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Now The Market Has Been Flipped On Its Head

A report from Mansion Global on New York. “The impact of the dearth of new development transactions was felt most in the Financial District and Battery Park City, which saw sales plummet 41% compared to the same time last year, while median prices dropped 22% to $960,000, according to Corcoran. ‘We are experiencing one of the most pronounced Q3 slowdowns in nearly 10 years,’ wrote Elizabeth Stribling-Kivlan, Stribling & Associates’s president, in the report. In fact, it was the worst performing third quarter since the fall of Lehman Brothers in 2008, the report said.”

“Transaction numbers were further dragged down by huge declines in new-development sales. New condo closings fell around 40% according to Corcoran, Halstead and Brown Harris Stevens, and by 21.9%, according to Douglas Elliman.”

From CNBC. “Prices fell, inventory jumped and discounts were higher and more common. Real estate brokers say the Manhattan real estate market is suffering from an oversupply of luxury units, a decline in foreign buyers and changes in the tax law that make it more expensive to own property in high-tax states.”

“There is now a seven-month supply of apartments, up from five months in the third quarter of 2017. While the top of the Manhattan market has been under pressure for over a year, the third quarter added a new problem: stress in the market for entry-level apartments.”

“Most of the growth in inventory in Manhattan in the third quarter was in studio and one-bedroom apartments, said Jonathan Miller, CEO of Miller Samuel. About half of Manhattan real estate is purchased with cash and half with mortgages. Since a majority of entry-level apartments are purchased with mortgages, sales fell with rising interest rates.”

“‘Before, it was the top of the market that was weak and the bottom was strong,’ Miller said. ‘Now the market has been flipped on its head.'”

“But the high end also continues to come under pressure from the supply of new condo towers being built in Manhattan —many of which have been pulled off the official market and are now sitting idle as ‘shadow inventory’ that will keep a lid on prices.”

“The average sales price in Manhattan’s luxury market — the top 10 percent by sales price — dropped 12 percent in the quarter and inventory soared by 27 percent. Sales of new development fell by 22 percent.”

“Miller said that overall sales levels and prices are still on the higher side or ‘right in the middle’ of their historical averages. But he said that after the parabolic peaks in 2014 and 2015, a correction was inevitable.”

From Business Insider. “Until recently, it was mostly buyers in Manhattan’s luxury housing market who were spoiled for choice. The aggressive price cuts and vacancies in the priciest apartments that cost over $1 million have been well documented.”

“But even the cheapest homes are now struggling to sell, according to a report by Douglas Elliman Real Estate. It showed the number of sales fell for a fourth-straight quarter, by 11%, during the July-September period on a year-over-year basis.”

“The lower end of the market is starting to soften, too, and this represents a reset taking place, according to Jonathan Miller, CEO of the real-estate appraiser Miller Samuel and author of the report.”

“‘Soft at the top is still there,’ Miller told Business Insider. ‘It’s just that we are starting to see softness at the starter end of the market, and that’s relatively new.'”

“The availability of housing by apartment size helps to tell the story of buyers’ reluctance (or inability) to settle for prevailing prices. Inventories rose by about 21% year-on-year for one-bedroom apartments. But that rate slowed to 8% for two-bedrooms, and 5% for four-beds, Miller said. This trend, Miller said, ran counter to the last couple of years when more buyers pounced on smaller and cheaper apartments.”

“New York is just one of several large US cities where buyers are getting more deal-savvy because prices have soared. Nationally, home prices have climbed above their pre-crisis level and at a faster rate than wages. That’s hurting would-be buyers; monthly existing-home sales have failed to cross the 5.72 million level reached in November 2017.”

“‘Existing home sales have peaked,’ US economists at Bank of America Merrill Lynch said in a note last week, adding that affordability largely explained the slowdown.”

“What this means is that buyers who are more patient in their hunt might just find a homeowner who will budge. According to StreetEasy, the number of home sellers who cut their asking prices reached its highest level since 2009 during the week after Labor Day.”

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This Post Has 21 Comments

  1. ‘he said that after the parabolic peaks in 2014 and 2015, a correction was inevitable’

    That’s about as close as we’ll see an admission of a bubble. NYC/Manhattan in 2018 is as clear an example of a mania as has ever existed, yet the media won’t admit it. Blind Freddie!

  2. “‘Soft at the top is still there,’ Miller told Business Insider. ‘It’s just that we are starting to see softness at the starter end of the market, and that’s relatively new.’”

    Translation: No one wants to pay these prices without the promise of eternal appreciation baked in.

    1. Wall Street doesn’t seem to have figured out that Zimbabwe Ben Bernanke and Yellen the Felon are no longer driving the train.

    2. That’s what I was saying about these many metros which were hot now not, with the spiraling inventories and price slashing. All these “buyers” (which aren’t living in cardboard boxes, BTW) are behaving more like speculators. Prices down, supply up, and they generally turn away. Now just who turned these housing markets into casinos?

      1. it is amazing how the housing market is >50% about psychology.

        Remember how granite counter tops are not good enough – it has to be quartz for the people that care

  3. ‘The lower end of the market is starting to soften, too, and this represents a reset taking place’

    Now serving crow, buffet style, to the shortage people.

    1. “Miller said that overall sales levels and prices are still on the higher side or ‘right in the middle’ of their historical averages.”

      They can’t stop lying long enough to eat crow.

  5. “Keeping a lid on the prices”. IMO, that’s what turns a sellers market into a buyers market. Instead of the UHS looking at the comps to see what’s sold, they look at the comps of what’s sitting. Simple as that, and I’m not an Expert and Analyst.

  6. “Financial District and Battery Park City, which saw sales plummet 41% compared to the same time last year, while median prices dropped 22% to $960,000…”

    A 22% drop in median prices is no joke. And this is in the top market in the US. Imagine what’s going to happen to prices of those crap shacks way out in BFE.

      1. Inconceivable! Surely if the market would’ve peaked two years ago and been falling ever since, that bastion of truth and light called the MSM would’ve alerted us to such a momentous development. I mean they give us the news, right?

        1. Depends on what you call mainstream. NYC probably has more media than any city that is dedicated to or frequently reports on real estate. I read all that stuff of course and the cracks showed up first in these somewhat obscure industry medias. Developers talking about how “nothing was selling”, etc. Broker reports, that sort of thing.

          The big media, WSJ and NYT, drop a crumb here or there but are largely caught up with covering the New Red Menace and can’t be bothered with the a$$-pounding people there are taking. But one example of how under reported the scale of this bubble burst was in early 2016 I documented a near 50% loss on pre-construction condos in NYC and Miami, in the same week. The one in Manhattan was sold to a woman billionaire. It had cost her $15 million and she never lived in it. Soon after it was finished she dumped it. Now you would think losing half would draw calls of a bubble, but these stories are tamped down so as not to spook the herd. Until it gets too loud to hide that is.

          1. Looks to me like the herd creatures have belatedly stopped grazing on the green shoots sprouting from the bovine excrement the MSMS flings across their pastures, and are now getting spooked as they look up to see the first stirrings of what will quickly be a panicked stampede to the corral exists.

    2. does anyone know what the 1) condo fees, 2) property taxes are. Say for a 1000 sq ft apt in the financial district. Say for a very nice but not super upscale condo

  8. “Inventories rose by about 21% year-on-year for one-bedroom apartments. But that rate slowed to 8% for two-bedrooms, and 5% for four-beds, Miller said. This trend, Miller said, ran counter to the last couple of years when more buyers pounced on smaller and cheaper apartments.”

    – KEEP BUILDING BOYZ

    You mean they built a bunch of safety deposit box in the sky for speculators without thinking of the average family demand? Which family is gonna buy a 1 BR box?

    1. If they get cheap enough maybe people will buy 3 of them next to each other and take out some walls.

  10. Chinese Developer Struggles in Brooklyn, Other Major US Projects
    Wall Street Journal-8 hours ago
    The project has four completed buildings, a mix of luxury condo units and affordable rental apartments, with roof decks, fitness centers and some ground floor …

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