How bad is Manhattan’s luxury condo glut, exactly? There’s been plenty of ink spilled in the past couple of years about supply outpacing demand, and what a glut of high-priced condos without buyers could do to the market.
And now, thanks to a StreetEasy analysis of publicly available and proprietary data on condo sales from 2013—when the latest boom in luxury development began—to 2019, we have an answer: It’s pretty bad!
According to the StreetEasy report, there have been some 16,242 new condos constructed in the city in the past six years. Of those, more than 25 percent are still sitting on the market—including around 40 percent of the condos for sale on Billionaires’ Row, according to an analysis of data conducted for the New York Times by data guru Jonathan Miller.
Miller’s analysis makes StreetEasy’s look downright conservative: “By Mr. Miller’s count, which includes buildings that are still under construction, there are over 9,000 unsold new units in Manhattan,” according to the Times.
And the condos that have sold are not necessarily being used by their buyers. Around 30 percent of luxury condos that have closed have since re-appeared on that site as rentals, according to StreetEasy.
These are sobering, if not totally unsurprising, statistics, putting real estate insiders—a bevy of whom spoke with the Times—on edge. “People don’t realize this is already as bad as it was after Lehman, purely from a supply standpoint,” Mark Chin, the CEO of Keller Williams, told the Times.
Where the glut is happening is also interesting. StreetEasy’s analysis found that the most unsold units are in the Lower East Side: Around 1,069 apartments have been constructed in the neighborhood, but more than two-thirds have not yet sold. The culprit there: One Manhattan Square, Extell’s condo that began closings earlier this year. Its 815 apartments “represent three-fourths of the new inventory” in the neighborhood, according to the Times, and yet by August, only about 20 percent of its condo sales had closed. (An Extell spokesperson told the paper that “hundreds” of contracts have not closed.)
That should worry the developers of three nearby projects in the pipeline. JDS Development Group, CIM Group and L+M Development Partners, and Starrett Development are behind new buildings due to rise on lots adjacent to One Manhattan Square, which will collectively bring around 2,700 new apartments (some of which will be rentals) to the neighborhood.
Other neighborhoods with a high number of unsold units include Midtown—blame Hudson Yards for that—as well as historically more affordable areas like East Harlem and Washington Heights.
The cause of this seems simple enough: There aren’t enough people who can afford to buy these high-priced condos. The median home price is currently $1.1 million citywide, and $2.3 million in Manhattan alone; the median household income, meanwhile, is just shy of $58,000 per year, according to the U.S. Census Bureau. And despite the fact that billionaires keep buying and selling their eight- or nine-digit apartments, there are only so many super high-rollers in the world.
But where this will lead is less clear—particularly with even more new, uberpricey condos coming to market in the next couple of years.
“With investors saturating the market, and more units on the way, New Yorkers can expect this condo hangover to last well into the future,” StreetEasy economist Grant Long concludes in the report. His take: prices may need to fall enough for locals, rather than investors, to opt in—though whether developers will do that remains unclear. “While this may be a difficult reality for many developers and investors to accept, it seems the most likely outcome of the city’s post-crisis building boom.”