August 26th 2014
MANHATTAN — A 2,520-square-foot gut-renovated loft on the corner of Soho’s Spring and Wooster streets, just above a Chanel boutique, recently saw a price cut of $1 million.
The apartment initially slashed its price by 4 percent in May, a week after hitting the market for $7.25 million. Owners are now asking for $5.95 million, according to its listing history on real estate search site Streeteasy.com. The unit’s broker from Nestseekers International declined to comment.
Price cuts have been on the rise: 63 percent of Manhattan’s neighborhoods and 54 percent of Brooklyn neighborhoods saw a larger share of listings with price cuts this August compared to last August, according to data compiled by Streeteasy for DNAinfo.
Below see a table of the neighborhoods in Manhattan and Brooklyn that had the highest number of price cuts:
“Price drops are trending right now,” said Brian Meier, whose team was Douglas Elliman’s top seller in terms of volume in 2013.
For the first time in the past year and a half, he’s heard brokers express frustration over stagnant listings and sparsely attended open houses.
Inventory has loosened a bit, and a wave of new units are expected to hit the market after Labor Day, said Meier, who plans to soon list roughly 70 new properties.
He estimates that the New York real estate market will see a 10 percent increase in listings this fall.
Roosevelt Island, the tiny sliver of land in the East River sandwiched between the Upper East Side and Astoria, had the highest rate of discounted units, with more than 65 percent of its listings seeing price cuts.
The neighborhood — future home of the $2 billion Cornell Tech campus — only had 32 listings this month. Still, 21 of those had prices cuts, according to Streeteasy data. The area’s median sales price was $840,000 in July of this year (the most recent available month), down from last July’s $1.476 million.
Price drops don’t necessarily mean that prices are lower than they were a year ago.
“Prices are still high,” said Alan Lightfeldt, a StreetEasy data scientist. “But buyers are able to negotiate more of a discount and take back some of that bargaining power.”
Here’s why there’s been an increase in price drops, according to experts:
1. Sellers are unrealistic about prices.
Many sellers have “unrealistic projections” of what their homes can fetch, Meier said. “The primary reason is you’ve got an owner who says, ‘My neighbor just got $2,000 a square foot. I want $2,500.”
In Cobble Hill, for instance, the median recorded sales price jumped from $755,000 last July to $1.625 million this July, Streeteasy found. An awareness of the dramatic increases may have influenced sellers to inflate their asking prices, resulting in nearly half of the neighborhood’s 30 listings seeing price cuts this month.
“Sellers have become more aggressive,” real estate expert Jonathan Miller said. “Price cut doesn’t mean value cut. Price cut means being too optimistic about the market.”
2. There’s an influx of novice brokers who aren’t pricing right.
“There are a lot more brokers today than even a year ago,” Meier said. “I think they’re taking any price rather than educating owners.”
There were nearly 4,000 new licenses for Manhattan real estate salespeople (who work under brokers) in 2014 to date, up from roughly 3,000 for the entire year before, according to data from the New York State Department of State, which issues the licenses and gives the licensing exam.
Brooklyn saw more than 1,500 new real estate sales people from January through August, up from roughly 1,000 from January through December the year before.
Those interested in taking the real estate salesperson exam in the city are facing a four-week wait, state officials said.
Jason Saft, of Urban Compass, who is known for selling properties that other agents haven’t been able to move, advises brokers adopt what he calls the “30/30 rule.”
“If a seller hasn’t gotten 30 people [to view the home] in 30 days, your listing is overpriced,” Saft said.
3. Fewer buyers are looking.
With mortgage rates “trickling up,” there are fewer buyers today than three months ago, Meier believes.
“There’s more supply, a little less demand,” he said. “Things are still selling, it’s just softer than it was.”
Though much of the new inventory expected to hit the market will be luxury condos in Manhattan, there are hundreds of new rentals expected in new developments in Brooklyn neighborhoods like Williamsburg that might convince some potential buyers to wait things out for a year or two, Saft said.
“We know a lot of buyers right now are pausing their search,” he said, because of the “unrealistic” prices.
“I advise my buyers that there is a lot of inventory coming up at 2015 and you may want to sit on the sidelines for now,” he added. “The reality is, you can go into a comparable rental right now without paying a fee. To me a smart buyer would say, ‘I’ll try my luck and rent for a year or two.'”
4. The top tier of the market — which is the bulk of the listings — is most sluggish.
Almost half of the inventory on the market right now is priced at the “top tier” of $1.9 million or more, Lightfeld said.
Those homes are facing a tougher sell than those priced lower, said Frederick Peters, president of Warburg Realty.
“For bigger properties in Manhattan, we’re seeing that buyers have become a little more hesitant and are looking for a little more give-and-take with the seller,” he said. “We aren’t seeing the softening in the less expensive parts of the market.”
Bidding for smaller properties in Manhattan and Brooklyn remained “very competitive,” he added.