Manhattan high-end real estate showed new signs of cooling during the second quarter, with secondary prices sliding and units staying on the market longer, according to a new report released on Tuesday.
The average resale apartment price in Q2 fell 5% from the comparable quarter last year, to $1,641,989, Brown Harris Stevens (BHS) said in its quarterly survey of New York City real estate.
During that time frame, resale closings stagnated, and sellers offered their biggest price discounts in nearly a decade, BHS said.
“Resale apartments sold in the second quarter spent an average of 131 days on the market,” the firm noted in its report. “This figure was 27% more than a year ago, and the highest level in seven years. Sellers offered their biggest price discounts in nine years, receiving on average 96.1% of their last asking price.”
In an interview with Yahoo Finance, BHS’s CEO, Bess Freedman, said that “Buyers are in the drivers seat” as real estate prices moderate.
“If we want to see the market improve, sellers have to adjust their prices,” Freedman added.
Manhattan cooperative prices averaged $1,337,649, falling 4% from the year-ago quarter, while 3+ bedroom apartments plunged 10%, BHS said.
Only studio co-op units, which rose compared to 2018, were spared the wrath of falling prices.
Condominiums, on the other hand, saw upticks in price. There was a 13% shift upwards for two-bedroom condos since this time last year.
Much of the market’s underlying weakness was offset by a surge in new development closings, BHS said.
That segment saw an 11% jump in sales compared to the comparable period in 2018, and a 3% hike in the overall average apartment price, while the number of closings climbed 71% from this time last year.
Freedman noted that this final stat may be an outlier, because of a motivation to finish deals before changes to the mansion tax kicked in.
BHS’s report is the latest sign of a leveling off in New York home prices, an effect that’s also being seen nationwide — even with rock-bottom interest rates that make buying a relatively attractive prospect.
Although some of the froth is coming off the Big Apple’s home prices, the luxury market continues to be saturated—and is driving up average prices.
Two new high-end buildings in hot neighborhoods,15 Hudson Yards and One Manhattan Square on the Lower East Side, have driven much of the new luxury sales this quarter, BHS found.
Brooklyn, Long Island City stay hot
Indeed, BHS’s data showed the rest of Manhattan’s luxury prices are still at eye-popping (and wallet-busting) levels. Average sale prices topped $2 million while the median sale price of $1,250,000 eclipse prices in the four other boroughs.
Yet some real estate professionals say Manhattan is cooling because the outer boroughs — namely Brooklyn and Long Island City, Queens — are increasingly popular.
“Interest rates are at an all time low...and with that we’re seeing people coming out to buy” in Brooklyn and other “trendy areas,” said Jared Goodloe, a real estate agent with Halstead Real Estate, who has clientele in both Brooklyn and Manhattan.
“We’re seeing a lot of people coming in from the city to Brooklyn,” Goodloe added. “Long Island City is becoming highly desirable because it’s accessible to the city,” while Brooklyn is an easy commute for residents working in lower Manhattan, he added.
“There are a lot of things in Brooklyn like tax abatements and incentives...its more attractive” than in Manhattan, Goodloe said.
BHS’s Freedman agreed, saying that “people are seeing these places as new opportunity zones. That’s good.”
New York’s move toward becoming more of a buyer’s market is good news for people attempting to put down more permanent roots in the city. Still, rents across the city continue to skyrocket.
According to data from real estate listing site Zumber, one bedroom apartments in the city hit a median rent of $2,980 in June, a 4.6 percent spike from May. New York has the second-most expensive rental market in the country, trailing only San Francisco.
As the buyer’s market cools and the renter’s market stays hot, fewer renters believe they will own a home at any point in their lives, according to a recent survey conducted by Freddie Mac.
Of the renter’s surveyed, 82 percent reported renting to be cheaper than buying.
While the renter’s market and the proliferation of housing options in outer boroughs has changed the NYC housing market significantly, Freedman remains generally optimistic about the direction.
“I think 2019 will be better than 2018,” she said.
Calder McHugh is an Associate Editor at Yahoo Finance. Follow him on Twitter: @Calder_McHugh.