Back by Popular Demand - Q2 2018 Manhattan Market Report

It is official, we have shifted to a buyer's market in Manhattan due to a large increase in available inventory and decrease in transactions. 

Well priced listings are still moving quickly in all segments though we have noticed higher velocity primarily in resale neighborhoods (East Village) vs. those currently saturated with high end new development (Midtown West). 

The new report includes a deeper neighborhood by neighborhood breakdown. Highlights below or click here for the full report. 

01. National Housing Indicators

Since 2015 the Case-Shiller 20-City Composite Home Price Index has outpaced New York's Index. As the index analyzes re-sales, it is clear that over the past three years the premium of New York resales dipped below that of the 20-City Composite. As of March 2018 the premium for resales in New York declined, while the 20-City composite continued to increase. This is in keeping with the general trend of the overall housing market, where nationally the market is undersupplied resulting in increased premiums for resales as new inventory has not kept pace with demand.

02. anhattan Inventory

Inventory levels reached new peaks in 2Q 2018 as buyers at most price points, especially those contemplating homes in the $1M - $3M segment, exhibited patience as a result of numerous factors: (1) the recent tax reform that reduces deductibility of state and local taxes, including property tax in New York, (2) gradually rising interest rates, which directly reduces affordability for leveraged purchasers, and (3) awareness of potential market weakness / perceived over-supply in the core luxury market.

03. Manhattan Contracts Signed

Given the aforementioned concerns of core purchasers, the number of contracts signed during 2Q 2018 totaling 2,605 reflected a 5% year-over-year decline. However, in what seems like a paradigm shift, the $10M+ price segment was the best year-over-year performing segment of the market this quarter. In fact, the 61 total contracts signed this quarter last asking $10M+ represented a 56% year-over-year increase – a long-awaited and pivotal moment for the ultra-luxury segment since the slow down that began in 2016. Sellers have finally demonstrated their willingness to discount prices in line with the current market and reset their expectations from peak pricing in 2014 and 2015. However, although this quarter shows positive signs for the ultra-luxury segment, discerning buyers are cognizant of the overarching disconnect between the amount of $10M+ inventory (441 active listings as of 2Q 2018) and $10M+ demand (215 contracts signed during the last twelve months). With two years of remaining $10M+ supply (based on trailing twelve months contract velocity, excluding shadow inventory) and a deep pipeline of luxury product expected to come online in the next two years, there will continue to be volatility as supply/demand dynamics attempt to stabilize.

04. Manhattan losings

There were 1,001 condo closings this quarter, representing a 21% year-over-year decline, primarily attributable to fewer new development closings (-35% y-o-y) and continued hesitation from prospective purchasers. Manhattan’s median sales price declined by 8% year-over-year to $1.685M, driven by a higher proportion of closings this quarter attributable to resales versus new development when compared to last year. Of the 1,274 closings in 2Q 2017, about 40% occurred at new developments and of those new development closings, 65% reflected contracts signed in 2016 or earlier. 

There were 1,165 co-op closings this quarter, representing a 16% year-over-year decline, primarily attributable to a 17% year-over-year decline in closings below $3M. Given the lackluster contract velocity of co-ops last quarter (1,092 contracts signed in 1Q 2018, 23% y-o-y decline), which would have represented a portion of closings this quarter, exacerbated by lingering uncertainty for purchasers in the $1M - $3M price segment, it is not surprising to see a year-over-year decline. In keeping with this trend, median days on market for co-ops increased to 90 days from 69 days in 2Q 2017 driven by co-ops priced under $1M (77 days in 2Q 2018 vs. 57 days in 2Q 2018) and co-ops priced between $1M - $3M (106 days vs. 84 days). Furthermore, the median sales price of a co-op declined by 2% year-over-year to $810K.