Tag Archives: Manhattan Real Estate

Manhattan Apartment Sales Plummet, Worst In Three Decades

The virus pandemic and social unrest have sparked an exodus of city dwellers to rural communities and towns. Remote access for work, and the recession, coupled with high unemployment, will extend this outbound emigration trend for the next several years as people seek cheaper living accommodations ex-metro areas. 

It appears the factors mentioned above have dealt a heavy blow to the Manhattan real estate market, which suggests a correction in apartment prices are ahead.

Manhattan apartment sales plunged 54% in 2Q20 compared with the same period last year, marking the most significant decline in 30-years, according to Miller Samuel and Douglas Elliman. The median sales price fell 18% to $1 million, the largest decline in a decade. According to real estate firm Compass, there were only 1,147 sales in the quarter, the lowest on record, due mostly because of coronavirus lock vdowns barred agents from showing apartments until June 22.

“Manhattan was effectively shut down throughout the second quarter until the final week,” the report said. 

“Agents are going nonstop right now,” said Bess Freedman, CEO of Brown Harris Stevens, told CNBC.

“Sellers can’t be married to pre-pandemic prices,” Freedman said. “Everyone needs to be reasonable and fair about the new environment.”

“There is going to be an incredible supply of rentals,” he said. “We are going to see a lot of negotiating and landlord incentives.”

The latest indicator that the Manhattan real estate market is turning could be the number of signed contracts in June, were down 76%, compared with the same time last year.

Further, an entire floor apartment at the “coveted” One57 building, one of the flagships of billionaire’s, aka bagholder’s row, just sold for $28 million about six years after it was initially purchased for $47.4 million. 

It marks a 41% discount for the luxury apartment in the span of about a half-decade. The plunge in prices would be the most significant discount to date at the building. 

If readers aren’t familiar with the current exodus trends ex-cities – here’s the latest:

Coast to coast, people are fleeing cities: 

Some have even fled to the Caribbean:

To sum up, if you haven’t considered leaving a major city because its unaffordable – now might be the time, due mostly because a correction in housing prices is likely underway. 

Source: ZeroHedge

Why Manhattan’s Skyscrapers Are Empty

Approximately half of the luxury-condo units that have come onto the market in the past five years remain unsold.

In Manhattan, the homeless shelters are full, and the luxury skyscrapers are vacant.

Such is the tale of two cities within America’s largest metro. Even as 80,000 people sleep in New York City’s shelters or on its streets, Manhattan residents have watched skinny condominium skyscrapers rise across the island. These colossal stalagmites initially transformed not only the city’s skyline but also the real-estate market for new homes. From 2011 to 2019, the average price of a newly listed condo in New York soared from $1.15 million to $3.77 million.

But the bust is upon us. Today, nearly half of the Manhattan luxury-condo units that have come onto the market in the past five years are still unsold, according to The New York Times.

What happened? While real estate might seem like the world’s most local industry, these luxury condos weren’t exclusively built for locals. They were also made for foreigners with tens of millions of dollars to spare. Developers bet huge on foreign plutocrats—Russian oligarchs, Chinese moguls, Saudi royalty—looking to buy second (or seventh) homes.

But the Chinese economy slowed, while declining oil prices dampened the demand for pieds-à-terre among Russian and Middle Eastern zillionaires. It didn’t help that the Treasury Department cracked down on attempts to launder money through fancy real estate. Despite pressure from nervous lenders, developers have been reluctant to slash prices too suddenly or dramatically, lest the market suddenly clear and they leave millions on the table.

The confluence of cosmopolitan capital and terrible timing has done the impossible: It’s created a vacancy problem in a city where thousands of people are desperate to find places to live.

From any rational perspective, what New York needs isn’t glistening three-bedroom units, but more simple one- and two-bedroom apartments for New York’s many singlesroommates, and small families. Mayor Bill De Blasio made affordable housing a centerpiece of his administration. But progress here has been stalled by onerous zoning regulations, limited federal subsidies, construction delays, and blocked pro-tenant bills.

In the past decade, New York City real-estate prices have gone from merely obscene to downright macabre. From 2010 to 2019, the average sale price of homes doubled in many Brooklyn neighborhoods, including Prospect Heights and Williamsburg, according to the Times. Buyers there could consider themselves lucky: In Cobble Hill, the typical sales price tripled to $2.5 million in nine years.

This is not normal. And for middle-class families, particularly for the immigrants who give New York City so much of its dynamism, it has made living in Manhattan or gentrified Brooklyn practically impossible. No wonder, then, that the New York City area is losing about 300 residents every day. It adds up to what Michael Greenberg, writing for The New York Review of Books, called a new shameful form of housing discrimination—“bluelining.”

We speak nowadays with contrition of redlining, the mid-twentieth-century practice by banks of starving black neighborhoods of mortgages, home improvement loans, and investment of almost any sort. We may soon look with equal shame on what might come to be known as bluelining: the transfiguration of those same neighborhoods with a deluge of investment aimed at a wealthier class.

New York’s example is extreme—the squeezed middle class, shrink-wrapped into tiny bedrooms, beneath a canopy of empty sky palaces. But Manhattan reflects America’s national housing market, in at least three ways.

First, the typical new American single-family home has become surprisingly luxurious, if not quite so swank as Manhattan’s glassy spires. Newly built houses in the U.S. are among the largest in the world, and their size-per-resident has nearly doubled in the past 50 years. And the bathrooms have multiplied. In the early ’70s, 40 percent of new single-family houses had 1.5 bathrooms or fewer; today, just 4 percent do. The mansions of the ’70s would be the typical new homes of the 2020s.

Second, as the new houses have become more luxurious, homeownership itself has become a luxury. Young adults today are one-third less likely to own a home at this point in their lives than previous generations. Among young black Americans, homeownership has fallen to its lowest rate in more than 60 years.

Third, and most important, the most expensive housing markets, such as San Francisco and Los Angeles, haven’t built nearly enough homes for the middle class. As urban living has become too expensive for workers, many of them have either stayed away from the richest, densest cities or moved to the south and west, where land is cheaper. This is a huge loss, not only for individual workers, but also for these metros, because denser cities offer better matches between companies and workers, and thus are richer and more productive overall. Instead of growing as they grow richer, New York City, Los Angeles, and the Bay Area are all shrinking.

Across the country, the supply of housing hasn’t kept up with population growth. Single-family-home sales are stuck at 1996 levels, even though the United States has added 60 million people—or two Texases—since the mid-’90s. The undersupply of housing has become one of the most important stories in economics in the past decade. It explains why Americans are less likely to movewhy social mobility has declinedwhy regional inequality has increasedwhy entrepreneurship continues to fallwhy wealth inequality has skyrocketed, and why certain neighborhoods have higher poverty and worse health.

In 2010, one might have thought that the defining housing story of the century would be the real-estate bubble that plunged the U.S. economy into a recession. But the past decade has been defined by the juxtaposition of rampant luxury-home building with the cratering of middle-class-home construction. The future might restore a measure of sanity, both to New York’s housing crisis and America’s. But for now, the nation is bluelining itself to death.

Source: by Derek Thompson | The Atlantic

Zombie NYC Developers Resort To Inventory Loans To Stay Afloat During Housing Slump

New York City’s housing market has been swamped with a historic mismatch involving a flood of luxury inventory and a shortage of buyers. 

Manhattan is facing one of the worst slumps since 2011, forcing developers to take out low-interest inventory loans, collateralized by unsold condos to stay afloat. 

These loans are lifelines for struggling developers and a boom for companies such as Silverstein Properties Inc., who is expected to double its inventory loan book to more than $1 billion in 2020, reported Bloomberg.

Silverstein’s inventory loan book is growing at an exponential rate as a housing bust across Manhattan gains momentum. 

Michael May, CEO of Silverstein, said inventory loan growth among developers is the fastest in Gramercy, Tribeca, and Midtown East. These areas have also been hit hard in the housing slump. 

“You’re seeing some projects that are completed that have just had very, very slow sales,” May said. “Given the amount of condo developers seeking debt, if we open the floodgates, we could probably load $1 billion of that product on within the next 60 days.”

Developers have been pulling inventory loans to avoid slashing listing prices that would spark a firesale and lead to further downside in the housing market.

“Our goal is not to lend to projects that fail: We’re in a position where if a project has a problem, we believe that we could execute the business plan, and we could finish the construction,” May said. “We think that there’s still demand for units that are priced well, but in many cases, the owners of these projects have not adjusted their expectations to where the price would sell in the market yet.”

Silverstein has completed $500 million in financing year-to-date. Inventory loans are expected to be a large portion of the firm’s book in 2020, as there’s no sign the Manhattan real estate market will see an upswing then, and developers will need cheap financing to weather the storm.

As a result, the rise of zombie developers across Manhattan is inevitable. Thank You Federal Reserve! 

Source: ZeroHedge

Brokers Baffled As Manhattan Luxury Housing Rout Spreads To Broader Market

(ZeroHedge) When the first signs of stress in Manhattan’s luxury real-estate market started to appear roughly one year ago, we anticipated that the weakness in the high-end would soon spread to the broader market.

And as it turns out, we were right. To wit, the latest evidence that the NYC housing bubble is beginning to deflate comes courtesy of Bloomberg, which reported on Tuesday that during the three months through September, the number of homes purchased in Manhattan declined for the fourth straight quarter, dropping 11% from a year earlier to 2,987, according to a report Tuesday by appraiser Miller Samuel Inc. and brokerage Douglas Elliman Real Estate. Meanwhile, the number of listings climbed 13% to 6,925 homes, the most since 2011.

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While the pullback had previously been isolated to the luxury market, which was struggling with an abundance of new supply, even the smaller, cheaper apartments that have typically been favored by members of New York City’s professional class lingered on the market during the third quarter, with inventories rising by about 15% for studios and 21% year-on-year for one-bedroom apartments. Meanwhile, inventories rose 8% for two-bedrooms, and 5% for four-bedrooms.

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Of course, brokers are hoping that this is just a gully and that sellers will ultimately prevail by sticking to their guns. Rising interest rates, as one broker pointed out, are giving sellers time to wait for a better offer, as chances are they are locked in at a lower rate. But the data suggest that this isn’t happening, as the number of sellers cutting prices has climbed to its highest level since 2009 as BAML warns that “existing home sales have peaked.”

With economic growth accelerating and US stocks at record highs, real estate brokers can’t figure out what’s behind the recent softness, with one calling it “perplexing.”

“It is somewhat perplexing,” said Garrett Derderian, director of data and reporting for brokerage Stribling & Associates, which also released a report on Manhattan home sales Tuesday. “The financial markets are quite strong. Mortgage rates, while rising, are still at historic lows. But the perception has become that the market is overheating in terms of pricing. No one obviously wants to come in at the top where they’re paying the highest prices as things are going down.”

But any of our regular readers will know that this pullback in housing prices isn’t “perplexing” in the least: Rather, it’s the result of a confluence of factors, most notably the staggering jump in home price to average earnings ratios accompanied by a drop in foreign capital from China and the former Soviet Union. 

Danske Bank’s massive money laundering scandal has triggered calls to tighten European banking regulations, threatening to cut off the flow of “dirty money” from the former Soviet Union. At the same time, China has cracked down on capital outflows, making it more difficult for wealthy Chinese buyers to stash their money in hot property markets. The influx of foreign money over the past 10 years has led to bubble-like valuations, leaving home ownership in markets like NYC (and Vancouver, and London, and Hong Kong…) out of reach for locals.

One real-estate broker touched on this trend by warning that sellers must now “bring prices closer to where they need to be” in an interview with Bloomberg.

“For the last eight years, the market has been going up, up, up,” said Bess Freedman, co-president of brokerage Brown Harris Stevens. “But now, it’s really time for sellers to adjust prices to where the market needs to be. I think slowly they’ll do that more and more.”

We couldn’t have said it better ourselves. And according to brokerage Brown Harris Stevens, previously owned Manhattan homes spent an average of 104 days on the market in the third quarter, compared with 94 days a year earlier. Manhattan co-ops, typically a primary residence of the buyer, have endured falling prices across the board, with three-bedrooms seeing the biggest decline at 17% to $3.13 million. Going forward, not only will real-estate brokers in the city be responsible for matching buyers and sellers, they will also need to better manage sellers’ expectations, or risk a repeat of what’s happening in Vancouver.

Source: ZeroHedge

Retail Rents Plunge 20% Across Manhattan

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As we anticipated earlier this year, the first the signs of the coming implosion of the US real-estate bubble are emerging in the high end of the nation’s most overcrowded and expensive housing markets (Manhattan and San Francisco are two salient examples). 

And in the latest confirmation of this trend, the Wall Street Journal published a report this week highlighting how the business environment for commercial landlords in New York City’s most densely populated borough is growing increasingly dire, as landlords who had left storefronts vacant in the hope of courting the next Bank of America or CVS have inadvertently turned trendy downtown Manhattan neighborhoods like SoHo into a “shopping wasteland”.

Thanks in large part to their intransigence, commercial landlords who catered to retail tenants are being hit twice as hard as they otherwise would’ve been, as tenants, no longer able to afford rents higher than $600 per square foot, are now demanding concessions and rent reductions, a phenomenon that has seen average rents in certain neighborhoods plummet on a year-over-year basis.

According to CBRE Group, a real estate services firm that pays close attention to commercial rents in Manhattan, some of the hardest-hit neighborhoods are also some of the borough’s most trendy, including the Meatpacking District, and SoHo.

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Here’s an excerpt from the WSJ story, entitled “Retail Rents Plunge in Major Manhattan Shopping Districts”.

The average asking rent on Washington Street between 14th and Gansevoort streets in the Meatpacking District dropped to $490 a square foot from last year’s $623, a 21.3% decrease and the largest percentage drop in asking rents among the shopping corridors CBRE tracks.

Average asking rents tumbled 18.1% on both SoHo’s Broadway Avenue and the Upper East Side’s Third Avenue, where asking rents were $556 and $280 a square foot, respectively.

Availability remained flat compared with last year, with 209 ground-floor spaces marketed for direct leasing. The report noted, however, that landlords looking to directly lease space also will have to compete with sublease space, which has increased according to anecdotal reports. Some space available for sublease comes as retailers leave behind old quarters for better locations, Ms. LaRusso said.

Conditions are favorable for tenants, said Andrew Goldberg, vice chairman at CBRE. Landlords are more open to shorter-term leases and provisions allowing tenants to get out of leases if a retail concept doesn’t work.

“I think we will start to see some more of the savvier tenants of companies realize we’re starting to get to a point where they can drive some good deals for themselves,” Mr. Goldberg said.

The problem when rents enter free-fall territory is that it’s a self-reinforcing phenomenon (not unlike the blowup that triggered the demise of the XIV, but over a much longer period of time). As rents fall, retailers start wondering if they can procure a better deal, possibly in a better neighborhood. All of a sudden, landlords must now essentially compete with themselves as the number of subleases climbs.

Of course, Manhattan is Manhattan. There will always be hoards of boutique merchants, big-name brands and – well, Walgreens – clamoring for commercial rental space. 

But after nearly a decade of soaring real-estate valuations, it appears one of America’s hottest housing markets is heading for a “gully.”

On the other end of the property market, a drop in valuations and transaction volumes has inspired some observers to proclaim that “this is the breaking point.”

In short, we wish the Kushner Cos the best of luck as they prepare to buy out the remaining stake in 666 Fifth Ave. Because overpaying for commercial real-estate in Manhattan in 2018, nine years into one of the longest economic expansions on record sounds like a fantastic plan.

Source: ZeroHedge

Manhattan Home Sales Tumble Most Since 2009 as Buyers Walk

Home sales in Manhattan plunged by the most since the recession as buyers at all price levels drove hard bargains and were in no rush to close deals.

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  • Haggling gets more aggressive for listings at all price points
  • ‘People are very anxious about overpaying,’ brokerage CEO says

Sales of all condos and co-ops fell 25 percent in the first quarter from a year earlier to 2,180, according to a report Tuesday by appraiser Miller Samuel Inc. and brokerage Douglas Elliman Real Estate. It was the biggest annual decline since the second quarter of 2009, when Manhattan’s property market froze in the wake of Lehman Brothers Holdings Inc.’s bankruptcy filing and the global financial crisis that followed.

The drop in sales spanned from the highest reaches of the luxury market to workaday studios and one-bedrooms. Buyers, who have noticed that home prices are no longer climbing as sharply as they have been, are realizing they can afford to be picky. Rising borrowing costs and new federal limits on tax deductions for mortgage interest and state and local levies also are making homeownership more expensive, giving shoppers even more reasons to push back on a listing’s price — or walk away.

While just a few years ago, bidding wars were the norm, “there’s nothing out there today that points to prices going up, and in many buyers’ minds, they point to being flat,” said Pamela Liebman, chief executive officer of brokerage Corcoran Group. “They’re now aggressive in the opposite way: putting in very low offers and seeing what concessions they can get from the sellers.”

Corcoran Group released its own Manhattan market report Tuesday, showing an 11 percent decrease in completed purchases and a 10 percent drop in sales that are pending.

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For sellers, to reach a deal in the first quarter was to accept a lower offer. Fifty-two percent of all sales that closed in the period were for less than the last asking price, according to Miller Samuel and Douglas Elliman. Buyers agreed to pay the asking price in 38 percent of deals, but often that figure had already been reduced. Combined, the share of deals without a premium was the biggest since the end of 2012.

“Even with New York real estate prices, you do hit a point in which resistance sets in,” said Frederick Peters, CEO of brokerage Warburg Realty. “People are very anxious about overpaying.”

Peters said that these days, he gets dozens of emails a day announcing price reductions for listings. And buyers are haggling over all deals, no matter how small. In a recent sale of a two-bedroom home handled by his firm, a buyer who agreed to pay $1.5 million — after the seller cut the asking price — suddenly demanded an extra $100,000 discount before signing the contract. They agreed to meet halfway, Peters said.

Buyers also are finding value in co-ops, which in Manhattan tend to be priced lower than condos. Resale co-ops were the only category to have an increase in sales in the quarter, rising 2 percent to 1,486 deals, according to Corcoran Group. Sales of previously owned condos, on the other hand, fell 12 percent as their owners clung to prices near their record highs, the brokerage said.

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The median price of all sales that closed in the quarter was $1.095 million, down 5.2 percent from a year earlier, brokerage Town Residential said in its own report. Three-bedroom apartments saw the biggest drop, with a decline of 7 percent to a median of $3.82 million, the firm said.

Prices fell the most in the lower Manhattan neighborhoods of Battery Park City and the Financial District, where the median slid 15 percent from a year earlier to $1.21 million, according to Corcoran Group. On the Upper West Side, the median dropped 8 percent to $1.1 million.

Neither new developments nor resales were spared from buyer apathy. Purchases of newly constructed condos, which continue to proliferate on the market, plummeted 54 percent in the quarter to 259, Miller Samuel and Douglas Elliman said. Sales of previously owned apartments dropped 18 percent to 1,921.

The plunge in transactions is actually a good thing, in that it may serve as a wake-up call for more sellers to scale back their price expectations, said Steven James, Douglas Elliman’s CEO for the New York City region.

“It sends the sellers a signal that you have to get more reasonable if you want my buy,” James said. “It’s like buyers said, ‘I’ve told you all along, but you wouldn’t listen! Now I have your attention, so let’s talk.”

Video Link

Source: By Oshrat Carmiel | Bloomberg

 

 

 

An Inside Look At Manhattan’s Billionaires’ Row

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Along Manhattan’s 57th Street, stretching from Columbus Circle on the west side to Park Avenue on the east, you’ll soon find more than a half-dozen glittering, ultra-exclusive condominium towers that will offer unparalleled views of Central Park — and virtually the entire city. Welcome to Manhattan’s Billionaires’ Row, the current trophy real estate of the 1%.

The mega projects, with some penthouse floor plans such as those at 432 Park Ave. expanding to more than 8,200 square feet, are expected to list on average for more than $14.5 million (or $4,375 a square foot). Some even have living rooms bigger than most condominium units in Manhattan (the average size of a condo unit in Manhattan being 1,100 square feet.)

The sky-high prices on Billionaires’ Row will also help push the average price for a unit at new developments in Manhattan to $7 million (or $2,787 a square foot) by 2017, according to Gabby Warshawer, head of research for CityRealty, a New York real-estate research firm. Manhattan condo units on average were just $1 million as recently as 2005, says Warshawer.

An inside look at ‘Billionaires’ Row’

For the Manhattan, and global, elite, trophy apartments in the sky, overlooking Central Park, will set new marks for luxury and price.

Aside from the luxuriously appointed apartments and the central location, there’s something else that’s appealing about the apartments: As Noble Black, a real-estate agent who has marketed condominium units in One57, points out, unlike many city co-ops — whose boards are famously picky and have turned down such notables as pop singer Madonna and former President Richard Nixon as potential residents — buyers on Billionaires’ Row don’t need to open up their financial books to co-op boards or even submit to interviews.

Here’s a look at what $14 million–plus will buy you along Billionaires’ Row …

These sky-high trophy homes overlooking Central Park set new marks for both luxury and price

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157 West 57 St.

One57, built by developer Extell, was the first on the Billionaires’ Row strip to be built and is 75 stories tall and more than 1,000 feet high. The building, which includes a Park Hyatt hotel with services catering to owners’ every whim, with room service, maid service and a spa and gym, saw its penthouse apartment sell for a record $100.5 million in December 2014 to a yet-unnamed buyer. All told, the entire building’s 92 condo units were worth an estimated $2 billion and will sell for an average of $6,300 a square foot, according to CityRealty.

111 West 57th St.

Built by JDS Development Group, this extraordinarily slender skyscraper will rise 80 stories and more than 1,400 feet. That’s taller than the Empire State Building. The 60 apartments will start at $14 million according to the developer’s website and rise to $100 million, according to CityRealty. Completion is expected in 2018.

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550 Madison Ave.

The rehab of the 37-story Sony Building will include a $150 million penthouse and possibly a five-star hotel. The skyscraper, completed in 1983, was sold to Joseph Chetrit, a real-estate developer for more than $1 billion in 2013. The sell-out price for the property will likely approach $2 billion, or more than $4,400 a square foot, CityRealty says.

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432 Park Ave.

Currently the tallest residential building in the city at 1,396 feet, the condominium development by CIM Group/Macklowe Properties recently sold its penthouse for $99.5 million.The building’s total sales will be worth an estimated $3 billion (or nearly $6,300 a square foot), according to CityRealty, assuming the 144-unit building is sold out. Closings on the remaining units — which range from $17 million to $81 million — are expected to start at the end of the year.

53 W. 53rd St.

Hines Development’s 77-story condominium has been in the works for 10 years but has only recently started marketing its 100-plus units. The 1,050-foot-high trapezoidal tower with geodesic elements is set to be completed in 2018 and to include a unit priced at $70 million, according to CityRealty. All told, the sell-out price is anticipated at upward of $2 billion.

by Daniel Goldstein for Market Watch