April 10, 2018

They’re Now Aggressive In The Opposite Way

A report from Curbed New York. “The federal tax overhaul appears to be affecting New York real estate already. Namely, New Yorkers aren’t buying—the past three months marked Manhattan’s lowest sales quarter total in more than six years as well as the largest annual decline in nine years according to the newly released market reports for the first quarter of 2018. Douglas Elliman’s report shows that despite a strong local economy, ‘unease regarding effects from the federal tax law and an uptick in mortgage rates may have resulted in a slowdown among buyers and sellers.’ There’s also a chance the decline in sales was overstated, the report says, as the number of closed new development sales fell by half while the ‘legacy’ contract pipeline emptied.”

“The median sales price in Manhattan slipped from last year, a slight two percent to $1,077,500. Price per square foot declined much more, 18.6 percent to $1,697. There’s plenty of luxury real estate to go around in 2018: luxury inventory rose at more than twice the rate of the overall market, while the market share of luxury resales was at its highest level in two-and-a-half years. The median sales price for luxury real estate was $5.9 million, a number that declined 15 percent from a year ago. But there were 1,494 listings on the market, 15 percent more than last year.”

From Bloomberg. “Home sales in Manhattan plunged by the most since the recession as buyers at all price levels drove hard bargains and were in no rush to close deals. Sales of all condos and co-ops fell 25 percent in the first quarter from a year earlier to 2,180, according to a report Tuesday by appraiser Miller Samuel Inc. and brokerage Douglas Elliman Real Estate. While just a few years ago, bidding wars were the norm, ‘there’s nothing out there today that points to prices going up, and in many buyers’ minds, they point to being flat,’ said Pamela Liebman, CEO of brokerage Corcoran Group. ‘They’re now aggressive in the opposite way: putting in very low offers and seeing what concessions they can get from the sellers.’”

“Corcoran Group released its own Manhattan market report, showing an 11 percent decrease in completed purchases and a 10 percent drop in sales that are pending. For sellers, to reach a deal in the first quarter was to accept a lower offer. Fifty-two percent of all sales that closed in the period were for less than the last asking price, according to Miller Samuel and Douglas Elliman. Buyers agreed to pay the asking price in 38 percent of deals, but often that figure had already been reduced. Combined, the share of deals without a premium was the biggest since the end of 2012.”

“‘Even with New York real estate prices, you do hit a point in which resistance sets in,’ said Frederick Peters, CEO of brokerage Warburg Realty. ‘People are very anxious about overpaying.’”

“Prices fell the most in the lower Manhattan neighborhoods of Battery Park City and the Financial District, where the median slid 15 percent from a year earlier to $1.21 million, according to Corcoran Group. On the Upper West Side, the median dropped 8 percent to $1.1 million. Neither new developments nor resales were spared from buyer apathy. Purchases of newly constructed condos, which continue to proliferate on the market, plummeted 54 percent in the quarter to 259, Miller Samuel and Douglas Elliman said. Sales of previously owned apartments dropped 18 percent to 1,921.”

“The plunge in transactions is actually a good thing, in that it may serve as a wake-up call for more sellers to scale back their price expectations, said Steven James, Douglas Elliman’s CEO for the New York City region. ‘It sends the sellers a signal that you have to get more reasonable if you want my buy,’ James said. ‘It’s like buyers said, ‘I’ve told you all along, but you wouldn’t listen! Now I have your attention, so let’s talk.’”

From Real Estate Weekly. “Citi Habitats February Rental Market Analysis found that landlords made modest adjustments in pricing and increased their use of move-in incentives during the month. Some 46 percent of rental transactions brokered by Citi Habitats offered a free month’s rent and/or payment of the broker fee to entice new tenants in February – up from 43 percent in January. These incentives remain remarkably high – and while they are most common on high-end product, they can be found on both new construction units and re-rentals alike.”

“‘Landlords are taking a proactive approach to temper resistance to current rents,’ explained Gary Malin, president of Citi Habitats. ‘Through moderation in pricing and the continued use of concessions, they have been able to consistently reduce vacancy rates – while providing attractive opportunities for apartment seekers. There are a lot of great options for tenants, especially on the luxury end of the spectrum.’”

“Douglas Elliman Real Estate February Rental Market Report also showed record or near-record landlord concessions and declining net effective rents across all three boroughs. ‘Record concessions in Manhattan, Brooklyn and Queens are once again the strongest leasing trend for this month,’ said Hal Gavzie, Executive Manager of Leasing for Douglas Elliman Real Estate.”

From The Real Deal. “Residents are beginning to move into Extell Development‘s new luxury rental building at 510 East 14th Street in the East Village and timing couldn’t be worse in theory. In February, an oversupply of high-end units brought apartments with monthly rents at $10,000 or more down by about 11 percent to an average rent of $12,925. Additionally, a Douglas Elliman report found that 36.2 percent of buildings offered tenants concessions to sweeten the deal, as The Real Deal reported.”

“Extell’s 110 market-rate apartments in the building, which can range in size from studio apartments to three-bedrooms, are supposed to rent from between $3,695 up to $12,510 for a three-bedroom unit. The developer is also offering two months free rent.”

“Director of residential sales and leasing, Anna Zarro believes the building is ‘in a really special position given the sub-market we’re in,’ and said applications for the units have been coming in steadily, though she didn’t give exact numbers. ‘There’s not so much new, well-thought out luxury product with the lifestyle considerations that we’re providing.’ Time will tell, but it’s not slowing down Extell’s plans; the company is in final stages of securing its next development site on the Upper East Side, as TRD reported.”