Slow and steady is becoming a trend with big budget buyers in the New York City real estate market — a side effect of congestion and lack of demand.
- At the close of 2015, Olshan Realty reported a two-month increase in days on the market for luxury properties.
- In the first week of April, just 18 contracts above $4 million were signed – the lowest of that same week since 2012.
- The median resale price in Manhattan grew 3.8 percent last year to $978,765, but within the luxury tier (top 10 percent), median resale price went up just 0.2 percent.
- Pockets like East Brooklyn and Upper Manhattan are still competitive markets for buyers.
Slow and steady is becoming a trend with big budget buyers in the New York City real estate market — a side effect of an overly congested market. Is the market headed for trouble because sales growth isn’t hitting double-digits anymore, or is tapering at the top normal after years of unsustainable sales growth?
“Demand is there, I see it everyday,” said Raphael De Niro, real estate broker and head of The De Niro Team for Douglas Elliman. “The problem is supply. There’s too much supply and it can’t be absorbed in this cycle.”
Douglas Elliman’s Q1 report for Manhattan, prepared in conjunction with Miller Samuel, shows listing inventory increased 9.1 percent last quarter and 5 percent year-over-year, reaching 5,506 homes on the market in the first quarter.
Christie’s International Luxury Defined report says over 6,500 units flooded the New York City real estate market in 2015, the largest supply since the financial downturn. Many of those units fell into the luxury category, leading to a slowdown in sales not seen in the last few years.
At the close of 2015, Olshan Realty reported a two-month increase in days on the market for luxury properties. The number of contracts at $10 million and higher dropped 16 percent from 2014. In the final four months leading up to 2016, there were only four weeks with 30 or more contracts signed.
The slack didn’t pick up in January, but much of that could be chalked up to seasonality. Jump forward to the first week of April, when just 18 contracts above $4 million were signed — the lowest of that same week since 2012.
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The second highest contract in the first week of April, Unit 6 at East 12th St., originally went on the market for $14.5 million in June 2015. The 4,514 square foot condo in Greenwich Village went into contract for $9.985 million. A listing on the Upper East Side reduced its price from $48 million to $29.5 million, going into contract back in mid-March.
“Manhattan and Brooklyn sellers are being more cautious with their pricing and perhaps a little less free-wheeling than they’ve been over the past few years,” StreetEasy data scientist Alan Lightfeldt said. “In order to sell in this market, sellers need to lower their asking prices slightly to see a greater return with fewer price cuts.”
More time, less appreciation for high-tier homes
According to StreetEasy, the median resale price in Manhattan grew 3.8 percent last year to $978,765. However, within the luxury tier (top 10 percent), median resale price went up just 0.2 percent, reaching $3.25 million.
Top-tier listings in the first quarter took an average of 113 days to sell, up 22 days from last year. Manhattan homes overall spent 63 days on the market, up from 5 days the year prior.
Similar trends were seen in Brooklyn, where the median resale price on all homes increased 7.1 percent to $545,330. Comparatively, the median resale for high-end Brooklyn homes was $1.36 million, a 3.9 percent increase from last year.
Brooklyn luxury tier homes that went into contract in the first quarter spent 73 days on the market, an increase of 24 days from last year. All Brooklyn homes that went into contract in the first quarter spent 58 days on the market.
Even the Federal Reserve reported a softening, citing appraisal firms – including Miller Samuel – recognizing less activity due to overcrowding at the top.
A shifting narrative?
Douglas Elliman’s Q1 report also reveals average sales prices within Manhattan’s luxury market grew 14.1 percent year-over-year to almost $8.3 million. Miller Samuel notes in the report that new development accounted for 61.5 percent of the luxury market, swelling the average price significantly.
The number of closed sales also grew 8.3 percent from last year but dipped 3.7 percent from last quarter. Again, various factors were affected by new development.
Nonetheless, days on the market remains high at 122 days, a 35.6 percent hike since 2015.
Another interesting note in the report was the consistent share of cash transactions in the first quarter of the year across Manhattan, at 46 percent. Although the federal mandate for disclosing cash buyers over $3 million in Manhattan just went into effect March 1, some expected all-cash transactions to surge prior to the regulation.
While the $3 million dollar rule in NYC has loopholes, regulations might not have the impact headlines and politicians are showcasing. De Niro says the percentage of those attempting to launder money through all-cash transactions is low.
“I think foreign investment will always play a major role in Manhattan,” he said.
Regardless of Manhattan’s state of oversupply, the borough retains a worldwide reputation as a cosmopolitan hotspot for condos, co-ops and townhomes. Only now, buyers are in control and likely to take their time when spending upwards of $5 million.
“I see things the way they are for at least the next 12 months,” said De Niro. “Buyers know they can shop around and get a good deal. They have more options than ever.”