Manhattan’s real estate market ended 2017 in a more stable condition than 2016, but the recovery lacked velocity and there were few bright spots, according to year-end reports from major brokerages, all released Wednesday.
While the median sales price in Manhattan edged up 1% annually to $1.06 million by the end of 2017, the average sales price declined to $1.897 million, falling 10.6% year-over-year and below $2 million for the first time in the last seven quarters, according to Douglas Elliman reports prepared by Jonathan Miller, chief executive of real estate appraisal firm Miller Samuel.
"The diminishing ‘legacy contracts’ in luxury new developments are mainly to blame," said Mr. Miller of the fall last year in average prices.
Those contracts, which were signed in 2014 and 2015 during a construction boom, had previously skewed average sales prices upward.
More:Brooklyn Saw Soaring Luxury Prices in 2017
Overall, 2,514 Manhattan homes sold in the fourth quarter of 2017, down 12.3% from the same period in 2016. The average sales price per square foot declined 20.6% year-over-year to $1,609, according to the Douglas Elliman report.
Other brokerages observed a similar market trend in Manhattan with slightly differing data due to some methodology nuances.
For example, the Corcoran Group found that median sales price in Manhattan reached $1.068 million in the fourth quarter, up 5% from a year ago. The average sales price, on the other hand, dropped 8% year-over-year to $1.695 million, as a result of fewer homes selling with sky-high price tags. The brokerage recorded 3,140 sales in the fourth quarter, down 15% year-over-year.
Luxury market continued to suffer from too much inventory
Market oversupply as well as tax reform-related concerns slowed the luxury Manhattan market in the fourth quarter, according to Douglas Elliman and Stribling & Associates.
The average luxury sales price, defined as the top 10% of the market by Douglas Elliman, stood at $7.58 million by the end of 2017, down 20.7% compared to the fourth quarter of 2016.
This segment had an entrance threshold of $3.895 million in the fourth quarter of 2017, dropping 13.4% from the comparable period in 2016. The number of luxury sales fell 13.4% to 252, while active listings grew 13.2% to 1,439.
There were 152 sales in the fourth quarter of 2017, fetching a price of at least $5 million, 38% fewer than the same period of 2016. One notable trend in this segment was the prevalence of all-cash buyers, Mr. Miller said.
"Almost 90% of deals in the $5-million-and-plus market were all-cash deals, compared to the normal range of 70% to 80% seen in the past couple of years," he said.
More:What Are the Reporting Requirements for All-Cash Purchases of U.S. Properties?
The reason for this was largely related to the new tax law, Mr. Miller said. As the discussion of tax reform began last fall, it caused uncertainty, especially with regards to mortgage financing.
According to a separate report by Stribling & Associates, $5-million-and-plus sales only accounted for 6.2% of the Manhattan market, compared to 13% of those sold under $500,000. The two segments previously had a more equal market share.
Luxury homes priced between $10 million and $20 million logged the most significant price declines, with the median price dropping 9% to $12.46 million and the average price falling 6% to $13.31 million.
"The glut of new luxury development projects coupled with the uncertain tax bill changes caused many buyers to hesitate on large purchases and financing," Elizabeth Ann Stribling-Kivlan, the firm’s president, wrote in the report.
"In return, we saw that sellers came down on pricing and created more room for negotiability. This is a trend we expect to continue into the new year," she continued.
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New development markets saw further correction
New developments, which mostly fall into the luxury category, continued to see price corrections. According to Douglas Elliman, the average sales price in this market dropped 7% to $2.74 million. The median sales price also slumped 16.8% to $4.06 million.
New development inventory expanded for the sixth consecutive month to 1,054, accounting for 15.4% of all the Manhattan listings in the fourth quarter, according to Douglas Elliman.
Throughout 2017, a total of 1,320 units in new developments entered into contract, an increase of 4% year-over-year, according to the year-end report by Halstead Property Development Marketing.
The average price-per-square-foot rose 2.2% year-over-year to $2,282, which has remained essentially flat for the past 10 quarters.
"In 2017, we saw a correction—which is still underway—at the top end of the Manhattan market; a continued flat-line for pricing in Manhattan," Stephen G. Kliegerman, the firm’s president, said in a statement.
The percentage of new development deals entering contract over $5 million fell to 19.5% from 24.6% at year-end 2016. Conversely, the share of those under $5 million rose to 80.5% from 75.4% at the end of 2016, according to the report.