The last of the legacy contracts from the superluxury boom are closing, and the market is beginning to feel the hangover.
As 2017 ended, the average sale price in Manhattan dipped below $2 million for the first time since early 2016. Average prices for Manhattan condos were down 15 percent in the fourth quarter, and the median price was down 4.7 percent year-over-year, according to a quarterly sales report from Douglas Elliman.
The dropoff is largely due to the fact the wave of contracts signed in 2014 and 2015, during the luxury development boom, is coming to an end. That’s evidenced by the much starker declines in the luxury market, where the average sales price slipped 21 percent, from $9.6 million in 2016 to $7.6 million at the end of 2017. In the new development market, the average price fell 17 percent to $4 million.
“The legacy contract pipeline is drying up,” said Jonathan Miller of appraisal firm Miller Samuel, and the author of the report. With fewer uber-luxury new development units to skew prices, the sales numbers in the fourth quarter are a better reflection of the current market. “It’s not that housing prices have fallen; it’s a shift in the mix,” Miller said.
According to a report from Stribling & Associates, the losses in the condo market were unevenly spread throughout the island. Average declines were highest on the Upper East Side and Upper West Side, where the average sales price fell by 15 and 19 percent compared to 2016, respectively. Meanwhile, the Financial District and Midtown West saw increases of 36 and 22 percent, respectively.
The co-op market performed better than condos last quarter. Both the average and median sales price increased by 2 percent to $1.2 million and $770,000, respectively, while inventory fell by 2 percent, according to the Elliman report.
The fourth quarter also saw a drop in sales volume, and the lowest number of deals since 2011, probably due to the uncertainty surrounding tax reform, according to Miller. There were 2,514 condo and co-op sales, down 25 percent from the previous quarter and 12 percent from the final quarter of 2016. It was largely due to a dropoff in co-op sales, with 29 percent fewer sales than the previous quarter, more than double the 13 percent decline in condos.
With fewer sales, inventory edged up slightly to 1.2 percent in resale listings and 3.2 percent for condos.
While it’s unclear how the tax bill will affect sales in 2018, one metric indicates that the Manhattan luxury market could be immune, at least to the mortgage interest deduction cap: in the fourth quarter, 90 percent of all contracts above $5 million were paid in cash; in 2017, it was 83 percent.