(Bloomberg) -- The price of Manhattan resale homes hit a record in the third quarter, but sellers shouldn't get too bullish. It took some discounting to get there.
Owners pared an average of 6.8 percent off their asking prices in the quarter -- the second-most since 2010 -- and the adjustments spurred a flurry of sales at all price levels, pushing the resale median up to $995,000, according to a report Tuesday by appraiser Miller Samuel Inc. and brokerage Douglas Elliman Real Estate. That was the highest level since the firms started tracking the data in 2003.
“Whenever the market feels and looks and smells healthy, sellers get intoxicated by that, and, as an agent, you want to say, ‘Please don't drink too much here,'” Steven James, chief executive officer of Douglas Elliman's New York City division, said in an interview. “The market now is people who are motivated to sell.”
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After years of being of able to dictate prices amid a shortage of supply, Manhattan homeowners now are reining in their loftiest expectations and agreeing to pocket more-modest gains on their properties as a way to get deals done. Buyers, who held back for much of 2016, are once again signaling their interest. The number of resales in the three months through September rose 7.3 percent from a year earlier to 2,908, Miller Samuel and Douglas Elliman said. It was the biggest quarterly sales total in two years.
While the median price of those transactions climbed just 1.9 percent, it was enough to reach a high-water mark.
“This is the paradox,” said Jonathan Miller, president of Miller Samuel. “Sellers are enabling more activity by coming down from unrealistic pricing. And you're seeing more transactions, which include higher-end transactions.”
Corcoran Group released a report Thursday showing that, when it comes to resales, the lower the property's price, the better it did. Completed deals for previously owned co-ops, which are usually cheaper than condos, increased 5 percent from a year earlier to 2,098, the brokerage said. Of those transactions, 84 percent were for less than $2 million.
Purchases of resale condos, which are generally costlier, fell 9 percent to 1,012 -- the only category where sales declined, Corcoran said. Deals for less than $3 million made up 92 percent of condo resales in the quarter, but only 66 percent of the inventory was in that range.
Hell's Kitchen
Jill Godmilow was among buyers in the quarter who looked to keep their purchase costs within reason. The 74-year-old filmmaker and professor emeritus at the University of Notre Dame was selling the third-floor walk-up in Tribeca that she bought 42 years ago for $17,000, and seeking a new place that fit a few specific criteria: “under a million, ground floor, charming.”
By the time she toured the Hell's Kitchen apartment that would eventually become her home, it had been on the market for more than a year. The owner, who initially sought $1.175 million, agreed to sell it to Godmilow for $1.1 million, then reduced that to $1.04 million after the co-op board raised questions about the unit's central air-conditioning.
The owner was probably willing to negotiate because he saw a buyer who not only was paying cash but also, as an established artist with money left over from the $2.1 million sale of her Tribeca home, could get approved by the co-op board, said Godmilow's broker, Siim Hanja of Brown Harris Stevens, which also released a report on the Manhattan market Thursday. “Ultimately, what makes sense for the seller is the total package, not just the number.”
Bidding Wars
While there were still bidding wars, fewer buyers were interested in paying more than the asking price, Miller Samuel and Douglas Elliman said. Of all sales that closed in the quarter, 13 percent were above the list price, down from 18 percent a year earlier, according to the firms. Studios, the smallest and cheapest category of apartments, had the biggest share of buyers who paid more -- 17 percent.
The jump in transactions also put a dent in resale inventory, bringing it down 4.1 percent to 5,075 listings as of Sept. 30, Miller Samuel and Douglas Elliman said. The absorption rate, or the amount of time it would take to sell all those units at the current pace, dropped to 5.2 months, from 5.9 months a year earlier.
“We're back to a healthy market, but that healthy market can change on a dime,” said James of Douglas Elliman. “When people feel like ‘Oh the market's come back, we can make more money' -- I don't think that's the way to read this report.”
To contact the reporter on this story: Oshrat Carmiel in New York at ocarmiel1@bloomberg.net.
To contact the editors responsible for this story: Daniel Taub at dtaub@bloomberg.net, Christine Maurus
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