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Examining Manhattan's Snake-like Listing Discounts

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[This week, real estate appraiser, Curbed graph guru and podcaster extraordinaire Jonathan Miller hits the discount racks.]

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This week I presented the two types of listing discounts we track each quarter for co-ops and condos in Manhattan to get a sense of whether sellers are being realistic. Listing discount is the measure of the difference between the asking price and the contract price, measured as a percentage.

When I began to measure listing discounts a decade ago I felt its usefulness was limited, because at that time it was becoming conventional wisdom to price a listing closer to its market value. Before that the tendency was to list higher, because sellers were wary about leaving money on the table in case they got lucky. Any comparison with those periods would show a decline in the listing discount because of the new marketing viewpoint, rather than as a market trend in supply and demand.

The black line represents the listing discount from the last list price (the final asking price before the apartment went into contract), and is what I present in our market reports because it's the point where sellers get serious and a listing actually enters the market. The higher the line, the greater the spread between the list price and sales price.

Listing discount from original list price is represented by the red line and tends to be more random, but has a somewhat consistent relationship with the last list price discount. It represents sellers' initial hopes about their property value when it enters the market. I added the original listing discount to the last listing discount metric in 2002.

In early 2009 both metrics spiked in a fairly consistent manner, which meant that prices were falling sharply and sellers were behind the market in setting their prices. So buyers and sellers had to travel a lot farther to have a "meeting of the minds."

What's strange is how in recent quarters, the discounts seem to be merging. The spread between list and sales price is very high, but the difference between the original list and last price is not. I suspect the coming-together is more about the last quarter's jump in the last listing discount, which seems to be a bit of an anomaly.

If re-sale apartment activity continues at the same pace as last year, the discounts will trend lower, but I doubt they will reach levels seen earlier in the decade.
· Manhattan Listing Discount (Original v. Last) [Miller Samuel]
· Three Cents Worth archive [Curbed]