Apartment prices are heading down soon, there’s simply too much supply coming on. Not only in LIC, but citywide – a gaze across the river confirms that the cranes aren’t just in Court Square and Queens Plaza. A good analogy would be the recent drop in crude oil prices. All those drilling rigs cracking open shale, led to a glut. In the latter stages, a lot of cheap debt and high priced equity fueled even more drilling, until it tipped the balance.
We have the same in NYC – a hunt for yield has led investors worldwide to invest here, both by lending money to developers and acting as silent partners on the equity side1. So many of the new towers and other projects are being built using Other Peoples Money (OPM), which in the 21st century is the last stage of a real estate bull market. The good news is that the percentage drops from today’s peak apartment prices, will not be nearly as drastic as oil’s.
More importantly, while we expect softness in the rest of the city, sales inventory in LIC is still low, and only being added in drips and drabs. Furthermore, the desirability of living in LIC will continue to increase going forward, and therefore the discount to Manhattan and northern Brooklyn will narrow. Unfortunately, the excess supply in those areas will mute prices here in the next few years, so while I expect them to see a dip by the new year, we’ll probably tread water and stay flat – a revision from my June estimate of 2-3% annual increases going forward.
What does this mean for you? If you’re selling or looking to sell your apartment, price it more aggressively to put it at the head of the line with buyers. As for timing, though I say “Next year” in the headline, that’s only three months away, and in reality it could be between three weeks and 30 weeks. So unless you want to play Russian Roulette, I would look to start now. That’s because once the first headline (or maybe second after this one) hits that announces apartments not moving, the bottom quickly falls out and sellers start panicking -> more reactionary headlines -> more panicky sellers.
If you’re looking to buy, then don’t pay up to do so – there are no bargains out there and rents should flatline in NYC at worst. Though LIC may not have a lot of inventory coming on soon, adjacent neighborhoods do, and I include Manhattan in that group. Most ominously, West Street in Greenpoint is currently a hive of construction projects large and small. Despite the long distances to public transportation, by 2020 the waterfront there will be identical to Long Island City’s.2
Mapping Hundreds of Greenpoint Apartments On the Rise – a year later it’s thousands and much further along
Outer Borough’s Tallest Tower Will Be Mostly for Renters – developers of 77-story tower say it’ll primarily be rentals …w/ a little condo. Rental or condo, the biggest question is will it actually be built as the glut precedes it …?
Listing of the Day – another 3-bdrm for close to $3 mil on the mkt, this one in Hunters View w/ 2,000 sq ft
Savanna Decides to Hold Onto One Court Square – aka the Citi Building. Tried for a quick-flip by playing up it’s conversion to resi -> never a good prospect for it and the kind of late bull market ‘try-to-find-an-outlier’ ploy
Queens Might Have It’s Own High Line Style Park – a slow news day means even this highly improbable gets published, sorta like clickbait
NYC Craft Beer Boom – interview w/ Big Alice founders, now this is more tangible
Theater Review: ‘The Pillowman’ at Chain Theatre in LIC – “it’s easily one of the best revivals on the Off-Off-Broadway scene this year” thru Oct. 3