Manhattan Housing takes a Fourth Quarter Hit

Stribling & Associates, a New York residential brokerage, today releases the fourth quarter Manhattan Market Report. The report, the only to cover sales, contracts, and inventory levels across the borough, noted this was the weakest performing fourth quarter across all metrics since 2012, when the uncertainty over the impending “fiscal cliff” chilled the nation’s economy.

“Every quarter of 2018 saw a decrease in the number of sales over the same period one year ago, including the most recent quarter,” said Garrett Derderian, Director of Data & Reporting at Stribling. “The striking occurrence now is the number of sales hit a post-crash low. The last time we observed so few fourth quarter sales was 2011.” Total sales, at 1,906, was down 10% from this time last year, and down 25% from a record Q4 in 2015.

The luxury threshold, which Stribling defines as the top 10% of all sales, stood at $4.35 million. Derderian noted, “The luxury market has continued to diverge from the market at-large, as we are still seeing record-setting transactions. Well-heeled purchasers are able to pick up high-value assets at relative discounts and are oftentimes less influenced by outside conditions.” Many legacy contracts, or deals signed in new developments up to two years ago or more, finalized their sales in the fourth quarter, driving up the average price in Manhattan 1.8%, while the median price dropped 4.4%. “In a healthier market, these numbers would move correspondingly,” he advised.

Derderian pointed to total dollar volume as evidence of this shift. “Despite fewer sales than one year ago, total dollar volume increased. In the fourth quarter of 2018, total sales volume was $4.07 billion, up 1.6% from $4.01 billion on year ago.” Still, total volume was down from nearly $5 billion in 2015.

To showcase the degree these high-priced legacy and outlier transactions influenced dollar volume, he added, “By removing legacy contract sales at 220 Central Park South and 520 Park Avenue, along with high-priced outlier sales at 432 Park Avenue, we can create a better picture of where the market truly stands.” Indeed, by Stribling’s calculation, removing the top 15 transactions of the quarter, all located within the aforementioned developments, total volume drops to $3.56 billion, 11.2% lower than one year ago.

For the overall market, discounts continued to rise. In the third quarter of 2018, the average discount for a Manhattan home was 6.4% off the initial asking price. In the fourth quarter, that number grew to 7.9%. However, these discounts were not spread evenly across the borough. The greatest discounts could be found in the Financial District, at 10%. Derderian stated the market is ‘oversaturated with inventory’ as many new developments have been built, with more on the horizon. The smallest discounts, at 5%, were in Upper Manhattan. Derderian cited the market as ‘ripe with opportunity’ for home purchasers and investors.

While sales data provides the best price indicator, Derderian pointed to the significance of contracts signed to determine current velocity of transactions within the quarter itself. “If you look at contracts signed, they were only down 3% from this time last year. However, it was still the least number signed in a fourth quarter since 2011.”

Derderian credited the slowdown to both new development projects and resale properties. “Developers have realized they need to offer more incentives to lure prospective buyers, with so many properties on the market. On the resale side, it can be challenging to convince sellers we are past the cycle-peak. Oftentimes, it takes homeowners longer to come to terms with where the market is at. On top of that, individuals must now compete with developer incentives, most of which resales cannot afford to offer.”

Contract prices are down across the board in all inventory types. On the condo side, Midtown West saw minimal price shifts, largely due to new development in the area surrounding Hudson Yards, which buoyed prices. For co-ops, Upper Manhattan saw slight increases. However, on average, Upper Manhattan properties cost less than half of those in prime co-op markets, such as the Upper East Side.

Across Manhattan, the average property spent 152 days on the market. This was the longest time it took to sell a property in the fourth quarter since 2012, when they averaged 154 days. The time a property spent on the market increased 20% from this time last year.

Inventory in Manhattan continued to increase in the fourth quarter, topping 7,000 units, an increase of 13%. “For certain, there is an oversupply of units on the market,” Derderian reported. The real inventory figure is much likely higher than what is publicly reported, Derderian informed, as some sellers take their properties temporarily off the market around the holidays, only to relist in early 2019.

“Additionally, there is a considerable amount of shadow inventory,” he stated.  Shadow inventory consists of vacant units in new development projects that have been built or are under construction, but are not publicly marketed, although can be sold to an interested buyer.

As for a look ahead, Derderian offered, “The Federal Reserve raised its benchmark interest rate the fourth and final time for 2018 in mid-December. This will certainly impact buyers, directly or indirectly, across all price points.” However, the central bank only predicts two increases in 2019, down from the three previously projected. “As more inventory comes online, as is forecast, sellers will need to adjust expectations to meet the market where it is. New York remains a top global market for real estate, but like the rest of the world, it can only move if the price is right.”

Highlights from Stribling & Associates 4Q Manhattan Market Report:

  • Median sales price was $1,075,000, down 4.4% year-over-year
  • Average sales price was $2,021,992, up 1.8% year-over-year
  • Average price per square foot was $1,460, down 2.6% year-over-year
  • Average days on market: 152, a 20% increase from one year ago
  • There are 7.4 months of supply, up from 5.5 last year
  • 31% of inventory was priced above $3 million
  • 16% of sales were priced above $3 million
  • Market-wide average discount from initial ask was 6.4%

Recorded Sales:

  • There were 1,906 recorded sales to date, an 10% decrease from one year ago
  • Co-ops made up the largest share of closings, with 55%
  • Condos totaled 43% of all deals
  • Condos were the most expensive, with an average PPSF of $1,701
  • 1BR units captured 38% of all sales
  • 4+BRs, with 6% sales, had the highest average PPSF of $1,823
  • Downtown captured the greatest share of closings, with 27%, and was the most expensive market with an average PPSF of $1,728
  • Upper East Side condos recorded the greatest median and average price increases
  • Upper West Side condos measured the greatest median and average price decreases
  • Financial District/Battery Park City condos had the greatest discounts, averaging 10%
  • Upper East Side co-ops experienced the healthiest price increases

Contracts Signed:

  • Total contracts signed decreased 3% to 2,446
  • 1BRs made up 39% of all contracts signed
  • 3BR condos had the greatest condo price declines, with the median price down 5% and average price down 16%
  • 4+BR co-ops showed the greatest price decreases, with the median price down 14% and the average price down 16%
  • Downtown averaged the highest PPSF, $1,809
  • Downtown had the largest apartments at 1,573 square feet
  • Upper East Side condos saw the greatest declines, with the median price down 24% and average price down 12%
  • Downtown condos measured a median price decline of 8% and average price drop of 16%
  • Upper East Side co-ops had no change in median price and an 8% decline in average price

Inventory:

  • There were 7,019 units on the market at the end of 4Q18
  • Condo units made up the largest share of inventory, with 49%
  • Condo units had an average PPSF of $2,108
  • Co-op units were the most affordable, with an average PPSF of $1,271
  • 1BRs made up 30% of inventory
  • The $13M bracket totaled 37% of inventory
  • Downtown measured 29% of all inventory
  • All markets yielded lower prices on one or more metrics
  • Downtown totaled 34% of all condo inventory
  • Downtown condos saw both median and average prices decline by 3%
  • Upper East Side co-ops totaled 29% of the co-op inventory
  • Upper East Side co-ops saw a median price decline of 11% and average loss of 19%

About Stribling & Associates

Stribling & Associates, Ltd. is a premier residential real estate firm with over 300 agents throughout five locations across Manhattan, Brooklyn, and Long Island City. As one of the most renowned brokerages in New York, Stribling uses its respected expertise in the current market to provide individualized services to both buyer and sellers. Stribling agents specialize in the sale of luxury townhouses and cooperative and condominium apartments. The company’s philosophy is based on professional, personalized services coupled with exceptional knowledge of key residential market trends. Stribling Private Brokerage specializes in the discreet marketing of properties over $5 million and commands a prominent market share in that sector of Manhattan residential real estate. Through strategic partnerships with Miami’s Cervera and international estate services firm Savills, Stribling’s global reach extends to more than 700 offices worldwide.

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