Tuesday, December 11, 2007
The New York City economy
"Manhattan’s condo market continues to be robust"
Each month, the Mayor's office publishes the Monthly Report on Economic Conditions (230kb pdf) providing a snapshot of the macro economic environment and a very local take on it. It has been a while since we've taken a look at one here, but you can subscribe to this report and get past issues at The NYC Economic Development Corporation site. On the city's residential market, the outlook sounds mixed; "Manhattan’s condo market continues to be robust. Demand for recently completed condos has outpaced supply, resulting in a decline in inventory. In fact, according to Miller Samuel data, the combined condo and co-op inventory dropped 31.7 percent in Q3 2007 from a year ago. In addition, the average sales price rose 6.3 percent over the past 12 months to a staggering $1.37 million. The market for 1-3 family homes (largely outside of Manhattan) however, is behaving much more like the rest of the nation, as has been the case in past market cycles (see chart)."
The relationship between real estate markets in Manhattan, the rest of the five boroughs, and the nation are not clear. The mortgage market is national, and its upheaval is touching everywhere; however the real estate market is affected by more than that. There is no national housing market. There are many smaller, local ones. High rates of owner occupancy, a low level of exposure to sub-prime loans, and population growth, have all contributed to the conditions which have fueled the local Manhattan market's continued growth. How will the volatile year on Wall Street affect bonuses which often are spent on real estate? How might rising unemployment affect us? Are these long or short term considerations? It is hard to predict how next year will look, but I'm inclined to see the glass as at least half-full. Where do you think we are headed?
summary of the report
- Housing: While Manhattan’s condo market remains robust, the local market for 1-3 family homes has been slowing. Through Q2 2007, single-family sales in the City have declined by 30 percent year-over-year, the sharpest decline in the past 30 years.
- Commercial Real Estate: Asking rents continued to escalate through October, with the average Midtown rent up 30 percent from a year ago. Conditions are not expected to remain as strong due to the credit crunch. It is likely that demand for office space will decline, reflecting an anticipated reduction in financial sector employment.
- U.S. Economy: GDP excluding residential fixed investment rose 5.1 percent in Q3 2007. However, overall conditions remain unsteady as credit market turmoil persists, housing market conditions worsen and oil prices escalate.
- Financial Markets:Wall Street suffered a bleak third quarter due to the summer’s credit crunch, although equities were still up in October.
- Inflation: Core PCE remained within the Fed’s target rate of one to two percent year-over-year although headline CPI climbed to 2.8 percent due to soaring energy and commodities prices. New York Area headline CPI grew slower than the nation, increasing at a 3.1 percent rate compared to the nation’s 3.5 percent rate.
- New York City Labor Market: Mild labor market weakness was evident in the October. The seasonally adjusted, three-month moving average of NYC unemployed residents was up 19.8 percent year-over-year. Also, the number of unemployment insurance beneficiaries were up on a year-over-year basis for the first time in four years.