STRIBLING MANHATTAN & BROOKLYN SEMI-ANNUAL MARKET REPORT JULY 15, 2016
MANHATTAN & BROOKLYN SEMI-ANNUAL
MARKET REPORT
July 15, 2016
Presented by
Elizabeth Ann Stribling-Kivlan
President
Elizabeth F. Stribling
Chairman
Researched by
Geoffrey E. Martell
Director of Data
OVERVIEW
The first six months of 2016 have ended with the United Kingdom’s vote to leave the European Union sending tremors across global financial markets. So what does this, along with the upcoming presidential election, mean for New York City real estate, in the context of the past half year’s numbers?
In large measure, the demand and appetite for New York real estate has remained healthy over the last six months, although one must look at the various segments of the market to get a complete and more accurate picture of what has transpired in that period. In the past, we spoke of the market as uptown versus downtown, distinguished solely by location as opposed to type or even square footage. In recent years the focus has been on co-ops versus condos, along with resale versus new development. Now it is no longer a bifurcated market but a “quad-furcated” market of new development, resale co-ops, resale condos, and the luxury market of $5 million and up properties.
The first half of 2016 has witnessed slight increases in average and median sales prices in Manhattan compared to this time last year. Simultaneously, we have seen decreases of both total sales volume and total number of resale units, coupled with a slight increase in days on market. The Brooklyn Market, despite fewer recorded sales this past quarter compared to last year at the same time, has continued to be competitive evidenced by increases in average and median prices year-over-year, and little to no negotiability thus far.
So what now? How do we interpret this data and does it spell difficulty for New York? Here at Stribling, the “silver bullet” is correct pricing. In what is currently the hottest sector, the $3 million and under market, well-priced apartments are sought after by local buyers whose end use is for their primary day-to-day living. That being said, we have seen an increase in investors in this price range in Upper Manhattan, but the majority of under-$3 million purchases remain for personal use. This is not a “let’s test the market and see what we can get” arena, but one where mint condition apartments in one-of-a-kind or hard-to-match buildings are much in demand.
This year’s most frequently asked question is, “Do New Yorkers actually buy apartments in the city?” The answer is yes! Yes, they do! We are a local market and the majority of our buyers are working, enjoying, and living a “New York” lifestyle. New York is always a dream. People all over the globe aspire to own an actual piece of this city. However, the press has greatly exaggerated the influence of foreign buyers in New York City. Currency shifts,political and economic uncertainty, and cheaper oil have significantly altered the roles that citizens of Brazil, China, and Russia once played. Now we are seeing an increase of buyers from India who are buying in larger numbers in a myriad of Brooklyn and Manhattan neighborhoods. And while the focus is often upon the foreign buyer, the national market cannot be ignored, with many people from California and Colorado as well as residents
of the tristate area searching for pied-a-terres.
The most discussed subject seems to be new development. Cranes appear in every direction, and buildings are growing taller and taller. Every newspaper headline or dinner party conversation centers around the latest, glossiest new “starchitect”-designed towers, with their grand penthouses in the clouds. Although the competition might be stiffer, enormous transactions are still occurring. Harry Macklowe’s 432 Park Avenue recently saw a penthouse go into contract with an asking price of $76.5 million (or $9,497 psf). Even though new development sales have slowed, there are some projects that are bucking the trend. At 252 East 57th Street, a 65 story building designed by SOM with interiors by Daniel Romualdez, there were six contracts signed in June, totaling over $50 million. But even with these positive examples, there is a lot of product currently on the market, or slated to come on within the next couple of years. And while today’s buyers will pay more for a brand new gleaming apartment which is perfect on day one, they are no longer dazzled by the emperor’s new clothes.
Perhaps the second most popular topic of the year is a softening at the top of the market. At Stribling, we define the luxury market as properties with an asking price of $5 million or more. This segment has seen 78 units trade since the beginning of the year, compared to 126 units for the first six months of 2015. Likewise, the highest sale price for 2016 to date is $53 million for a Fifth Avenue apartment which closed for $18 million over its asking price, versus a record $77.5 million for a co-op on Fifth Avenue in 2015. The evidence clearly points to a drop-off, but sales in this segment of the market are largely determined by inventory, and it’s possible that more truly record-worthy properties will appear before the year ends.
And then there is the infamous Brexit… Has the world stopped? Is New York going to feel the pull on its financial and residential markets? Clearly there is a real sense of uncertainty and confusion in the United Kingdom and the European Union. The stock market impact of June 25th was very telling, but that proved to be a short-
term reaction as we have seen fear diminish and the stock markets rebound in England as well as the United States. Some analysts expect foreign buyers to turn their attentions more fully
on New York City now, but a stronger dollar relative to the pound and the euro, together with persistent problems at home, are likely to inhibit that response. On the bright side, the additional downward pressure the British decision has put on interest rates may benefit our market, though chiefly at the lower end.
As it has in the face of prior setbacks, New York City real estate—both commercial and residential—will maintain its importance and worth, thanks to the
transparency of US currency and real estate laws coupled with the geographic limitations of building on what is,
in fact, a series of islands. Per Melissa Cohn of FM Home Loans, “low interest rates and our stability will only continue to make New York and US real estate a stronghold in anyone’s portfolio.”
Here at Stribling, we believe that demand for New York will continue in 2016, but we are also aware that, as the presidential election approaches, a slight slowdown can be expected— especially given the divisive tenor of this year’s contest.
With any luck, we may see a return to “normal” conditions, something we haven’t encountered in almost two decades, particularly in the last several years when there appeared to be an almost-frenzy to enter the market, accompanied by precedent-setting prices for square footage and land.
Overall, Manhattan apartment prices rose due to a large number of new development closings. Average prices rose to $2,093,165, up 14% from this same time last year. However, overall activity paints a mixed picture. As previously mentioned, while prices continued to rise, the numbers showed fewer recorded sales and contracts
signed, down 27% and 9% respectively from this time last year, reflective of brokers’ sentiments across the board that the market is softening compared to previous years, and returning to normal. The normalization of the market is also highlighted by the rise of inventory and months of supply approaching 6 months. Also, the average discount from list price, an indication of buyers’ negotiating power, increased from this time last year along with days on market.
• Median and average prices are up year-over-year
• Number of sales and contracts were down as days on market increased
• Months of supply inched closer to six months for the first time in years
• Negotiability and listing discount increased year-over-year
• Sellers were sluggish to adjust to buyers’ expectations and market experience
The number of new development closings fell from last quarter, but were up from this time last year. While sales fell, average prices continued to rise due to closings on a large number of new development contracts that were signed 12-18 months ago. As such they are not necessarily representative of current conditions which reflect the financial market uncertainty of Q4 2015 and more recent global political volatility. Additionally, the supply of new development listings has slowly crept upward since
Q2 2015, with a corresponding rise in days on market, representing a slightly slower market than this time last year. Median prices for new development fell as the number of Q2 closings fell, while units being “flipped” in new development buildings were added to inventory as well.
• New development sales dropped quarter-over-quarter, but are up from last year
• Median and average prices are up year-over-year, but reflect the period when the units went
under contract 12-18 months ago
• Downtown leads the city in
new development closings
• Negotiability and days on market are up
Resale condo prices decreased across the board year-over-year. Average resale prices dropped by 12% while median prices dropped 5%. Inventory rose approximately 10% from this time last year, with an increase in marketing time from 98 days to 103 days. Months of supply increased to
6.5 months from 4.9 months, a metric indicative of general market volatility in Q1 2016.
• Sales dropped significantly compared to this time last year
• Prices also decreased quarter-over-quarter and year-over-year
• Days on Market increased along with the average listing discount
The number of recorded sales among resale co-ops dropped significantly from 2,081 in Q2 2015 to 1,561
in Q2 2016. Compared to this time last year, median resale co-op prices increased by 1% and average prices decreased by 1.5% to $1,337,745. This downward shift is attributed largely to the fall in the number of sales above $20 million compared to Q2 2015. The upward shift in median price indicates that the price floor for co-ops is rising. Furthermore, average price per square foot for co-ops
also rose, precluding the rise in median prices from being attributed solely to a number of very high priced co-ops in the luxury market. The relative strength in the co-op market may be attributed to a number of influences, though two likely factors are a slight decrease or softening of foreign demand for condominiums and a greater proportion of local buyers who either prefer or are comfortable with purchasing a co-op.
• Number of co-ops sales are down by 25%
• Average days on market are up by 14% year over year with average discount up as well.
• Price indicators mixed with average prices falling by 1.5% and median prices rising year-over-year
For Stribling & Associates, the Luxury Market is defined as sales achieving a sale price of $5,000,000 or more. In Q2, the luxury market saw decreases in recorded sales and contracts signed compared to Q2 2015, with a significant increase in both months of supply and marketing time. Broker perception that the luxury market has been sluggish compared to this time
last year is confirmed by these metrics.
• 65% of luxury sales were new development closings
• Average price per square foot was up, but median price per square foot fell year-over-year,
• Negotiability was up for both new and resale luxury units year-over-year
The Brooklyn market, like the Manhattan market,
saw an overall decline in the number of sales compared to this time last year, as well as to Q1 2016. Average and median prices increased by 7% and 3% respectively from Q2 2015. Additionally, negotiability and days on market are up year-over-year, with inventory contracting slightly. Overall, the Brooklyn market showed signs of continued strength and competitiveness despite fewer closed sales.
• Overall increase in prices signaling continued strength in the market
• Negotiability and months of supply up year-over-year
• Days on market increased year-over-year for most product types
The number of new development closings fell from Q2 2015 by 6.5%. Average prices and median prices
rose from Q1 2016 by 7% and less than 1% respectively. As to be expected with a spring push, sellers received, on average, closer to their listing prices for units compared to Q1. However, days on market rose year-over-year, indicating that buyers have been slower to purchase and felt more confident “shopping around” for value.
• New development prices continued to rise year-over-year, but median prices fell slightly
• Inventory rose from the previous quarter, but dropped slightly year-over-year
• Days on market increased with negotiability rising sharply from the same time last year
The number of resale co-ops that sold in Q2 fell from this time last year. Months of supply rose from 2.4 last year to 2.7 as the amount of listed inventory increased by approximately 15% quarter-over-quarter. Days on market rose as well, mirroring the Manhattan co-ops, though negotiability remained very tight.
• Resale co-ops dropped in number of sales, and months of supply increased
• Days on market increased as listing inventory grew
• Negotiability was minimal as competition for affordable inventory remained strong
Resale condominium closings dropped by about 6% from this same time last year, with a slight uptick in the number of contracts signed. Months of supply rose from Q1 2015, while days on market and negotiability are both up from this time last year, signaling a less frenzied market.
• Resale condo price growth was strong
• Listing inventory rose for a second straight quarter with months of supply also increasing
• Negotiability and days on market are both up year-over-year
The performance of Brooklyn 1-3 family houses revealed mixed signals. Recorded sales were down from Q1 2016 and Q2 2015, while the average days on market and average listing discount were both down from the same times last year as well. Absorption rate rose to 6.0 months, indicating a significantly longer amount of time for all listing inventory to sell at the current rate of sales. Prices indicators oscillated as well, with median prices rising year-over-year, but average prices falling over the same period.
• Price indicators were mixed, with median prices rising
• Number of closed sales dropped year-over-year by 26%
• Absorption rates rose indicating a slower market
The Right Broker Makes All the Difference.
Over the past 36 years, Stribling brokers have successfully represented the world’s most discerning clients, offering an exceptional level of service, integrity and sophistication coupled with an in-depth understanding of the ever-changing real estate market. Stribling professionals embrace a wide range of tastes and styles, ensuring that each client is matched with the broker who can best assist them in buying or selling their home.
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For over 30 years, Stribling and Associates has represented high-end residential real estate, specializing in the sale and rental of townhouses, condos, co-ops, and lofts throughout Manhattan and Brooklyn, and around the globe. Stribling has more than 200 professional brokers who use their respected expertise to provide personalized service to buyers and sellers at all price levels. A separate division, Stribling Private Brokerage, discreetly markets properties over $5 million, and commands a significant market share in this rarified sector of residential real estate. Stribling is the exclusive New York City affiliate of Savills, a leading global real estate advisor with over 200 office in 48 countries.
Check out their listings: http://www.whomyouknow.com/2016/07/remarkable-real-estate-listings.html
Whom You Know Congratulates their new President, Elizabeth Ann Stribling-Kivlan: http://www.whomyouknow.com/2012/12/breaking-manhattan-real-estate-news.html#.VvFbTIrLIU
