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Sellers Chop Prices and Buyers Feel Less Urgency as NYC Real Estate Cools

By Amy Zimmer | July 6, 2017 5:41am
 The library/office in a 3,480-square-foot four-bedroom townhouse in a boutique condo at 55 Vestry St. in Tribeca, listed by Douglas Elliman for $7.285 million.
The library/office in a 3,480-square-foot four-bedroom townhouse in a boutique condo at 55 Vestry St. in Tribeca, listed by Douglas Elliman for $7.285 million.
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Douglas Elliman

MANHATTAN — In the current real estate market, bidding wars are less common, there are fewer all-cash deals, units are languishing longer on the market and sellers are chopping prices a bit more than a year ago, experts say.

But these cooling conditions do not necessarily translate into bargains.

In Manhattan, homes sold, on average, for about 6 percent less than their last advertised price, according to a report on second quarter sales data released Thursday from Douglas Elliman

That was nearly three times higher than what it was a year ago, at 2 percent, and tied the highest listing discount in five years.

Sellers are adjusting their prices as the number of days that units remained on the market jumped more than 21 percent to 108.

“Buyers are just sitting,” Elliman report author Jonathan Miller said, marking a stark contrast to the frenzied open houses of 2015. “It’s a more sustainable market. The conditions reflect more realistic expectations by all parties.”

Still, Manhattan’s median sales price — representing the midpoint of the market — jumped 7 percent to a record $1.189 million, and the average sales price hit a record $2.189 million, the Elliman report found.

“We’re not seeing the insanity of 2015, but we’re still seeing this upward pressure on prices,” Miller added.

Bidding wars haven't disappeared altogether, but the number of deals going for over the asking price dipped nearly 2 percent from the same time a year ago, to roughly 14 percent of the overall market share.

Along with that, the share of all-cash deals dropped to a new low since Miller began keeping track of such data in 2014.

“Cash was the vehicle to win bidding wars,” Miller said, noting that many buyers try to gain leverage by paying in cash and then refinancing after the closing.

The dip in all-cash sales also reflected reduced activity in the very high end of the new development market where cash is king, Miller added.

Bidding wars continued to be more common for smaller units, in general, and especially for homes priced under $1 million in Brooklyn, according to Frederick Peters, of Warburg Realty.

But even in these situations, he said, the pace has slowed, and overall, buyers don’t seem to be in a rush.

“Competitive bidding, while not entirely gone from the marketplace, has become an occasional response to extremely competitive pricing on the part of sellers," Peters wrote in his report.

Brokers with listings almost identical to ones they had that sold quickly six months ago are now finding a dearth of offers, Peters said.

“And when an offer does come in, the buyer of today demonstrates little urgency. ‘I’ll respond after the weekend,’ they say. Or, ‘We’re going out of town; if it’s still available when we get back maybe we will increase our offer,’” he said.

If they do end up increasing their offer and agreeing on a price, he added, contract negotiations move at a slower pace than before. Instead of two weeks, many of these deals are now taking three to four weeks.

People are feeling, perhaps, less optimistic because of political anxiety and global safety concerns, which means that sellers can no longer pin their hopes on “aspirational” pricing and wait for that “one buyer” to overpay, he said.

“Buyers are as price conscious as I have ever seen them,” Peters said.

For Peters, this market is no longer a sellers’ market, but it’s not quite a buyers’ market either.

Instead, he believes it’s a brokers’ market, where real estate experts can be helpful adjusting expectations of those on both sides of the equation.

“Buyers and sellers see value differently, and it is up to agents to reconcile their viewpoints to bring a deal together, Peters said.

There was also an uptick in listings and sales in new developments for under $5 million, according to the report from Halstead Property Development Marketing.

Listings that were priced under $5 million grew from 48 percent in 2015 to roughly 62 percent this last quarter, the report found. Contracts signed in this price range grew, too, year-over-year, from about 72 percent to 77 percent.

The Financial District, Upper East Side and Lower East Side had the largest amount of the inventory in new buildings, along with Williamsburg, Prospect Heights and Boerum Hill in Brooklyn. 

With prices based on a per square foot basis, more efficiently sized two-bedrooms are selling “incredibly well” in Brooklyn, where the median size for two-bedroom units is 1,171 square feet compared to Manhattan’s 1,400 square feet.

The average price per square foot for units in new developments entering contract was $1,421-per-square-foot, up nearly 4 percent from the year before. In Manhattan, it was $2,172 per square foot, up 2 percent.

“Projects like 50 Greenpoint, 610 Warren and 251 First Street, all in Brooklyn, have seen huge demand for well-designed, efficiently sized and accessibly priced homes,” Halstead Property Development’s Stephen Kliegerman said, “and we expect more projects in the pipeline to be built like this.”