The Real Deal New York

Manhattan’s new $2M marker

Average apartment prices soar to record heights, but do they really represent today’s market?
By E.B. Solomont | April 01, 2016 12:00PM
Joey Brucculeri and Elizabeth O'Neill

Joey Brucculeri and Elizabeth O’Neill

Remember back in December, when the median price of a Manhattan apartment crossed the $1 million mark for the first time? Brace yourself because another key metric just topped the $2 million threshold.

The average sales price jumped 18.4 percent to $2.05 million during 2016’s first quarter. That’s up from $1.7 million at the same time in 2015, according to Douglas Elliman’s latest quarterly market report. (The median price for the overall Manhattan market, meanwhile, was $1.1 million, up 17.3 percent.)

Closings of new development units — which on balance fetch more than resales — pushed up overall prices, but those deals represent contracts signed 12 to 18 months ago, Jonathan Miller, founder of appraisal firm Miller Samuel and author of the report, pointed out. In reality, he said, buyers, sellers and brokers are heading into a spring market where demand and prices for new condos are softening and re-sales are gaining traction.

“If you were having this conversation two years ago, you’d say the tie goes to new development,” Miller said. “Now, it’s clearly the resale market.”

On the face of things, new condo sales seem to be moving full steam ahead.

The number of new development sales in Manhattan surged a massive 94 percent to 621 in the first quarter, double the 320 closings from a year earlier. Meanwhile, the median price of new development pads shot up more than 60 percent to $2.6 million during the first quarter (from $1.6 million in 2015’s first quarter).

But Miller said those new development price jumps represent sales at some of NYC’s most expensive new projects, such as Macklowe Properties’ 432 Park Avenue and Rudin Management and Global Holdings’ Greenwich Lane.

Greenwich Lane

Greenwich Lane

The numbers tell a different story on the resale front. In that sector, there were 2,256 closings during the first quarter — a 3.6 percent drop that Miller attributed to low inventory. The median price increased 7.3 percent to $950,000. According to Miller, while that jump is far lower than the price increase seen at new condos, it’s still a significant improvement from the same time in 2015. During the 2015 quarter, the median sale price in the resale market dropped 1.2 percent to $885,000.

In a sign that sellers are holding their ground despite a shift in the market, Miller also found that the listing discount — the spread between what sellers want and what buyers will pay — narrowed to 2.1 percent from nearly 5 percent a year ago. 

Residential brokers said tight inventory and economic headwinds are making buyers and sellers more sensitive.

“Sanity and fundamentals are returning to the marketplace,” said Brown Harris Stevens’ Jean Meisel. “The idea of putting a high price on an apartment and then reducing the ask will be counterproductive.”

In fact, Warburg Realty’s Elizabeth O’Neill said several value-conscious clients, who are looking to spend under $2 million, have homed in on apartments with price cuts. “They believe the price reductions bring the prices into line where they should have been,” she said.

Of course, the lower end of the market has been firing on all cylinders. According to the Elliman report, the absorption rate — the number of months it would take to sell out all available inventory — was 4.3 months for one bedrooms versus 5.9 months for two bedrooms and 7.6 months for three bedrooms.

Eric Levine, a broker at the Level Group, said he’s seen price drops at the high end of the spectrum but that units in the so-called affordable segment — under $2 million — are still sticking to their original asking amounts.

Timur Mone

Timur Mone

“These buyers tend to be buying primarily for owner occupancy, rather than spec or investment,” he said.

Still, Platinum Properties’ Timur Mone said while buyers “are hesitant to overbid for units that are not priced properly,” sellers still wield considerable power. “Inventory is tight,” he said. 

Not surprisingly, Miron Properties’ Joey Brucculeri said there’s still a good amount of confusion in the market. He said his savvy buyers are asking if it’s still a good time to buy. He said buyers are acutely aware of possible market shifts. “One of my clients was turned off by a unit because he thinks the resale value won’t hold due to the new rental building being constructed across the street,” he said.

Warburg’s O’Neill agreed, adding that some buyers are in a “holding pattern.”

“They are afraid to move forward [because] they feel a further correction will take place,” she said, “and they are desperately afraid of overpaying.”