Comparing the sales metrics on a year-over-year basis, the marketplace looks fantastic. On a quarterly basis, the figures look OK-to-good. And if we dig deeper and look at the statistics on a monthly basis, they only look fair, at best.
This is because in the second half of 2011 the dollar volume dropped. This occurred between the second quarter, in which we saw $8.5 billion in sales, and the third quarter, in which we saw $7.1 billion. We saw the figures drop again in the fourth quarter, in which there was $6 billion in dollar volume, representing a 15 percent drop in activity.
In terms of the number of properties sold in New York City, we saw a peak in the third quarter, when 593 properties changed hands, and a 15 percent drop in the fourth quarter, when only 505 buildings shifted ownership.
This dynamic, in which both dollar volume and number of properties sold are both retreating, would normally have led us to believe that a double dip in the sales market might be starting. However, the observance of healthy appreciation in property values leads us to draw the conclusion that we are, and have been, in a supply-constrained market as opposed to a market that is sliding into a double dip.
We’re not out of the woods yet, however. We’ve seen the rate of appreciation occur at a declining rate throughout the year: At the end of 1H11, the appreciation rate was running at more than 9 percent. By the end of the third quarter, the rate dropped to 7.3 percent. By the end of 2011, the rate lingered at 6.1 percent. It’s worth repeating, however, that fluctuations in these metrics over a one-, two- or three-quarter period can be misleading due to large transactions that skew the numbers. Still, we’ll be watching the numbers.
We do expect sales volume to be up significantly in 2012, both from a dollar-volume and number-of-properties-sold perspective. This is due to a natural regression toward long-term trend lines (which we remain well below) and a looming, perhaps major, increase in 2013 capital gains rates, which should drive hundreds of properties into the market.
Robert Knakal is the chairman and founding partner of Massey Knakal Realty Services and in his career has brokered the sale of more than 1,175 properties, having a market value in excess of $7.8 billion