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  • Loy Bernal Carlos


New York, NY - Second quarter figures on property sales and rentals came out last week and it pretty much reflected what our experts on the field already know: market performance is mixed, with the upper end experiencing sluggishness, the ultra-luxury market practically at a stand still, and the more affordable units moving at a considerably quick pace.

Despite what brokerages and industry reports suggest, nothing that is happening now is really surprising or new. The "starter market," i.e., those that are either considerably lower on a price per square foot, or are affordable in terms of budgetary considerations (ex. studios below or around $500,000; one bedrooms below $1 mil, 2 bedrooms priced up to $1.5 mil) are in high demand. This may be attributed to stubborn high rentals (read why rental pricing isn't reliable below), fear of rising interest rates; and an active international investor market for lower-end properties. Its is important to underscore that it has been the case for this market segment for more than a year, and we predict it will continue to outperform its pricier counterparts, activity wise.

The secondary level market are just above the affordability of new homeowners and are beyond reasonable returns on investment. This mid-luxury market is experiencing difficulty in selling. Predictably, there is considerable increase here in both price reductions and time on the market. Brokers and sellers who were still coasting in the fantasy of a roaring market were the major culprits and victims. They now find themselves with no offers and with minimal, if any, activity even when the listing has been on the market for weeks. Still they try all sorts of marketing and promotional gimmicks. But in this market, it is not location, location, location. It's PRICE, PRICE, PRICE!

To be fair, many good agents advise proper pricing to their sellers. Unfortunately, some simply ignore it, thinking they will be the one seller in a (few) hundred to get lucky. Someone does win the lotto every week, after all.

They're usually the same people who want to sell at higher than market price, and pay lower than market when they purchase. They have their own special calculator that defies the laws of economics and math. It's like a "magic mirror' that gives them only numbers that please them.

Of course, everyone is entitled to dream. That's not what's inherently creating a difficult market. But when the economy is relatively flat, this means a flat real estate market as well. No one moves. And THIS, is what's causing a lack of inventory.

Contrary to popular belief, a deal is made not when someone loses. It's made when both parties are motivated to do a deal, that is, when "no deal" is worse than settling for a little less(or more) than what each expected. When, like today, both parties are on the fence waiting for the market to pivot widely their way, we've reach a stalemate.

The ultra-luxury market with double digit price ($10+ mil) tags are suffering the most. This is especially true since activity coming from international investors caught the attention of the U.S. Congress and the public. The election of Donald Trump should have been a positive for the industry. But so far, it has proven to be a plague. Even simple matters that could be easily explained as normal industry transactions are infected by Trump's obscure financial dealings, sloppy communications, non-disclosures, disclosures after the fact, inconsistencies, and an arrogant insistence that his family and their finances are beyond question, and worse, above the law. All this is more than likely going to lead to MORE regulations, not less, which is the opposite of what the industry expected.

Going back to the ultra-luxury market, as we reported previously, there should have never been this much inventory built. Overzealous developers kept building as if billionaires are taking them by the dozen. Real estate is not the only investment opportunity in this global economy. Those who can afford to take risks have other investment interests. There wasn't a limitless list of billionaires looking for $50 mil homes. Notwithstanding that in every habitable continent, there is at least some part experiencing political and societal instabilities. While less affected, the very affluent are not altogether immune to local and global crises.

By far, the Manhattan townhouse market is the most striking. Inventory is at an all time high, and so are the days on the market. Still, there seems to be no huge effect on asking prices, at least for now. Brokers and sellers are finding creative ways to market their properties. For instance, 50-54 East 81st Street is a set of three separate townhouses facing P.S. 6 on Manhattan's Upper East Side. While an interesting marketing ploy, it is difficult (albeit not impossible) to imagine that someone will purchase the combination upwards of $50 mil plus renovation cost! Furthermore, how someone is going to be able to create a seamless facade is beyond me. But I could be wrong.

Then there's the East Side owner who is trying to sell a renovated townhouse, with three different prices: one for delivered vacant, one with him as a tenant and the rest vacant, and one selling just part of the townhouse. Unless he is willing to pay over market rate to lease, almost no buyer will want a previous owner leasing in a unit they just bought.

The bottom line, reasonable sellers who price their apartments properly are more likely to sell their properties quickly. Those who own "starter" or "affordable investments" may even receive multiple offers. Those who are not prepared to lower their expectations should expect to wait longer for the right buyer or for the market to catch up.

On the other hand, buyers should also understand that most sellers are not desperate. You should not make a lowball offer, significantly less than market, just because you "heard it's a buyer's market" and expect to get anywhere. You are just wasting everyone's time. Also, when you work with a broker, you should let the agent make the appointments and do the negotiations. Don't do it on your own thinking you'll be cutting someone's commission. Don't surprise the listing agent later that you have a "broker" when you find out you can't. Someone who doesn't trust is generally untrustworthy. Agents may work on a listing for months, even years. Maneuvering to cut them off their commission after the fact is so, well, presidential 2017.

With regard to the rental market, rental figures remain artificially inflated. There is an excessive amount of rental inventory. Many landlords are offering them at "No Fee," are offering to pay brokers' commissions, and/or giving one to two months rent concessions. This is true especially for the typical apartment layouts. Lofts and other unique higher-end residences may fair better, but they also tend to take longer to rent. Some are even including extraordinary lifestyle connection services like those managed by Classiques Modernes.


Of the boroughs analyzed, Queens experienced the greatest price appreciation, with median home prices up more than 5 percent in nearly every submarket. Despite signs of a competitive market across all three boroughs, the share of homes with a price cut rose — particularly among homes within the luxury sector.

“Looking at this year’s home shopping season, we’re seeing a competitive landscape with rising home prices and falling inventory levels across the City,” said StreetEasy Senior Economist Grant Long. “Inventory is tightest and price growth strongest among the markets geared toward those on a budget, perhaps looking for their first home. But this quarter’s data shows signs that buyers may be regaining some leverage: The share of homes that offered a price cut were up since last year, signaling that there are limits to how fast prices can rise and that more sellers may be willing to negotiate.”

See below for additional sales and rental market trends across Manhattan, Brooklyn and Queens.

Q2 2017 Key Findings – Manhattan

  • Manhattan’s resale home prices rose from 2016 levels, except within the luxury tier. Manhattan’s median resale price increased by 1.2 percent year-over-year to $1,173,119[ii]. Home prices at the bottom end of the market rose the most, at 4.7 percent, while luxury prices dropped by 3.5 percent since Q2 of last year.

  • Upper Manhattan prices cooled. Strong price appreciation in Upper Manhattan finally slowed in Q2 2017, maintaining its stronghold as the most affordable submarket in the borough with a median home resale price less than half of the borough median, at $496,881.

  • Prices increased the most in the Upper West Side. Median resale prices for homes in the Upper West Side increased almost 2.6 percent since Q2 of last year.

  • Inventory in Manhattan remained tight. The amount of homes listed for sale in Manhattan dropped by nearly a quarter (21.9 percent) since this time last year.

  • Rent prices in the bottom tier continued to grow. The median rent price in Manhattan rose by 1.2 percent since Q2 of last year to $2,971[iii], and rose by 1.4 percent among the most affordable segment of the market.

Q2 2017 Key Findings – Brooklyn

  • Brooklyn’s median resale price rose 5.6 percent over the past year. The median resale price was $757,507 in Q2 2017, with South Brooklyn neighborhoods reporting the greatest annual price growth, up 9.7 percent since Q2 2016.

  • Prospect Park prices showed signs of relief. The median resale price of this popular submarket fell to $937,338, down 10.1 percent from peak levels in April.

  • Sales inventory in Brooklyn dipped, mirroring the trend in Manhattan.Brooklyn home shoppers had 16.3 percent fewer homes to choose from than at the same period last year.

  • The share of homes with price cuts rose. An increasing share of homes had their prices cut in Brooklyn, with cuts made on 35 percent of the homes for sale in Q2 2017, compared to 31 percent in Q2 of last year.

  • Despite recent cooling, Brooklyn rents increased slightly. Brooklyn’s median rent price of $2,442 was 1.3 percent higher than its Q2 2016 levels and just one dollar below its all-time peak of $2,443 in Q3 2016.

Q2 2017 Key Findings – Queens [NEWLY ADDED THIS QUARTER]

  • Prices rose the most in Queens among all three boroughs. The median resale price increased 8.3 percent year-over-year to $500,351. Median resale prices went up across the borough, increasing more than 5 percent in every Queens submarket except the Rockaways, which remained flat.

  • Sale-to-list price ratio remained high. Queens saw a sale-to-list price ratio of 98 percent in Q2 2017, meaning Queens sellers typically received just 2 percent less than their initial asking price.

  • Growth in sales inventory remained muted. For-sale home inventory in Queens was just above 3,000; little changed from the levels of the past two years.

  • The share of discounted rentals fell, hitting South Queens and the Rockaways the hardest. Typical of the busy rental season, the share of rental listings offering a discount fell nearly 3 percent since last quarter. South Queens and the Rockaways were among the city areas with the fewest discounts; only 13 percent of listings and 14 percent of listings in those submarkets were discounted while on StreetEasy, respectively, compared to 26 percent of listings across the borough.

Click here for the full report on StreetEasy

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