Manhattan apartment sales drop 46%, leaving 10,000 units unsold

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The Manhattan skyline looms beyond a Brooklyn boardwalk on August 12, 2020 in New York City.

Spencer Platt | Getty Images

Manhattan apartment sales fell 46% in the third quarter as buyers continued to flock to the suburbs and Florida, according to new real estate reports.

There are about 10,000 apartments for sale in Manhattan today, which would be a record, according to Compass. With so many new listings flooding the market and so few buyers, the inventory of unsold apartments continues to rise in a city that already had a glut of high-end apartments before the pandemic. The current supply of luxury apartments for sale would take almost three years to sell, according to a report by Miller Samuel and Douglas Elliman.

“There is no shortage of apartments for sale, but there is a shortage of buyers, said Jonathan Miller, CEO of Miller Samuel.

There were a total of 1,375 sales in the third quarter, down 44% from the previous year. The prospects for a turnaround before the election also look increasingly unlikely. Signed contracts for September fell 42% in Manhattan from a year ago, according to Miller Samuel.

Manhattan faces high unemployment, rising crime, growing sanitation and public transit issues, and only 10% of Manhattan office workers are returning to their buildings. All of this makes buyers reluctant to make a big bet on Manhattan real estate.

The likelihood of higher taxes to pay for the multi-billion dollar city and state budget holes is also driving more and more real estate dollars from the city to the suburbs and other states. Signed contracts in the Hamptons were up 76% in September from a year ago. They increased 56% in Westchester County, New York, and 36% in Fairfield County, Connecticut.

Florida has seen an unbroken increase in purchases, with contracts signed for homes in Palm Beach County up 62% and Miami-Dade County up 21%.

Apart from the urban exodus, Manhattan’s real estate market continues to suffer from high prices. Brokers have been touting a “buyers’ market” in Manhattan for months, saying prices will come down and attract bargain-hungry buyers and families who have been waiting years to buy in Manhattan.

Still, the average selling price in Manhattan rose 32% in the third quarter to $2.18 million. The median selling price also rose 7% to $1.1 million.

Analysts say the increase was mainly due to statistical flukes. Activity in the third quarter of 2019 was depressed by the launch of the city’s mansion tax. In addition, a series of hyper-priced deal closings in the new 220 Central Park South luxury condo tower, which were brokered years ago, also drove prices up.

Analysts also say that average and median selling prices in Manhattan are more a reflection of apartments that are selling than a way to gauge the value of the same apartment over time. Because the third quarter saw more sales of larger and more expensive apartments, average and median prices rose.

A more accurate reflection of price drops, they say, is the average discount between the asking price and the selling price. Third quarter apartments sold at an average discount of 9% – compared to a more typical discount of 5% before the coronavirus pandemic.

Still, the average price per square foot in Manhattan also rose in the third quarter, suggesting prices need to drop further before buyers rush in.

“If you look at 2009 and then 9/11, sellers may take a few years to adjust,” Miller said.

Miller said he doesn’t expect actual prices to fall more than about 10%. Before the pandemic, prices were already down 15% from the 2015-2016 peak, he said. So the combined 25% discount on the peak should be enough to draw shoppers back to the city, he said.

“But it all depends on quality of life issues like policing, sanitation and public transport,” he said. “I don’t see any improvement in the market in the fourth quarter. But I think we could see a noticeable improvement in 2021.”

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