A TALE OF TWO CITIES…
It's that time of the season again. The Fed sat tight on interest rates during the March meeting. After raising a 1/4 point last December, only to witness act VI of the financial crisis play out in other parts of the world, the Fed had little choice but to keep their hands in their pockets. Ironically, and somewhat predictably, rates fell to new post war lows in the early part of this year, despite the hike in the funds rate. As a matter of fact, I had a client lock a loan in during the week of the market swoon, only to re-adjust 7/8 of a point lower before closing! I had advised many to take advantage of the stock market panic and buy. The adage, buy when there is blood in the streets has proven (so far) to be correct. The Fed had reason to wait as becoming too hawkish in the wake of world events could put us at risk of making the same mistakes Japan did in the 80s, 90s, 2000s, and....well. Assuming things stabilize, I will not be surprised to see a hike at the next meeting as the USA is the best bet in town.
Trees don't grow to the sky, but castles made of sand may not in fact, melt into the sea. The Tree Section has seen an enormous number of new listings in the last weeks, particularly in the 3mm price point. A slew of new construction has come to market with more to follow. I would expect modest reductions in prices in the Trees and have already seen prices of tear downs come down. Not to panic, just an adjustment to the increased inventory.. At last count, there were 85 listings in the Trees, about double last year at this time. Sand Section listings number 21 with quality inventory still near historic lows. In short, people want beach front property. There are several factors at work. There are fewer build-able lots in the Sand. The vintage duplexes that remain still provide steady incomes to those who have owned them for a long time and still have low property tax. Additionally, the tax bite is hefty as ownership in years, far exceeds Tree Section homes. For this reason, we see very few come up for sale. The remaining inventory of dirt value lots is very low. The aging baby boom population is also at work. As kids move out, many are choosing smaller homes, closer to the beach. Another factor keeping the boom sizzling in the Sand is the rise in wealthy young entrepreneurs from nearby technology hub, Silicon Beach. They are far more likely to purchase something smaller in the Sand and have no need for a 4500 square foot 5 bedroom house in the Trees or East Manhattan. Of course there are the Rams. Finally, the Sand Section has been a historical out-performer. Notwithstanding a massive polar ice cap melt, there is a very finite number of ocean front, or near ocean front property.
In short, the boom is still alive and healthy down here in our neck of the sand. By no means is there any meaningful decline elsewhere in Manhattan, but prices have moderated a tad east of Highland. I continue to believe the average price of south bay real estate will still increase in low single digits this year, with aforementioned areas outperforming. We live in one of the most desirable communities in the entire country! Never forget how fortunate we are.