Sotheby's 3rd Quarter Market Report has been released. Our takeaway (supported by our boots on the ground intel) is that the market is shifting, starting from the top down. A key metric we look at in the report is Absorption Rate whereby we take the number of active listings in a particular price range and divide by the average number of closed sales over the last 6 month period. The report refers to a "historic range of equilibrium” being around 9 months of absorption. To translate, what this means is that when the absorption rate in a certain price range is below 9 months, that market is considered to be a Seller's market. When the rate is at 9 months, the market is at its equilibrium point. When we have more than 9 months of absorption, we are in a Buyer's market. As of the 3rd Quarter, properties in the $20M+ range have an absorption rate of 25 months - well over the 9 month equilibrium point. Properties in the $10-$20M range are being absorbed at a rate of 20 months, $6-$10M are at a rate of 11 months and its only in the $4-$6M range where we see the rate (10 months) closer to the equilibrium point. Below $4M, the Seller seems to still have the upper hand however we cannot be certain for how much longer.

 

Financial Markets abroad have been uncertain and the US stock market experienced a very volatile end of Summer as we know. Uncertainty generally leads to caution in the marketplace which leads many to believe the current slow down in Real Estate in New York marks less of a long term change in overall direction as much as simply a pause while people gather themselves and reassess - waiting for some level of confidence to return to financial markets before jumping back in.