The slowdown showdown

Manhattan’s $5M-to-$10M market is in softening mode as over-priced ‘dead wood’ moves at a snail's pace

Dec.December 01, 2015 07:00 AM

snailsWhen the actor Chris Meloni tried (unsuccessfully) to sell his apartment overlooking Central Park in 2012, he asked an ambitious $12 million for the sprawling pad at the Park Imperial on 56th Street. This time around, listing agent Brian Lewis of Halstead Property offered a piece of contrarian advice to the “Law & Order” star.

“I looked carefully and saw that a lot of other apartments [in the building] weren’t moving,” said Lewis, who urged Meloni to go for a lesser price of $8.9 million, which he got in September, after three months on the market.

If the apartment had listed for $11 million or $12 million, it would “still be on the market,” Lewis said.

While the slowing of the ultra-luxury market has been well-documented, some sellers are dismayed to see that even buyers who can afford to spend up to $10 million on a New York City home are looking for a good deal. And the yawning divide between buyers and sellers has left pricey homes sitting on the market for months on end.

In fact, more than 70 percent of the listings priced between $5 million and $10 million that are currently on the market have had a price cut at some point, according to data compiled for The Real Deal by listings portal StreetEasy.

“Sellers in the last year have become more disconnected with the market, meaning they’re more optimistic and aggressive in their pricing,” said Jonathan Miller, president of real estate appraisal firm Miller Samuel. “There’s a lot of dead wood on the market, despite the low inventory. There’s product that’s just wildly overpriced and won’t sell.”

By StreetEasy’s count, there are some 700 properties for sale in Manhattan asking between $5 million and $10 million. The largest concentration of those properties is Downtown, where there are 296 listings, followed by the Upper East Side, with 177 listings, and the Upper West Side, with 105 listings.

Brokers said that in recent months, classic co-ops on Fifth and Park avenues have lingered on the market, either because buyers are looking elsewhere or because they are overpriced.

Lewis said he advises sellers not to take cues from apartments in their building that may be sitting on the market. (Or worse, he said, from shiny new condos that come with big price tags.)

“If you’re pricing something based on your neighbor’s exuberant sale in the winter or spring of 2014, you may want to pause and know you have fewer buyers looking right now,” he said. “You have a leaner audience.”

But not all sellers have gotten that memo.

No need to pounce

According to Miller Samuel, during the third quarter, Manhattan listings priced between $5 million and $10 million saw average discounts of 0.2 percent — down significantly from the 4.1 percent discounts they were seeing in 2013.

Brown Harris Stevens agent Lisa Lippman said there’s a smaller pool of buyers who can — and will — spend up to $10 million for a New York City pad, and those buyers have little tolerance for overpricing.

“If someone has a budget of $5 million, they may look at $5.5 million but not at $6 million,” said Lippman. “If you overprice by enough, you bring in the wrong buyer. They’re disappointed in what they see — the apartment is too small, too dark or needs work.”

There’s no doubt that it’s taking longer to sell high-end apartments. Manhattan apartments asking between $5 million and $10 million spent an average of 144 days on the market during the third quarter. That was up more than 118 percent year-over-year, from just 66 days a year earlier, according to Miller Samuel.

As the lower end of the luxury market shows, it’s not for lack of interest.

In the $1-million-to-$3-million price range, apartments are selling so fast that buyers barely have the chance to mull over their decision before making an offer (see related story on page 49).

Lewis said his high-end buyers have quieted in recent months as new inventory has started to pile up. “They’re still there, and they’re still looking, but they don’t feel a real need to pounce,” he said.

He recently sold a $5 million condo in the West 70s. The buyer “moved at her own pace” and returned the signed contract after a week and a half, instead of the more typical four-day turnaround.

“Last year, sellers [in this price point] were saying, ‘Sign now in 36 hours or we have another offer.’ But there’s really been an inherent shift,” he said.

Noah Rosenblatt, founder of analytics firm Urban Digs, said he’s seen a slowdown in sales across all price points, but the “higher end shifts down at a much fiercer pace than the lower-end counterparts.” That’s partly because prices appreciated too much at higher levels and partly because many of the new condos hitting the market are in this price range, which gives buyers more choices.

Yet if there is a bright spot in this market, it might be the demand surrounding new developments. Buyers are “enamored” with new products, said Ben Shaoul, founder of Magnum Real Estate. “You want the newest iPhone, newest car, latest model computer. And there’s always going to be a premium paid for new product.”

In fact, the number of new development closings between $5 million and $10 million jumped to 62 during the third quarter from just nine during last year’s third quarter — a massive 588 percent spike. Miller said those sales reflect the luxury product that’s been developed in recent years and which saw contracts signed six months ago or earlier.

But with regard to what’s happening now, the more telling statistic is the number of contracts being signed as opposed to closings. According to Halstead Property, there was a 20 percent drop in the number of contracts signed in September on properties under $20 million. While that is a broad swath of the market, sources say it’s clearly impacting the $5-million-to-$10-million bracket.

BHS’ Lippman said the high-end market started to soften earlier this spring. “There was pushback from buyers because people started feeling there was a lot of overpricing,” she said. “Inventory started building up, and then buyers said, ‘It’s been on so long, I don’t have to do anything now. I’ll wait until the price drops.’”

Sellers, it seems, are still stuck in the frenzied mindset that existed in 2013 and 2014, when they controlled the market. At that time, many were aspiring to the astronomical sums they were seeing at new condos and believed their $8 million apartments were suddenly worth $15 million.

Today, the reality is different.

Robin Schneiderman, director of new business development for Halstead Property Development Marketing, cautioned that within the $5-million-to-$10-million category, there are multiple submarkets. Within those submarkets, prices can vary wildly based on a building’s view, amenities, finishes and size.

For example, he said, more than half the units at 111 Murray Street — which is being marketed by Douglas Elliman Development Marketing — are priced above $7 million, but the building is 65 percent sold thanks to sweeping views, design and amenities, including exclusive access to a private-jet concierge service.

While an 80-year-old building on the same block wouldn’t command the same prices, “For a Downtown new development, $3,000 per foot is the highest end of the market,” said Schneiderman. “They can achieve [that] if they go above and beyond.”

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