West Village trading for $5,000/SF. This explains why some prime development sites are seeing bidding at $650-700/BSF.
According to Massey Knakal's Property Sales Report, there have been 52 development sites which have sold in Manhattan in the first three quarters of this year, so this should hopefully bring some new product online. But with this only representing about three million square feet, it should still be a drop in the bucket.