The market’s up. No, it’s down. It’s rebounding. No, its crashing, The confounding reports about the state of Manhattan’s luxury market, at $4 million and above, are enough to send many folks to a fortune teller to try and get some clarity. What cannot be denied are the facts. One in particular will surely stop people from looking for a crystal ball.
According to a recent weekly market report, highlighted in The Real Deal, Manhattan’s luxury residential market recorded 20 contracts during the week after Labor Day, the best post holiday week since 2006.
The priciest deal of the week was the $15 million sale of a Tribeca warehouse at 71 Laight Street. The building’s duplex penthouse had been converted by by Taconic Investment Partners. The same market report last week, however, showed only 13 signed contracts but it was largely due to the Jewish holiday on Monday and Tuesday. Last week the the priciest property was also sold for $15 million, a brownstone located at 18 West 75th St. It was initially listed for $19.5 million in October 2016.
It’s wise to remain level headed about the latest figures. The steady sales show signs of optimism but the overall trend, according to a recent report for second quarter of 2018 shows sales falling to the tune of 17 percent compared to the previous year, while inventory is on the rise. Average sales price also fell 5 percent to 2.1.million. The massive stockpile of new condos and hesitant foreign buyers, along with the new tax code, has, it seems, stymied sales.
“The market is resetting to a lower, more long-term level of activity,” Jonathan Miller, CEO of the appraisal firm Miller Samuel, told CNBC , referring to the post Labor Day report. Surging inventory will, no doubt be a major factor moving forward. There is currently a 16 month supply of luxury units according to the report conducted by Miller Samuel. Many industry experts feel the tax code also has a lot to answer for.
“Everyone is just dancing around the impacts right now,” Miller said. “I don’t think it will really be clear to people until they write that (tax) check next April.”
With available condos overflowing and sales slumping, the general thinking would be that houses prices would also be in the toilet. Not so fast. As of August Manhattan real estate was the most expensive in the US per square foot beating out Silicon Valley. Some city properties even topped $10,000 per square foot, according to a report profiled in CNBC. The report by data analytics firm NeighborhoodX, shows that real estate in New York City’s central borough is more than twice as expensive as any other city in the US when measured on a per square foot basis. According to NeighborhoodX, Manhattan homes average of $1,773 per square foot.
So how can the Manhattan market be in free fall on one hand but super expensive on the other? The answer lies somewhere in the middle. Yes, there is a lot of supply of properties which has slowed down the market but demand to live in Manhattan is still there. It’s just that buyers are spoiled for choice and aren’t buying at the same clip as in 2014 or 2015. As recent sales show, though, they are still buying. Jonathan Miller is right, the Manhattan market is not frothy currently but it’s still alive.
With inventory high, now is probably a good time buyers to look and negotiate. To prove the point, Mansion Global highlighted two such cases. A penthouse unit at Manhattan’s prestigious 432 Park Avenue sold for $30.79 million, a 24 percent discount from its original $40.75 million asking price. Further downtown, a penthouse at 160 Leroy sold for $43.5 million, a 14 percent discount from the $51 million for which it was first listed. Between Jan 1 and May 31st of this year, 58.6 percent of luxury homes (priced at $4 million and over) were discounted between first being listed and closing, according to StreetEasy data. The median discount was just shy of $1 million.
Sellers, especially those selling older homes, need to have their properties in immaculate condition in order to compete with the glut of shiny new condos. When inventory eventually drops, which it will, the market will pick up steam again and the same deals will not exist. My guess is that there’ll probably be a lot of people kicking their heels, saying, If only…