Desperate Sellers Resort To Dramatic Price Cuts In Manhattan's Luxury Real Estate Market

Tyler Durden's picture

We have been covering the bursting of the Manhattan luxury real estate bubble for quite some time now (here, here, and here). Most recently we noted that REIT Equity Residential slashed its full year guidance due to the fact that a supply glut was causing the firm to give considerable concessions in order to secure tenants in Manhattan. On the earnings call, COO David Santee even said "There's some crazy stuff going on in New York."

We are now seeing more evidence that the only way luxury homes are moving on the island is if the seller offers dramatic price cuts. As Mansion Global reports, according to Olshan Realty's weekly snapshot of Manhattan's luxury market, 35 luxury Manhattan homes changed hands last week (the highest number of contracts this year for homes $4 million and above), which was up from 19 the previous week, and up from 24 the week commencing May 30.

However, Olshan believes that the underlying reason for the number of contracts signed was the fact that desperate sellers, whose properties were on the market an average of 311 days, gave buyers significant price discounts to the tune of 11% on average. The average discount in the w/c June 13 was nearly double that of the prior two weeks, and the number of contracts signs reflects that in order to move units, prices need to come down dramatically.

"The luxury market is bloated and choking with a lot of over-priced inventory, but once sellers capitulate and adjust to realistic price levels, the market moves. Not coincidentally, the May and June weeks that showed the strongest activity of the year were also those that saw prices slashed" said Donnan Olshan, president at Olshan.

As an example of how far prices are falling on these luxury homes, the number one contract last week was a townhouse at 18 East 69th Street on the Upper East Side, sold for $22 million. Prior to selling, the five-story house with 7,831 square feet  was listed at $26 million, meaning a reduction of over 15% in price. For context, the home was purchased in March 2012 for $13.25 million and was renovated. Prices have run up, but now are working their way back down as the supply glut becomes a reality and people begin to realize (especially REITs such as EQR and developers such as the Bauhouse Group) once again that real estate doesn't always rise in perpetuity.

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molecool's picture

Not really news there. Prices have a tendency to oscillate and are in fact reigned in by the laws of supply vs. demand. Doesn't mean there is an impending collapse. ZH click bait again?

MANvsMACHINE's picture

Where does it say collapse?

TradingIsLifeBrah's picture
TradingIsLifeBrah (not verified) MANvsMACHINE Jun 22, 2016 7:48 AM

"We have been covering the bursting of the Manhattan luxury real estate bubble..."

froze25's picture

Eventually you run out of suckers willing to pay those retardedly high prices.

SmedleyButlersGhost's picture

You're talking about NYC - the buildings there have a strange habit of collapsing.

Dolar in a vortex's picture

Or is it a habit of collapsing strangely?

Miles Ahead's picture

Not a habit.  Just once or thrice every 2001 years.

But ManvMachine is right.  It didn't say "collapse".  And "Supply vs. Demand" is something you were taught as a sophomore in H.S. kid.  Shoulda elected to finish those last two years and postponed spring break in Iraq until after methinks.

yellowsub's picture

That only applies to Federal buildings where nothing makes sense.

Chris Dakota's picture
Chris Dakota (not verified) SmedleyButlersGhost Jun 22, 2016 9:36 AM

Especially those heavily insured, filled with asbestos and owned by Jews.

Kirk2NCC1701's picture

It says "Bubble, Bubble, Soil and Trouble".

Bad news for RE Moguls, like Trump.

Lanka's picture

Come 2017, Trump hopes to get out of RE and start a new career.

TradingIsLifeBrah's picture
TradingIsLifeBrah (not verified) molecool Jun 22, 2016 7:47 AM

House was listed at $26 million, sold for $22 million and was purchased in 2012 for $13 million.  Where is the crisis?  The bubble continues, nearly doubled in price in 4 years.

Never One Roach's picture

Seems kinda high. I'll never pay over $8 million for a 685 sf apartment there.

 

 

//sarc

Houses Depreciate's picture

..... and not a buyer in sight at a small fraction of the asking price.

 

crushing.housing.losses.

sun tzu's picture

The crisis is for the person who lost $4 million plus commission in three years along with the bank that holds the mortgage

Momauguin Joe's picture

After the collapse, I wouldn't want to be within 100 miles of any city. 

RadioFlyer's picture
RadioFlyer (not verified) Momauguin Joe Jun 22, 2016 7:57 AM

You actually need to be the equivalence of 2 gas tanks away from any major city.  That said, I am screwed.

froze25's picture

I think that about 85% of the pop is screwed, get prepared get armed.

ToSoft4Truth's picture

You'll miss out on the best part.  It's gonna be great. 

drivenZ's picture

what collapse? the one that ZH has been talking about for 8 years now?

froze25's picture

Bubble gum and duct tape can only hold for so long. Do you really think that NIRP can last for that long? Do you really think that paper assets can be propped up indefinitely?

TradingIsLifeBrah's picture
TradingIsLifeBrah (not verified) Jun 22, 2016 7:45 AM

An 11% price drop seems drastic until you realize how much prices have gone up over the last few years.  Hell these people are probably trying to sell out of the low single digit growth real estate market of NYC so they can hop on the double digit growth train across the bridge in Brooklyn's real estate.  "It was all a dream" - Biggie Smalls

Oldwood's picture

I feel so sad for those poor rich nuyawkers....not really

Able Ape's picture

How desperate can you BE if you have property on the market that you sell for $22 million? My heart pumps out purple piss for those people...

SmedleyButlersGhost's picture

Yep - nice work unless you paid $25M

Government needs you to pay taxes's picture

I cant imagine a worse place to be holed up for a period of civil unrest/interrupted basic services.  

Infield_Fly's picture
Infield_Fly (not verified) Jun 22, 2016 7:53 AM

employment and real estate prices correlate well - never mind this "mansion/luxury pricing in NYC" crap

 

yield curve is flattening, 2-10s tightening = bank layoffs - the spread is how banks make money and pay for staff

 

when unemployment goes up, people lose their homes or sell their homes

 

barry distorts this by providing payment support to owners who are behind in mortage payments - much like the BS unemployment numbers

 

it eventually blows up real good

undercover brother's picture

This is a misleading article.  The person bought the house for $13 million in 2012 and sold it for $22 million in 2016.  how is that a collapse or even a pullback in prices?  Sellers think buyers are desperate and stupid and their brokers are sometimes greedy.  Considering the asking price on that house was a double in 4 years, there is no way anyone was paying that price.  The broker was wrong for listing it there. 

junction's picture

These prices are based in part on real estate holders working with brokers to generate bogus sales to increase the value of the houses.  In the art world, if a gallery has 4 Andy Warhols to sell, it may have a ring of bidders at an auction bid against each other when one Warhol painting is up for auction.  The new higher price "paid" for this Warhol now serves as a benchmark for other Warhols up for sale.  This higher price also increases the tax deduction of someone who makes a charitable donation of a Warhol, especially helpful if the Warhol you have is a fake. If the Chinese buyers with flight capital stop buying Manhattan real estate, the demand for overpriced apartments in Manhattan will collapse overnight. 

Atomizer's picture

The overvalued property owners cannot afford the NYC property taxes. Cut your losses and get out of NYC. Use the remaining money wisely. 

Omen IV's picture

single family property taxes in NYC are dirt cheap outside of Manhattan  - all subsidized by commercial property valuations and rates

buzzsaw99's picture

they can enjoy paying awesome property taxes after spending $22M. they probably got the $22M on a no down no doc ninja loan so no biggie, the fed will own it eventually.

Baby Eating Dingo22's picture

Wake me when that house sells for under 1 million

Until then, it's 22 x's away from anything near reality

south40_dreams's picture

After jacking up the prices 100% they had to discount 10%, hardly a collapse

Fed-up with being Sick and Tired's picture

I totally agree with you.   I am quite perplexed at the SHOUTED HEADLINE HERE but in reality, it is NORMAL to "over-price" a listing and come back to the buyer 10-20% esp in the luxiry segment.  THE SKY IS NOT FALLING!

Houses Depreciate's picture

Why would the sky be falling?

 

Remember..... Nothing accelerates the economy like falling prices to dramatically lower and more affordable levels. Nothing.

brushhog's picture

Price nearly doubled in 4 years? "Bursting bubble"? Come on guys.

snakehead's picture

How desperate are you really when you own one of those things? Clickbait.

oncemore's picture

The headline and the article do not match.

Doubled price in two years is not a  bursting bubble.

Bad journalism, bad research. 

Expat's picture

My God!  We must do something for these people! 

Apparently $7 trillion in free money has not been enough for the uber-rich.  They must have mooooore!

CJgipper's picture

This makes me want to renovate a place in nyc, not run away

nobodysfool's picture

Those fools in NYC, DC, SF etc. etc. can keep their $2800/sq ft cages & exhorbitant taxes that go with them.  As for me & mine, we'll stick with the open spaces out west. (but not too far west!)

Iconoclast's picture

$22 million for a house, FUKCIN hell, the elites have ruined our monetary system, at certain levels it's simply Monopoly money, and at the base level approx. 50% of American adults don't have 400 dollars of savings.

Sorry_about_Dresden's picture

What would happen if the Feral Reserve left the mortgage market and stopped rolling over mortgage paper?

The Feral Reserve has $1,749,348,000,000 in MBS on their balance sheet:
https://www.federalreserve.gov/releases/h41/current/h41.pdf

An increase of $6.3 billion over last week. What would happen to RE prices if the Feral Reserve stopped meddling in this unfree market? Where would prices go? I suspect the RE market would experience some serious deflation!

If true price discovery were allowed then real interest rates would be.......between 10% and 15% on mortgages??? This would mean people would have to pay cash or the prices would have to be halved for people to be able to crack the nut on 12% mortgage. People could only afford half as much house because they would be paying the other half in interest.

Janet Felon was asked if the Feral Reserves balance sheet needed to be stress tested. That is a good one! I almost laughed.

RaceToTheBottom's picture

This is a stupid article based on a stupid premise, unrelated to all the other stupid things going on in the country/world.  It is stupid that ZH has resorted to such stupidness to get people, including me,, to stupidly click on this article posted by a stupid version of Tyler.

Houses Depreciate's picture

Housing prices have a long way to fall. A very long way to fall.

1980XLS's picture

NYC.

 

The Irish Run it

The Jews own it,

The Niggas enjoy it.

 

 

An old German friend told me that. I'll never forget it.