Manhattan Apartment Prices Collapse Most In Four Years

When Douglas Eilliman released their 3Q 2016 recap of Manhattan real estate sales, it basically showed that pricing held up during the quarter as sellers refused to lower their asks but the number of closings collapsed as buyers started to back away from a market that was starting to look bubbly.  Here was our conclusion at the end of 3Q:

In conclusion, the lesson seems to be that the marginal New York City buyer has been priced out of the market (volume down 20%) 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.  Meanwhile, the luxury market is the only segment that seems to be holding up which only serves to prove that Chinese billionaires still have cash they would like to hide in the U.S.

Well, it seems as though sellers took note and decided to slash asking prices in 4Q.  With median prices dropping 6.3% year-ove-year, 4Q 2016 marked the biggest quarterly decline in Manhattan real estate prices in 4 years, according to a note from Bloomberg.

NYC Aparment

 

After being forced to slash his asking price twice in two months on a property in Chelsea, Rex Gonsalves notes that "This isn’t a market where you go into a bidding war."

Rex Gonsalves, a broker with Halstead Property, thought $715,000 was a fair price for a one-bedroom co-op apartment in Chelsea with an outdoor patio. But after one month on the market, the best offers that came in were about 30 percent lower, he said.

 

The sellers agreed to cut the price twice in two months, bringing it down to $649,000. That attracted two offers -- one below the asking price and one above it, Gonsalves said. The 16th Street apartment sold in December for the higher price, $659,000.

 

“This isn’t a market where you go into a bidding war,” he said. “When we got this offer over ask, the sellers said, ‘This is great.’ It really helps to have savvy sellers, who understand the market.”

Meanwhile, after scrapping a lot of deals in 3Q 2016 due to unrealistic asking prices, Jonathan Miller, of brokerage Miller Samuel, told Bloomberg that sellers are slowly coming to terms with the reality that prices need to come down if they actually want to sell their apartments rather than just pretend.

“Maybe we’re heading out of the period when there was no shame in overpricing your home,” Jonathan Miller, president of Miller Samuel, said in an interview. “We’re moving away from that and into something more pragmatic: Do you want to actually sell your property or do you want to pretend? Part of selling is pricing correctly or being more negotiable.”

 

Buyers agreed to pay more than the asking price in just 13 percent of all sales that closed in the quarter, down from 29 percent a year earlier, the firms said. They also are taking longer to make a decision: Previously owned properties that sold in the period spent an average of 80 days on the market, up from 71 days a year earlier. Manhattan resale deals totaled 2,385, a decline of 1.5 percent.

 

"We saw buyers acting a lot more aggressively with their bidding,” said Pamela Liebman, chief executive officer of brokerage Corcoran Group, which released its own report Wednesday that showed a decrease in sales for the quarter. “They didn’t hesitate to come in and make low offers. A lot of sellers remained unrealistic throughout the year, and that killed a lot of deals."

With the floodgates open, the only question now is how low will prices have to drop to clear the massive inventory overhang on the New York market?  Once fear grips that market, the race to the bottom can be quick and painful.

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