A few weeks back we wrote about how luxury real estate markets around the country were tanking (see ""I’ve Never Seen Anything Like This Before" – The Housing Markets In The Hamptons, Aspen And Miami Are All Crashing"). Turns out other price tiers may be at risk of contagion as lower-priced real estate is also starting to crash, at least in NYC.
Per Bloomberg, the number of listed dwellings, in the top 20% pricing tier, that have experienced price cuts from their original listing price has spiked over the past couple of months. While most price reductions are only coming in at around the 5% level, that is a huge deterioration for a market where sellers have become accustomed to selling at or above listing price.
But, turns out that the weak real estate pricing market isn't reserved to luxury real estate. StreetEasy data reveals that price cuts for real estate in the second highest pricing tier (i.e. dwellings priced in the top 60-80% of the market) are also spiking and the cuts are even deeper than the top tier. In fact, the percentage of NYC real estate in this tier experiencing a 10% or larger reduction in price relative to listing price has doubled YoY.
StreetEasy's economist, Krishna Rao, attributes sinking real estate prices to a "boom in supply as developers rushed to build luxury condos in 2014" as well as economic and political uncertainty that is keeping buyers on the sidelines. That said, Rao also points out that "prices and amenities in these luxury buildings have reached an unsustainable level" that will result in "some units languishing on the market."
"The luxury market was the first price segment where we began to see slowing price growth, and now we’re seeing other price segments following suit," Rao added.
"It may be that economic and political uncertainty have discouraged domestic luxury buyers, while a strong dollar kept foreign buyers at bay and that they will both return to the market when their concerns are assuaged," Rao said. "But it may also be that prices and amenities in these luxury buildings have reached an unsustainable level and we are going to see some units languishing on the market and others quickly falling in price as they struggle to find buyers. That more than anything will determine which way the market swings."
Frankly, we're not sure why consumers are balking at real estate prices in the Big Apple. After all, this entire 850 square feet of luxury living space can be bought for the bargain basement price of only $2.3 million. That's only $2,647 per square foot…AND it comes with a dishwasher.
Or, for the value shoppers, might we suggest this studio on the upper west side that includes a full 600 square feet of living space for only $925,000. That's only $1,542 per square foot and, get this, it comes with a dishwasher AND elevator access.