October 2017 — An Interesting Time for Luxury
The Market Pushes Ahead with an Interesting Backdrop
October welcomes the start of Q4 — we are on the final stretch of 2017 which is hard to believe! How did Q3 play out? Outside of real estate, financial markets continued to rise, closing out the third quarter which indexes notching all-time highs. Additionally, GDP growth from Q2 was revised up to 3.1%, indicating signs of a strengthening economy.
Looking back at Q3 real estate, results could seem weak to the naked eye, however, it is important to remember the inherent lagging nature of the real estate market. Contracts signed today may not close for months or even years down the road. My team had a particularly strong Q3, closing multiple deals at new developments, resale, and rentals. Market conditions seemed to have become a bit more normalized, with leverage not skewing heavily to one side. Buyers may have a slight advantage in the current market, however, we are seeing sellers adjusting lofty prices and making negotiations with buyers. With that said, both sides are coming together to get deals done.
As expected, the fall ushered in a new wave of energy into the market. Activity picked up to a brisk pace, with inquiries on properties and foot traffic increasing. While intricacies of foot traffic are still related to both price and size, a general uptick has been seen across the board. Additionally, some 40+ new developments will hit the market by the end of the season. Highlights of some buildings that hit the market include 277 5th Avenue, 125 Greenwich Street, 40 Bleecker, and 80 East 10th.
Thinking about the luxury market, it is important to remember the interesting times the market currently faces. The wealthy continue to accumulate even greater wealth, yet approach spending with an heir of caution in the post-crisis era. It is interesting to look outside the real estate market for clues as to the state of luxury markets. Thoroughbred horses are closely linked to the wealthy, and the high-end horse market has recovered from the financial crisis. One of the most famous auctions, the Keeneland Auction, reported 47 horses went for over $500,000 and above within first day alone at this year’s auction, the highest in years. The luxury goods aspect of this auction suggest people are feeling wealthy and willing to spend their money.
The Fed also continues to signal signs of a strengthening, recovery economy, all positive signs. Despite inflation remaining below the mandated target, the Fed is likely to raise interest rates again in December. In addition to a likely rate increase, the Fed will begin to enter a period of quantitative tightening as it unwinds its balance of Treasuries it acquired after the crisis. Signals both directly in the market and in tangential markets suggests continued bullishness and optimism!
Neighborhood Focus
In the middle of 5th Avenue, between the historic and classic upper 5th avenue and vibrant downtown, is a vibrant neighborhood of its own — NoMad. This area, “North of Madison Square Park, or NoMad, has become home to some of the newest shops, luxury hotels, and restaurants. Some regard NoMad as the intersection of the East and West Sides as well as of Uptown and Downtown. We anticipate arrivals of buildings such as 277 Fifth to push prices up in the area.
