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Three Cents Worth: Luxury Market Getting Away From Us

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This week I took a look at the top of the Manhattan apartment market to see whether or not all the luxury housing market hype we are reading about is, well, all hype. It sure doesn't look like it is. After all, the trophy sales we have been reading about (that have closed) on Curbed only impact the overall stats by a few percentage points if removed, so I wanted to see if the luxury market gains were a broader phenomenon.

I compared the "starting point" of the luxury market against its overall average to get a gauge on how much the luxury market has widened. I deliberately selected average sales price over median sales price in order to let trophy transactions be included in the mix.

In Manhattan , the word "luxury" is more overused than "lifestyle" and "location." In the 1950's, the term was typically used for a generic co-op that had a "doorman." Now its meaning has taken on a lot more baggage. For my purposes, I simply define it by price.

Luxury Market Threshold [olive line]?Hard dollar thresholds (i.e. $4M+) for trending grow meaningless over time with inflation. I thought it would be better (still has issues, though) to measure the "luxury" market as the top 10 percent of all purchases in each period since luxury housing could be considered relative to the market around it. I apply that same logic to all the regions we report on.

Luxury Average Sales Price [green line]?This metric is the average of the top 10 percent of all transactions for the period that appears in our Elliman report series.

I've clearly over-pontificated (a new word?) about the market craziness in 2008 and early 2009 apparent in this chart, that it was about the influence of the new development surge, 15 CPW and The Plaza closings at market peak and the drop-out of re-sales immediately after Lehman. Forget about that here?Curbed readers are already well informed market craziness as a rule.

Take a look at the post-credit crunch market:

Luxury market prices showed a little seasonality and have been on a clear upward trajectory, up more than 20 percent over the past 3 years. The overall Manhattan average sales price only increased 7.3 percent over the same period.

However since 2009, the luxury threshold has since remained remarkably stable with reasonable seasonality. You would think that the threshold would have risen along with the average sales price but it did not. This suggests to me that the price strength is located waaaaay at the top of the luxury market.
· Matrix [matrix.millersamuel.com]
· Three Cents Worth archive [Curbed]