Manhattan Real Estate Market Update Q4

Anthony Guerriero, Jan 31, 2018 3:10:10 PM

The fourth quarter of the 2017 real estate market in Manhattan is one best described as stable, with the last three out of four quarters showing an increase in closed sales activity. 2017 was a much better year than 2016, although there has been a marked drop in the number of signed contracts in the quarter year-over-year that can be primarily attributed to non-market factors such as tax reform and political climate.

When looking more closely at the property types, however, we see significant variation. Resale co-ops segment was the most active with a third consecutive quarter of growth in sales. Signed contracts for resale condos, however, have been hurt by continuing high prices, and new development closed sales were faced with a 12% decrease due to the current cycle and timing of building developers. With all of this in mind, and uncertainty around the new tax reform, we can surmise that Manhattan real estate is slowly becoming a buyer’s market.

Resale Condos

  • The average price per square foot was $1,759, flat year over year.
  • The number of sales in this market fell 3% to 929, the lowest since Q4 of 2011.
  • Days on the market was 116 days, flat year over year.
  • The inventory declined 4% to 2,485 units for sale.

Uncertainty regarding tax reform effects played out in Q4 in the resale condo sector, causing a decline in sales activity and flat prices. For the second consecutive year, the market underperformed and saw the fewest sales since 2011. Inventory of available units fell correspondingly with a 3% decrease across the board. Many are pointing to a disconnect in pricing, as active inventory was saddled with a double-digit premium per square foot when compared to Q4 closed sales.

Resale Co-ops

  • The average price of a Co-op was $1.26 million
  • The average price per square foot was $1,167, representing a 1% increase over last year
  • The number of sales in this market rose by 4%, up to 1,733 properties.
  • Days on the market was 88 days, a 5% decrease over last year.
  • Inventory rose by 15% to 2,824 units for sale.

Resale Co-ops ended 2017 as the year’s best selling real estate product, continuing to outperform other options by increasing in sales for the third consecutive quarter. Additionally, the high demand for co-op resales found the average length of a property remaining on the market dropping by 5%. In so doing, the market responded by increasing the available inventory by 15%.

New Development

  • The average price of a new development condo was $3.92 million.
  • The average price per square foot was $2,253, which dropped 17% over last year, as the number of super-luxury and ultra-luxury closings declined.
  • The number of sales in this market fell 12%, from 527 to 463.
  • The inventory grew by 30%, with 1,074 units now listed for sale.

As one might expect, the new development condo market numbers tend to increase or decreased based on the progress of ongoing building construction. No new buildings commenced closings in the 4th quarter and a number of large developments, such as 125 Greenwich and 91 Leonard launched sales, causing inventory to soar by 30%.

Luxury

  • The average price of a luxury apartment was $7.24 million in Q4.
  • The average price per square foot declined 12% to $2,625.
  • The luxury threshold was $3.882M.

The luxury segment is determined by the top 10% of closed sales based on price. The entry-level price, or “threshold”, fell by roughly $500,000, ending at $3.882 million. Additionally, the average price dropped by 10%, and price per square foot fell by 12%. These drops can be attributed to a shift in closings in the quarter from ultra-luxury and super-luxury closings, such as 432 Park and Greenwich Lane, at the end of 2016, to more modest luxury buildings in outlying locations, such as One West End and 252 East 57th St. However, we have seen a more competitive market with an increased inventory, leaving sellers with little other option than to drop the prices to satisfy customer demand. This represents a real potential for investors in the luxury segment, as these luxury units are low and ready to move.

In conclusion, the Manhattan real estate market remains stable and 2017 was healthier than 2016. That being said, the market continues to show trends skewing toward the side of the customer, or in other words, becoming a “buyer’s market”. An increase in available inventory, new development projects, and a lowering of the luxury threshold have created a market in which owners and developers are inclined to discount prices to keep up with dwindling sales. Because ofuncertainty with the tax reform, 2018 will be a good year for the buyer, and not so good for the seller. For those standing on the sidelines, it might be a good time to enter the market, before the positive effects of Trump’s tax reform kick in.

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