Despite a record-breaking year, Manhattan sales market frenzy is over

It's a new year, which means it's time to look at the slew of market reports from the last quarter of 2016, offering a few hints of what's ahead for New York's often unpredictable real estate market in 2017. Among those things: a continued slog for ultra luxury apartments, the end of aspirational pricing, and fewer bidding wars.

The Douglas Elliman report reveals the Manhattan sales market "showed a continued easing of conditions," according to numbers wiz Jonathan Miller, meaning we are "capping off a year without the frenzy seen in the prior several." One big issue was the sharp decline of bidding wars: the market share of folks fighting over pricey pads fell by more than half, to the lowest level in four years. While 12.9 percent of inventory in the overall market saw bidding wars, the luxury market share of bidding wars was just two percent while new development was zero percent. Because of that, sellers started pulling overpriced properties off the market. As Miller puts it, "Listings are falling in the luxury market, the weakest segment, so overpriced ‘aspirationally’ priced listings are falling out of the market."

Still, sales prices ended up high for the quarter—mostly because "legacy" contracts from up to two years ago caused record closing prices. Compared to last year, the price per square foot for all Manhattan sales increased 7 percent to $1,760 (a record), while the average sales price rose 7.7 percent to $2,098,459 (also a record). In the luxury market, the median price was was $6,567,712, up 9.5 percent. For a new development unit, the median sales price surged 44 percent to $2.965 million. The median sales price for a condo was $1,707,500, 1.6 percent less than last year, and a co-op came in at $752,000, 0.4 percent up from 2015.

Halstead also tracked a record average sales price for this quarter: $2,110,566, a nine percent rise from year ago pricing. But as Diane M. Ramirez, Chairman and CEO of Halstead, admits, "The increase was driven by luxury new development closings which do not necessarily reflect current market conditions."

Compass pointed out a few of the big luxury closings of 2016 in its market report: two sales above $60 million at 432 Park Avenue (including New York’s most expensive sale this year for $88 million), as well as sales above $40 million at One57, Baccarat Hotel & Residences, and 4 East 66th Street. In total, the brokerage firm tracked 1,987 closing for this quarter—down 36 percent from last year—with 2,502 contracts signed, down 7 percent. According to Compass, in the four weeks leading up to the election, 677 contracts were signed (with 44 contracts signed above $5 million) but in the four weeks following the election, 837 contracts were signed, with 60 contracts signed above $5 million.

But don't expect this to last forever: Miller expects that once the legacy contracts run our, "we’ll see these weird record price levels correct." He continues, "With a slow rise in resale inventory, and fewer bidding wars, we could see a little more sales volume in 2017 despite rising interest rates." But the pace and price of sales will not match the frenzy seen several years ago.

The prognosis from Corcoran’s fourth quarter report was "a mix of steadying prices, challenged inventory, an increase in contracts signed compared to a quiet last quarter and a decline in sales compared to an active fourth quarter last year." The report found that Downtown Manhattan had the most sales activity this quarter, with 983 closed sales and a 10 percent sales increase, the highest percent increase of any Manhattan submarket this quarter. Overall, the report declared that "2016 ended much as it began—with a variety of mixed signals indicative of shifting market conditions."

Finally, Brown Harris Stevens’ report pointed out some market changes in particular Manhattan neighborhoods. On the East Side, median prices for one and two bedrooms dropped slightly (to $722,500 and $722,500, respectively) while studios and three+ bedrooms rose (to $400,000 and $3.33 million). On the West Side, all sized apartments saw an increase in median price except three+ bedrooms, which experienced a 20 percent decline to a median price of $3.37 million. Between 34th and 14th Streets, studio and one bedroom median prices decreased slightly (to $535,000 and $920,000) while two bedrooms increased 3 percent to $1.497 million. South of 14th Street, median prices were essentially unchanged except for two bedrooms, which had a 14 percent decline to a price of $1.7 million.

• The Elliman Report: Manhattan Sales [Douglas Elliman]
• The Corcoran Report [PDF] [Corcoran]
• 2016 Manhattan Residential Market Report [PDF] [ [Halstead]
• 2016 Manhattan Residential Market Report [Brown Harris Stevens]