By Fuquan Bilal
Manhattan has fallen. For over a year the heart of the Big Apple has been battling a real estate correction. While it may not be fun for NYC homeowners, it makes other markets like New Jersey look really appealing to investors.
THE FALL OF MANHATTAN
Manhattan’s real estate market has been beaten up, beat down and stomped on over the last year. We’re already seeing the beginning of what could be a much deeper decline.
Overbuilding, overpricing, and often a complete lack of product-market fit has left some developers with 1,000 plus empty units they can’t sell. Even despite offering upgrades and paying years of condo dues on behalf of buyers.
Retail units are going vacant, inventory in general is rising, and higher property taxes are adding to the crunch. According to Zillow, the median home price in Manhattan is now over $1.5M. That represents a price per square foot of almost $1,500. Almost 10% of properties are in negative equity positions again, and over 13% of sellers cut their asking prices again last month. Rents are averaging $3,395 per month.
Zillow says home prices have fallen over 5% in the last 12 months and will keep declining through 2019. One recent condo sale shows a 24% cut from asking price.
That makes it very hard to justify investing for both the professional and retail home buyer. Although there may be new sales records set by the most skilled developers, such as the recent $238M condo purchase, these will be the exception and mostly born out of wealthy execs and family offices looking to hide money in the safety of real estate during the new recession.
NJ: IT’S GREENER ON THE OTHER SIDE OF THE RIVER
While it might feel like King Kong has been unleashed on the Manhattan real estate market, it’s quite a different story across the water in New Jersey.
Obviously, all real estate is local, and NJ has many submarkets. Yet, most places you look you’ll find quite stark contrasts to what’s going on in Manhattan, NY.
Clifton, NJ is still in great proximity to Manhattan for all the fun and business you want. Yet, the median home sales price here is just $341,100. Median price per square foot is only $238. The average rent is $2,100 a month. Zillow forecasts home values in Clifton to rise another almost 6% in 2019.
Then there is Trenton, NJ. Trenton boasts an average price per square foot of just $51. The median list price is just $69,950. Rents average $1,200 a month, providing a far superior price to rent ratio than you’ll ever dream of finding in Manhattan.
Investing in distressed markets presents a great opportunity, though there is a time for it. The numbers still have to make sense and be profitable within your strategy. Where will you be investing this year?
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