After a slower first quarter, one which saw prices level off, the second quarter saw a total 180◦, setting a historic, record high for the average sales price for Manhattan apartments, now at a whopping $1.87 million. While there are a number of different key themes from the past 90 days, the overarching one is, quite simply, the obvious lack of inventory on the market. Those subthemes, however, include:
- # 1: Stalled Inventory Growth – The consistent lack of inventory, despite last quarter’s slight uptick, is what produced these record-setting, headline-making prices this past quarter. The lack of inventory and strong demand makes it a total seller’s market and as long as that demand remains, whether it’s coming from foreign or domestic buyers, those prices will continue to remain high.
- # 2: An Array of Factors Contributed to Record Setting Numbers – Aside from low inventory and high demand, there were a number of additional factors that contributed to those record-setting numbers we saw this quarter, such as employment numbers, the strong local economy, and the highest average Wall Street bonuses since 2007.
- # 3: Bidding Wars Reign Supreme – The lack of inventory is not only causing prices to go up, but it’s causing bidding wars that sometimes result in the final sale prices that would make your jaw drop.
According to Jonathan Miller, by the end of June only 5,730 listings were left on the market. While that might be a 1.3 percent increase from the same time last year, it’s still 20 percent below the 10-year average. One of the hardest hit segments of the market, according to another report, is the under $500,000 price point. According to the report, “as of Q2 2015, total available listings less than $500K in Manhattan have fallen to their lowest share levels ever, comprising only 11.3% of the market with 1,093 listings, representing a share level decrease of 0.7% from last quarter and 3.7% from the same period last year.”
Jonathan Miller attributes the rise in demand to a number of things, including “a vibrant local economy and rising employment.” Another key market driver in Q2, he says, was that on Wall Street, they saw the highest average bonus per person since 2007. Those bonuses, according to the New York State Comptroller, were somewhere in the ballpark of $172,860 per person.
When you’ve finally found an apartment you like, after sifting through what little inventory there is, the next step is actually making an offer. But this is where it gets even more competitive as we know. An article on Yahoo.com told a brief story of the owners of a co-op that sold their property last month for $700,000 more than they were seeking after a bidding war broke out between 14 interested buyers. The co-op was originally listed by the sellers for $2.5 million, which was also the lowest they were willing to accept. A month later, the unit, which includes a 650-square-foot (60-square-meter) yard and temperature-controlled wine storage for 240 bottles, went into contract with a buyer who agreed to pay $3.2 million.
But even more than that, according to some brokers who have been involved in bidding wars, folks are raising offers just to buy themselves time to weigh options and will renege allowing the second highest bidder to win the property so sometimes it’s not bad to be second best.
Wei Min Tan is a property broker focusing on Manhattan, New York luxury condominiums and foreign buyers. He is often interviewed by the media including CNBC, CNN, The New York Times and The Wall Street Journal on the New York property market. View Wei Min's media appearances.