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Three Cents Worth: New v. Used

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[A second dose of truthiness from our graph guru Jonathan Miller in one week? It. Just. Happened. Today, the appraiser extraordinaire tackles the premium put on new development.]

[Click to expand.]

I went back through historical data and tagged new development sales so I could show the relationship between new development sales and re-sales. Of course, the expected premium of new development over re-sale pricing was confirmed in the results. However, there are points where the aggregate results show re-sales achieving a similar price-per-square-foot for brief periods. This happened in late 2003 and early 2006, but was a result of the mix that sold during that period. Median sales prices for both submarkets never intersected.

High profile developments like 15 CPW and The Plaza added a heavy volume of high-end closing activity from the end of 2007 to mid-2008, resulting in a spike in median sales price and ppsf. Making comparisons back to record aggregate prices of that period is therefore exaggerated. The decline in re-sale prices and ppsf indicators in the recent quarter indicates that weakening prices are not only attributable to the passing of those high-end projects through the system.

Here are a few results from the chart:

The new development premium based on sales activity.
By price per square foot: 19.8%
By median sales price: 55.4%

The new development units that sold were generally larger in size than re-sales, so the median sales price differential is higher than the price-per-square-foot differential between re-sales and new development. As a multiplier, the Manhattan ppsf premium for larger contiguous space exaggerates the premium based on median sales price.
· Manhattan Co-op/Condo New Development vs. Re-sale [Miller Samuel]
· Previous Three Cents Worth [Curbed]