Manhattan Apartment Prices Tumble In Q1 As Sellers Fret Over Rising Rates

Tyler Durden's picture

At the end of 4Q 2016, we noted that NYC real estate sales volumes were collapsing as sellers seemed to be having a difficult time accepting the fact that clearing prices had dropped below their exorbitant asking prices...here was our conclusion then (see "More Bad News For NYC Real Estate As Luxury Co-Op Contracts Collapse 25%"):

"The lesson seems to be that the marginal New York City buyer has been priced out of the market while sellers have not yet accepted that the bubble has burst deciding instead to maintain listing prices while letting their apartments sit on the market longer amid growing inventory levels...that should work out well..."

Now, it seems that growing fears over the flood of new inventory slated to hit the New York market combined with the Fed's promise to keep hiking interest rates has sellers slightly more willing to compromise. 

Per the following quarterly Manhattan market update from Douglas Elliman, the median sales price for apartments in the Big Apple dropped 3.3% YoY in 1Q 2017 prompting a 'surge' in deal volumes which were up 0.5%.

NYC

 

As Bloomberg notes, discounts versus asking prices also rose for every type of property tracked by Douglas Elliman.

Sellers who had been holding fast to ambitious pricing goals are softening their stances as they face the prospect of higher mortgage rates and more listings being added to the Manhattan market. In the three months through March, buyers of resale homes got discounts averaging 4.5 percent off the last asking prices, up from 2.7 percent reductions a year earlier, Miller Samuel and Douglas Elliman said. Discounts also increased for all other property types tracked by the firms -- condos, co-ops, new development and luxury homes -- as well as for the market as a whole.

 

“Sellers getting more relaxed with their pricing has certainly helped create a lot more transactions,” said Pamela Liebman, chief executive officer of Corcoran Group, which released its own report on the market Tuesday. “With prices stabilizing, buyers feel that they’re making a safer bet now.”

Meanwhile, the number of people willing to pay over asking price for the already exorbitantly prices NYC real estate continued to hover a multi-year lows. 

NYC

 

Temporary pricing blip or beginning of a long unwind?  Tough call....$2.1 million seems like such a good deal for 1,000 square feet...that's enough space for a bedroom AND a living room.

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NugginFuts's picture

Anyone got a non-biased view of the real estate market as a whole? Got a buddy in the industry who thinks things will keep going up forever, with increased sales coming from "new build" units (to offset declining supply in existing units).

I can understand that feeling, given my area is building more houses than seem reasonable, but what do I know? 

hendrik1730's picture

The Chinese built millions of "reasonable looking" houses, shopping malls and complete ( abandoned ) cities, but that does not mean they have a good housing market.

Justin Case's picture

I think China has done some very intelligent maneuvering particularly since the 2008 crisis. They figured out US fractional reserve scheme was toast but they played along anyway. They even levered up as much or more than we did since then. However, with this increase in credit they have built infrastructure in the form of roads, bridges, cities, plant and equipment …all for and with future uses. The West on the other hand has thrown a “standard of living party” and neglected infrastructure to the point of dilapidation. Yes China’s financial system will implode with all the rest, they may even lead it! But, they will be left with new infrastructure and “money” (meric's gold) to get started again. President Xi has even said this to his people and to the world. He said the short term would be difficult but the long term beneficial. I think he is telling the truth!

NugginFuts's picture

Where did President Xi say that? Love to read his thoughts on the matter.... Talk about a long term game of chess.

Justin Case's picture

There are search engines that do that kinda ting. I don't wurk for you.

Where did President Xi say that? In China.

HRClinton's picture

THUMP go the rents for Trump rentals. 

Throw in some free towels, water, wine, steaks.

Weisshaupt's picture

Thats okay, Trump can start a foundation and sell access and influcence instead. You know, like the Clintons did.

ave to be careful about that external server so you can hide from FIOA request though. 

 

Justin Case's picture

We have arrived at forever, many just don't see it, like in 2007. These mortgages are under water since they bought the house, b/c interest rates were not normal. Rate increases toppled the last real estate bubble. Same as the 1982 collapse. The common cause was rising rates. If rates were to normalize to historic levels of 6%, how many house holds could bear that monthly pmt?

The prices of homes in the Hamptons are cratering as is the condo market in Florida. When builders see that sales aren't going as projected they will start lowering prices to get them off their books and onto the banks books as a mortgage. Those that bought at peak will want to get out ASAP and the price woar begins. Then others will join in to salvage their debt, even at a small loss.

same'ol

Singelguy's picture

Just like cars, buying a house is all about the monthly payment. Wages have remained stagnant so if interest rates rise, the price has to drop in order to keep the monthly payment constant. Couple that with rising property taxes and there will be more downward pressure on prices.

Justin Case's picture

"Wages have remained stagnant"

I think that the Gov't shot itself in the foot by fake stats. People's wages are at 1998 levels while the real costs for everything has risen at a pace of around 9%/yr. With the rate of inflation being printed lower then what it acually is, has kept wages low. This means that income tax revenues haven't risen as fast as the true rate of inflation. When Gov't spends money and costs have risen at 9%, the short fall has to be funded by debt. The discrepency every year is about 8%/yr.

assistedliving's picture

the Mrs. just sold our place (bidding war) and bought a place in the West Village

(another bidding war, prev. deal fell thru in TRIBECA).  

Insane.  

If you can wait until 2018 my guess is HUDSON YARDS and about a dozen other LUXURY UNITS coming for Sale.  Has to impact the ENTIRE market.  That plus rising interest rates, crackdown on money laundering via RE, Retail getting slaughtered... has to be NEGATIVE.

Unless you work for GOOGLE of course

good luck

 

halfasleep's picture

anecdotally, i get the sense that foreign (read: chinese and other uber rich foreign nationals and friends) have been more than proping both the manhattan real estate and nyc rental markets (and by proxy everything else). one problem is that developers are late to the trend, and are over building in mass (large scale lux condos in LIC?). another is it seems like the foreign money is either drying up or going elsewhere, or unsure of us gov policies, etc. my .02.

TradingTroll's picture

My Chinese clients are starting to have trouble getting funds out of China. Just lost out on a $1bn+ project. Beijing won't let the Chinese bank wire the funds. The agent for the buyer said it's becoming a big problem and getting funds out of China has become extremely difficult.

One of my clients, a large fund, was warned two months ago by the Chinese government that if they wanted to invest overseas to get it done asap.

SOEs are probably still ok, but individuals and companies that aren't public or majors, will have a possibly insurmountable task ahead.

Truther's picture

1 million fled since 2011. Who wants to live in a liberal town anyway.

Justin Case's picture

The current population of China is 1,386,798,438 as of Tuesday, April 4, 2017, based on the latest United Nations estimates.

If 1 million people left, then there is only 1,385,798,438 left in China.

Ya think anyone ever noticed? What's that as a percent of the population? It is unlikely that the Chinese think that a handful of White People are exceptional in anything except their diminutive numbers.

Bill of Rights's picture

I wouldn't live in NY even if those million plus dumps ( on paper ) were free...Fuck NY

assistedliving's picture

Fuck NY?  

BIll of Rights was drafted in Federal Hall NYC.

Fool

marathonman's picture

Bankers drafting the Federal Reserve bill loaded up on trains in New York headed to Georgia for a 'hunting trip'.  Been at least a hundred years since NYC has been associated with freedom or liberty...

assistedliving's picture

another moniker betraying NY influence

buzzsaw99's picture

1,000 square feet...that's enough space for a bedroom AND a living room.

a bit of hyperbole. 1000 sq. feet gets you two maybe three bedrooms even in the midwest.

hendrik1730's picture

2 or 3 bedrooms in a 1000 sq feet ( less than 100m2 ) apartment? You must live in Madurodam.

buzzsaw99's picture

complete and utter bullshit. the vast majority of two bdrm apartments with living room and kitchen (with two full baths as well) are around 1000 sq. ft. i'm not going to add links because imo you aren't worth the effort.

Justin Case's picture

@buzzsaw99

I have to agree with you. I think there are minimun standards in the building codes on number of occupants and minimum sq. ft. I haven't checked so I could be rong.


chosen's picture

The jooz will be jumping.

ThE SoLuTiOn Is DeBt FrEe MoNeY cReAtIoNx's picture

For joy?, from knowing all this beforehand and buying out the goyim to live in a NYC all by themselves?

chosen's picture

From 30 floor buildings, as their real estate investments go to hell.

DisorderlyConduct's picture

Well the demographics say fewer buyers entering the US housing market. Rising interest rates mean fewer buyers given the same listing price. Record student loan and subprime auto debt would seem to indicate that those entering home buying years are more strapped -but at least they have a chick magnet car.

In my market (mid America) listings are going nuts. Seems that a lot of people want to sell - and they seem to be closing fast. But keep in mind that our market never really peaks or dips much since median prices are pretty affordable. So our market isn't as pronounced as the coasts. In fact we may be seeing home price inflation as coastals bring their big fat wallets - full from selling their 2M closets and coming to buy a 150k house on some land. That kind of buyer overpays to get what they want where they want and when they want.

So I could be short term bullish hoping to sell in a year or two to some coastal with too many US pesos. After that I really don't want to be stuck somewhere since it may have to be a distressed sale by then for me to move.

halfasleep's picture

being in one of the coastals i can vouch that this is very much what seems to be happening. folks now rich with coastal bucks are cashing out and moving back home near family. seems to coincide with boomers now retiring, wanting to see grandchildren that live half the country away - and folks just not wanting to work 80 hours a week pushing paper.

I am Jobe's picture

Hope Austin home prices crash too. Over Optimistic Libs 

j0nx's picture

Northern Virginia area too. Shit is crazy here. 15% increases in 3 months for no apparent reason when prices were already absurd 3 months ago. When does it end...

Houses Depreciate's picture

With rental rates and housing prices falling in NoVa, help is on the way!!

silverer's picture

Can we all sing along? It's the "Misallocated Capital" song today. Just follow the bouncing chart.

Sledge-hammer's picture
Sledge-hammer (not verified) Apr 4, 2017 2:45 PM

NYC is a city of great vibrant diversity.  You can have your choice of being mugged/murdered by any one of millions of negroes, Puerto Ricans, or other third-world mystery meat.  Plus, there are all kinds of different ethnic restaurants there.

Houses Depreciate's picture

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

globalintelhub's picture

At least they're not buying into timeshare scams http://fortisconsumerlaw.com/