What an unpleasant yr for Manhattan Luxury Condos & Co-ops, however the market went unglued in 2016

“It was more dramatic than any market could take when the sellers in Manhattan started cutting prices.”

By Wolf Richter for WOLF STREET.

The luxury real estate market in Manhattan didn’t quite plummet to post-Lehman Brothers blast levels, but instead closed and erased the euphoria that reigned from 2013 to 2015 when some of the world’s most glorious headlines – grabbing deals were signed and touted.

According to Olshan Realty, Manhattan condominium, cooperative, and townhouse sales under signed contracts priced at $ 4 million or more in 2020 fell 31% from 2019 to just 645 contracts signed. This was the lowest number of contracts since 2011, after already declining 16% in 2019, 5% in 2018 and 18% in 2016 – with false hopes rising 6% between 2017. The pandemic, that had the carpet in place Spring pulled out from under the market and only accelerated the process:

Signed contracts for homes in the trophy category of more than $ 10 million fell 42% year over year to just 106 sales in 2020, a 61% decrease from the 2014 luxury euphoria (270 sales).

The volume of contracts signed in 2020 in US dollars decreased by 2.6 billion US dollars, or 33 percent, from 2019 to 5.1 billion US dollars, down from the volume of 11.3 billion US dollars in luxury Euphoria year 2014 down 6.2 billion US dollars, or 55 percent:

Developers trying to unload their luxury inventory have faced heavy headwinds for the third straight year. Just 206 sales in the over $ 4 million category were down 26% year over year after sales in that category had already dropped 35%, with the number of contracts signed in 2020 down 57 from the peak euphoria of 2014 % down (481 contracts signed).

“Since the bleak days of the Lehman Brothers crash in September 2008 and the aftermath that followed in March 2009, the luxury real estate market in Manhattan has not experienced the unpredictable and disruptive effects of the Covid-19 pandemic,” wrote Donna Olshan in the 2020 Luxury Market Report .

The underlying market momentum isn’t nice. The average number of days in the market before a sale rose to 589 days, “mainly because developers were unwilling to discount inventory, often at their own risk,” says Olshan:

In order to arouse the interest of the buyers, the sellers reduced the prices before the signing of the contract by an average of 12% compared to the original offer price, compared to 10% in the previous year and compared to 3% and 4% in the euphoric years 2013 and 2014. Olshan Realty

The report attributes the accelerated downturn in Manhattan’s luxury real estate to:

  • Amendment to federal tax law to limit the deduction of mortgage interest on home purchases above $ 750,000.
  • Amendment to federal tax law that limited state, local, and property tax deductions to $ 10,000.
  • New York State raised mansion and transfer taxes and changed rental laws, “which discouraged investors.”
  • And the pandemic that “sent shoppers to the Hamptons, suburbs and beyond”. The now famous Exodus.

“It was more dramatic than any market could take when the sellers in Manhattan started cutting prices,” says Olshan.

But sharply lower prices and record-low mortgage rates are attracting buyers, and sellers are now ready to suffer huge losses to get rid of the condos they bought when they were in the utmost euphoria. The volume in the fourth quarter rose above the previous year’s level. However, Olshan cautions, ‚ÄúThis does not mean that Q4 performance will extend into the first quarter of next year. After all, we live in unpredictable and disruptive times. “

The bloodshed in the Manhattan luxury market for sellers who bought and paid epic condominium prices during the euphoria has become legend, including a $ 12 million loss on a Billionaire’s Row condo owned by the seller was acquired in 2014 by one of many big losers in the same apartment tower. Read on … Luxury Manhattan condos are seeing demand, but at much lower prices with big losses for sellers

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