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Manhattan Luxury Units See Price Cuts While Bidding Wars Rage Over Homes Under $1M

Median sales price in the borough jumped 7.3% from last year, report finds

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A closer look at the city’s submarkets shows that while competition and activity continue to rise in affordable areas like Upper Manhattan, luxury sales depended on sellers getting more realistic on their price expectations.

Matthias Haker Photography / Getty Images
A closer look at the city’s submarkets shows that while competition and activity continue to rise in affordable areas like Upper Manhattan, luxury sales depended on sellers getting more realistic on their price expectations.
Matthias Haker Photography / Getty Images

Beneath robust home sales in Manhattan, trends affecting the high- and low-end real estate markets continue to diverge: Luxury owners are slashing prices and offering other sweeteners to attract buyers, while sellers of "affordable" homes are benefiting from rigorous demand and brisk sales.

New York City’s top brokerages released a flurry of market data on Thursday that showed Manhattan set new price records in the second quarter. Median sales price jumped 7.3% from a year ago to $1.189 million, according to Douglas Elliman’s report compiled by real estate appraisal firm Miller Samuel.

More:Check Out News in the Luxury Manhattan Market

A closer look at the city’s submarkets shows that while competition and activity continue to rise in affordable areas like Upper Manhattan, luxury sales, defined as the top 10% of the market, depended on sellers getting more realistic on their price expectations.

"The key item from my perspective is greater negotiability at the high end of the marketplace," said Jonathan Miller, chief executive of Miller Samuel and author of the Douglas Elliman report.

On average, sellers discounted their homes 6.1%—tying a five-year high. The discounts were even more dramatic in the luxury sector, which saw an average 10.4% price reduction, a jump from 2.2% a year ago, according to the Douglas Elliman report.

Sellers recognize that if they don’t budge on price, their homes will sit on the market for months—in the second quarter the average days on market for luxury homes hit 231 days, a massive two-month increase from the previous quarter.

"Luxury sellers are becoming more realistic with pricing," Mr. Miller wrote in the report.

The median price of a luxury home in the second quarter was $6.836 million, or $3,037 per square foot, according to the Douglas Elliman report.

Bridging the disconnect

That disconnect between sellers’ and buyers’ expectations has created what Warburg Realty called a "broker’s market," where listing agents are becoming crucial arbiters in pricing and providing market data to clients.

"Buyers and sellers see value differently, and it is up to agents to reconcile their viewpoints," wrote Warburg’s CEO and founder Frederick W. Peters in its Q2 report.

"Shifting or uncertain markets always create value for someone. The challenge is knowing (or accepting advice) about when the deal has become good enough to make," Mr. Peters wrote.

More:Manhattan Luxury Sales Aided by 'Affordable Luxury'

A robust affordable market

By contrast, Manhattan’s affordable market—or affordable by Big Apple standards—needed little-to-no price sweeteners to get deals done and got a boost from low interest rates. Home prices under $1 million spent the least amount of time on the market, with more than two-thirds of them going into contract in less than 60 days, according to Stribling & Associates’ second-quarter report.

Buyers have flocked to Upper Manhattan to find more affordable housing and in doing so have caused prices there to jump. Last quarter was the first time that Upper Manhattan homes on the market had average prices topping $1,000 per square foot, according to Stribling. Median condo price jumped 19% in Upper Manhattan, to $865,000.

"Plentiful inventory levels and relatively low building costs make this area a hotbed for developers," according to Stribling, noting that bidding wars are back.