NYC Q2 Market Report


MANHATTAN MARKET DATA

The numbers are in — and it is prime time for buyers. Q2 2018 Manhattan market data indicates that buyers at most price points, especially those in the $1M - $3M segment, are increasingly demanding negotiability on pricing, and are willing to wait to get it. Inventory levels have reached new peaks this quarter (up 17% year-over-year) due to decreased contracts signed and closings in combination with the seasonal increase in new listings. This lack of urgency among buyers is likely the result of numerous factors, including uncertainty about the effects of the recent tax reform, concern about interest rates, a continued softening in rental prices, and/or a combination of these factors which is leading many buyers to bet that prices will come down.

Overall, Q2 2018 saw an 14-19% decline in number of closings and a 5-9% decline in number of contracts signed, with specific numbers varying depending on the source. Median sales prices declined 4.8% as the median days on market increased 13%. For Manhattan condos, there was a 21% year-over-year decline in the number of closings, primarily attributable to 35% fewer new development closings compared to last year, and an 8% decline in median sales prices. Co-ops also saw a 16% year-over-year decline in number of closings, and a 21 day increase in median days on market (90 days up from 69 days) driven primarily by co-ops priced between $1-3M. The median co-op sales price also saw a 2% decline compared to Q2 2017.

The biggest disconnect between asking prices and actual sale prices can be found in Midtown West (-20% with $1,916 per sq. ft. being the asking price, and $1,546 per sq. ft. being the actual selling price), followed by the Lower East Side (16% difference), Midtown East/Murray Hill (14% difference), and Chelsea (14% difference). The neighborhood that has the smallest disconnect is the East Village, with only a 2% difference between asking and selling prices. This is followed by the West Village (3.6% difference), SoHo (4% difference), and the Upper West Side (4% difference). The small disconnect can be attributed to these neighborhoods' relative popularity but also to price reductions to bridge the gap.

Manhattan Contracts Signed Down Despite Growth in Ultra-Luxury Segment

Given the aforementioned concerns of core purchasers, the number of contracts signed during 2Q 2018 reflected a 4.7% year-over-year decline. Interestingly, 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.

Manhattan Closings Down, Particularly For New Development and Coops

There were 1,001 condo closings this quarter, representing a 18.8% 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 4.8% 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 increased 13%. Furthermore, the median sales price of a co-op declined by 2% year-over-year to $810K.

BROOKLYN MARKET DATA

Brooklyn Market Remains Strong

Relative to Manhattan, the Brooklyn market has remained strong. While overall inventory is up slightly (by around 3%) and days on the market has increased as absorption has slowed, this is mostly on the higher end of the market and averages price per square foot increased 1% from last year's figures. Borough-wide figures are somewhat misleading though: Prices actually increased across product categories but more and more buyers migrated toward historically lower-priced areas impacting overall numbers.

Inventory

With regards to co-ops, the number of listings totaling 561 in 2Q 2018, represented a 1% decline from 2Q 2017, driven mostly from a 6% decline in inventory priced below $1M, which accounted for 83% of co-op inventory. This decline in sub-$1M inventory was offset by a 34% increase in inventory priced above $1M. As a result of this influx of inventory priced above $1M, the median asking price of a co-op increased by 15% year-over-year from $485K to $560K. With regards to single family homes, inventory declined by 12% year-over-year to 270 listings in 2Q 2018 from 305 listings in 2Q 2017, driven by a significant reduction in homes asking less than $1M (-40% y-o-y) as buyers absorbed lower-priced inventory during the quarter. Similar to the co-op market, as a result of less inventory available at lower price points, the median asking price of a single-family home increased to $1.9M in 2Q 2018 from $1.7M in 2Q 2017.

Contracts Signed

The number of condo contracts signed during 2Q 2018 totaling 496 reflected a 3% year-over-year decline. Condos priced under $1M, which represented 45% of total contract velocity, experienced a 14% year-over-year decline from 263 contracts last year to 225 contracts this period. Particularly, neighborhoods such as Williamsburg, which accounted for the largest share of contracts signed (19% of total condo contracts), saw contract velocity dip by 25% year-over-year from 123 contracts signed in 2Q 2017 to 92 contracts in 2Q 2018, mainly attributable to the looming L-train shutdown.

Closings

Condo closings declined by 15% year-over-year from 708 closings in 2Q 2017 to 599 in 2Q 2018, driven mostly by clustered closings at numerous new developments during 2Q 2017. New Development projects such as 550 Vanderbilt, The Boerum, Austin Nichols House, 465 Pacific Street, 251 First Street, and 51 Jay Street accounted for 200 closings alone during 2Q 2017. 2Q 2018 closings were further exacerbated by a broader decline in contract velocity intra-quarter driven by lingering uncertainty for buyers in the core price segment of the condo market. Co-op closings totaling 318 during 2Q 2018, represented a 5% year-over-year decline, primarily driven by a 19% year-over-year decline in co-op closings priced between $1M - $3M. Predominant co-op neighborhoods such as Southwest and Southeast Brooklyn, which accounted for 50% of total co-op closings, yielded mixed year-over-year results. In Southwest Brooklyn, where the median sales price increased by 5% year-over-year to $341K, co-op sales were up 3%. On the other hand, co-op closings in Southeast Brooklyn, which had a more sizable increase in median sales price of 14% y-o-y to $359K, saw a 15% decline in the number of closings, as demand tapered in response to higher prices. Single-family closings declined by 24% year-over-year from 238 in 2Q 2017 to 182 in 2Q 2018. This decline was primarily driven by homes priced between $1M - $3M, which saw a 35% year-over-year decline in closings from 101 in 2Q 2017 to 66 in 2Q 2018.

MARKET DATA FROM OUTSIDE THE CITY

Flat or Declining Sales Outside the City

In Westchester and Hudson Valley Region, sales are down or flat in more regions with signs that inventory is stabilizing. The lackluster market in these areas is most likely due to the tax changes which have severely limited property tax deductions, which will disproportionately affect these areas which have high property tax rates.

We have heard similar things from our New Jersey partners, namely a lack of contract activity and increased days on the market.

For an even more detailed report, take a look at Compass's full Manhattan report here, and the full Brooklyn report here.

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