Throwback to 2009?

Do you remember the real estate market in 2009? Let me refresh your memory… landlords and condo developers were dangling a month or two of free rent; sellers were offering paid attorneys’ fees to interested buyers and everyone was experiencing falling prices.

While we aren’t close to the 2009 scenario, the market has started to turn in different segments of New York’s residential market after five+ years of increasing real estate values. And in some cases, it’s the buyers and renters who have the upper hand.

The exception is the tight “affordable luxury” condo market (in the $1 to $3 million range) where there are still bidding wars. So far this year, condos in the $1 to $3 million range have remained on the market for 26 weeks versus high-priced condos in the $6 to $50 million range have lingered for 50 weeks.

New development condos and rentals are flooding the market

In Manhattan, new development inventory surged 27 percent to a total 973 units on the market in 2016’s third quarter year-over-year after four quarters of decline, according to Miller Samuel data. And there could be five years of excess condo inventory sitting on the market by the end of 2017. That oversupply could spell trouble for the developers who are looking to unload condos quickly as concerns about softening in the market swirl.

The rental market is also experiencing a supply glut. In both Manhattan and Brooklyn, rental inventory grew by more than 30 percent in September, and in Queens it expanded about 17 percent. This supply glut will continue in the coming months.

In Downtown Brooklyn alone, there are 23 residential buildings either recently completed or under construction that will add 7,500 apartments (mostly rentals) to the market by 2017. That’s roughly one-fifth of the rental units expected to come online citywide. Buildings like the Stahl Organization’s 378-unit 388 Bridge Street, which is a mix of condos and rentals, the Gotham Organization’s 586-unit 250 Ashland Place and 7 Dekalb — the first residential tower at the City Point complex — are all contributing to the flood of supply.

Taking longer to move units

In Manhattan, condos and co-ops spent 79 days on the market in the third quarter, up 8.2 percent from the same time in 2015, according to Miller Samuel. Meanwhile, in Brooklyn, residential listings spent 81 days on the market in the third quarter before selling, 26 more days than they did a year earlier.

On the rental side, Manhattan vacancies are on the rise. In September, 1.8 percent of available apartments were empty, according to Citi Habitats. That was the highest vacancy rate since September 2009.

Impact on rental markets

With inventory up, developers and owners are trying to woo buyers and renters. According to Miller Samuel, Manhattan landlords offered an average of 1.2 months in free rent both this (and last) September, and the number of owners providing incentives is on the rise. In fact, 28 percent of all landlords offered some type of concession in September, which is 10 percent higher than last year at the same time, according to Citi Habitats. The last time the concession level was that high was in June 2010 when a flood of condos that had been converted to rentals hit the market.

Concessions like free rent (between one and three months), paid broker fees and cash credits have been on the rise for about a year now.

After Manhattan rent growth started to slow last summer, rents began falling earlier this year for the first time since 2014. According to Miller Samuel, Manhattan median rents fell 1.2 percent in September year-over-year, to $3,396. Brooklyn rental prices, meanwhile, edged up 2.4 percent on the year, to $2,949, but that was after two consecutive months of declines. And the median rental price for Long Island City, Astoria, Sunnyside and Woodside was down 5.7 percent on the year in September, to $2,787.