The third quarter of 2017 didn't bring the sky-high sales records New Yorkers have become accustomed to, as luxury inventory declined in Manhattan with over-priced listings continuing to drop out of the market.
"New development legacy contracts are running thin," says Jonathan Miller, the numbers whiz behind the Douglas Elliman market reports. He's referring to contracts signed a few years ago for luxury apartments in buildings like 432 Park Avenue and 30 Park Place, before the developments were ready for occupancy. As those contracts have closed over the years, it's shot the market pricing up. "This pipeline was skewed much higher in price, and as it is starting to dissipate, we see the market coming back to a more stable level," Miller says.
Still, that doesn't mean prices have significantly dropped off. The median sales price for Manhattan sales rose 9.3 percent from a year ago, to $1.17 million. (That number fell short of the prior quarter’s record.) Price per square foot declined 11.5 percent, to $1,678, while the average sales price slipped 1.3 percent, to $2,002,835.
The co-op and resale markets set records in the third quarter: the median sales price of a Manhattan co-op increased 8.3 percent to $850,000, a 28-year record high. For resales, the median sales price increased 1.9 percent up to $995,000, though inventory fell for a second consecutive quarter as the new development supply continued to expand.
Finally, luxury pricing is down across the board, with median sales price down 4.8 percent to $6,423,107, price per square foot down 6.1 percent to $2,868, and average sales price decreasing 8.3 percent to $8,091,277. Miller has noticed, with a softening demand for huge, ultra-luxury apartments, "a shift in the mix to smaller—not small—new development, in the second wave of development after the first wave of $10+ million units." He also noted that bidding wars remain less frequent for larger apartments.
The new development market for co-ops and condos was active, with the number of closed sales surging 69.5 percent and listing inventory rising 6.9 percent, but there were some price drops there too. The price per square foot for new development units fell 18.3 percent to $2,482, while the average sales price declined 26.8 percent to $4,256,992 and median sales price decreased 23 percent to $2,797,500.
Stribling found, despite the softening luxury market and a relatively flat quarter in terms of year-over-year pricing, that the third quarter brought more closings over $5 million than below $500,000. (Yes, that depresses us, too.) Of those closings, co-ops made up the largest share, with 51 percent, and condos totaled 44 percent of all deals.
Condos were the most expensive of the lot, with an average price per square foot of $1,819—though the report mentions that all condo unit types experienced price reductions, with four-plus bedrooms seeing the steepest declines. Also, Stribling says, $20 million-plus condo sales saw the biggest yearly price declines, with the average price per square foot dropping 21 percent.
Corcoran's report, too, notes that "for the first time in almost three years, market-wide prices declined." The reason? "Sellers of aggressively priced properties woke up to the market reality of buyer intolerance for over-priced properties, especially in the luxury co-op and new development sectors," according to the firm's market report.
The median price of a Manhattan studio, according to Corcoran, dropped 8 percent from last year to $475,000; one-bedrooms increased 4 percent to $835,000; two-bedrooms also increased 4 percent to $1.658 million; and three-plus bedrooms increased 5 percent to $3.85 million.
Halstead's arm for new development, the Halstead Property Development Marketing, released its own report specifically analyzing new development this quarter. "In Manhattan, the market sweet spot is under $5 million, and more attainable price points are doing best in both Manhattan and Brooklyn,” says Stephen Kliegerman, president of HPDM. He notes that absorption has gone down significantly in Brooklyn year-over-year, due to a dearth of large projects launching in the borough. (That's set to change soon, with some projects in the pipeline for 2018.)
In Manhattan, Harlem experienced the largest quarter-over-quarter average price per square foot increase for new developments. A 26.4 percent increase to $1,526 is mostly due to closings at Circa Central Park, according to HPDM.
Fred Peters, CEO of Warburg Realty, offered some predictions for the rest of the year in the firm's market report. "We don’t anticipate big changes in the market as we move into the final quarter of the year," he says. "Inventory absorption should remain steady, and well-priced properties will continue to sell, if in two months rather than two weeks. The market will disappoint sellers with even mildly unrealistic expectations, and reward buyers who act to lock in better prices."
But for now, he notes, the market is stable: "Lower than a year ago but not changing much in value from week to week. It’s a good time to do business."
- Douglas Elliman 3Q 2017 Manhattan Sales Market Report [Douglas Elliman]
- Stribling & Associates 3rd Quarter Market Report [Stribling]
- The Corcoran Report Q32017 Manhattan [PFD] [Corcoran]
- Halstead Third Quarter New Development Market Report [PDF] [Halstead Property Development Marketing]
- All market reports [Curbed]