Manhattan's Luxury Real Estate Slowdown Is Spreading to Other Price Tiers
There are more signs of a slowdown in New York City real estate.
According to new data from listings website StreetEasy.com, the luxury market still has some adjusting to do with price cuts now spreading from just the most expensive apartments to other price tiers.
"Most of the increase in price cuts for the luxury tier is in the smaller price cuts bucket (5 percent)," said Krishna Rao, StreetEasy's economist. "While sellers aren’t going for aspirational prices, they haven’t fully adjusted to reality at the top end of the market."
The chart below shows the percentage of sales that have seen price cuts for the top 20 percent of Manhattan's real estate market, in terms of the listing price. There's been an increase of late in the percentage of listings that have seen price cuts of up to 5 percent or up to 10 percent.
The pain doesn't stop at the very top, however. When looking at the second highest tier of the price bucket, or sales just below the top 20 percent of the market but above the bottom 60 percent, the slowdown is increasing at an even faster clip.
"The luxury market was the first price segment where we began to see slowing price growth, and now we’re seeing other price segments following suit," Rao added.
This chart shows the same data as the first one, but for the second 20 percent price bucket.
According to Rao, much of the slowdown can be attributed to a huge boom in supply as developers rushed to build luxury condos in 2014, as well as a stronger U.S. dollar that made it more expensive for foreign buyers to snatch up U.S. real estate.
"It may be that economic and political uncertainty have discouraged domestic luxury buyers, while a strong dollar kept foreign buyers at bay and that they will both return to the market when their concerns are assuaged," Rao said. "But it may also be that prices and amenities in these luxury buildings have reached an unsustainable level and we are going to see some units languishing on the market and others quickly falling in price as they struggle to find buyers. That more than anything will determine which way the market swings."