The crumbling New York City real estate market has continued apace during the third quarter, after more than half of homes sold in Manhattan during the second quarter closed below asking price – the worst Q2 tally since 2009. And while real-estate brokers had hoped that the seasonal shift during Q3 would help lift sales as a flood of higher-quality offers hit the market, it appears canny buyers – wary of being left holding the bag after nearly a decade of asset appreciation – are refusing to indulge sellers’ lofty asks.
To wit, NYC home sellers slashed prices on almost 800 listings during a single week this month, the largest wave of discounts in at least 12 years, per Bloomberg.
In the week through Sept. 9, there were 774 homes in Manhattan, Brooklyn and Queens that got a price cut, the most for any seven-day period in data going back to 2006, according to a report Friday by listings website StreetEasy. The previous weekly record was in March 2009, during the global recession, when 713 properties were reduced.
With another post-Labor Day wave of listings expected, sellers are experiencing a “gut check” as they realize they must lower prices to the point of demand, because the days of foreign (mostly Chinese) buyers willing to pay the “Chinese premium” are over.
Sellers with older listings are adjusting expectations just as a wave of newer properties hits the market – customary in New York after Labor Day. In that same September week, Manhattan got 662 additional listings, the third-highest total for any week in StreetEasy’s data.
“It’s a big gut-check for sellers,” said Grant Long, senior economist at StreetEasy. “We’re at a period in the sales market where sellers have been incredibly ambitious with the prices they’re asking. They’re having to come down and bring prices to where demand actually exists.”
As we pointed out earlier this year, sales of luxury apartments (those that cost $5 million or more) plummeted more than 31% over the first six months of this year, forcing sellers to slash price (and developers, who have neglected the sub-luxury market in favor of supposed higher margins at the top end, to eat losses).
Steven James, CEO of Douglas Elliman, provided an apt summary of the dynamics at play in the contemporary NYC housing market.
“It’s about perception – that the market went way up, and it went way up real fast, and it’s not happening anymore, and I am not going to be the fool who gets burned by overpaying,” said Douglas Ellman CEO Steven James, who adds that buyers “do believe that over time, the market will go up, but it’s not going up right now.”
Meanwhile, in the real world outside of New York, the familiar problems remain: with housing starts still lagging expectations, the housing market appears stuck in a vicious cycle. Low development and supply are squeezing prices higher, which are rising more than 2x faster than wage growth across the nation, and as a result most working and middle-class Americans still can’t afford to buy a home.