I’ve been selling investment properties in New York City for 25 years and have never seen anything like the low level of sales that the market experienced in the first quarter of 2009.
In order to know just how abysmal the volume of sales has been, let’s review a little history. In order to study volume of sales we track a sample of 125,000 properties which fall into the C, D, S & K classes of properties which include multifamily apartment buildings, retail and mixed-use properties. During the last 25 years, the average annual volume of sales has been 2.5% of this total stock of properties or about 3,125 sales per year. The best years we have seen were 1986 and 2006 with 3.4% turnover, 1988 with 3.5% and a pinnacle in 1998 at 3.9%.
On the other side of the coin, we experienced the lowest level of turnover in both 1992 and 2003 which were both years at the end of recessionary periods and were years in which we reached cyclical highs in New York City unemployment. The volume of sales in those years was 1.6%. We had always thought that this 1.6% level of turnover was a baseline representing only those sellers who had no choice but to sell due to reasons such as death, divorce, taxes, insolvency, partnership disputes and the like. Our assumption was that volume would never get lower than the 1.6% threshold. Enter 2009.
If we annualize the turnover the market experience in the first quarter of 2009, in which there were only 233 sales closed, the volume of sales would be only 0.7%!
We certainly do not expect this trend to continue to an annual level of 0.7% but it is very likely that we may not see enough activity to hit the 1.6% level....
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Agents: Robert Knakal