Olshan Luxury Report shows large drop in sales

I know someone who called the peak in late Q1 / early Q2 of 2015.

Nothing alarming, more like a downshift into a normalising market. Time on market a bit longer however average price of (lux)condos higher 2016. The big question is what awaits us in 2017? I'll save those thoughts for our clients

I think the luxury market 4mm and above and greater than 2k per sq ft will remain under pressure due to supply. However, affordable luxury at 1500 per sq ft will be good in my opinion due to better bank stock prices and potential tax cuts. Potential for recession has been pushed back at least 1 year if not 2 years by most economists.

I personally think we are headed for a crash in the not too distant future.

30yrs what is your basis for predicting a crash?

30, If you are taking about super luxury crash (>3k per sq ft original ask), it is already off 15-20% percent. Just look at sales in 432 Park or new sales in 157 West 57th. In the village, 17 East 12th, 12 East 13th and 66 east 11th.

Which segment are you taking about with in luxury? >$4mm and <1700 per sq ft renovated has limited supply in condo or coops in a good area.

this was in today's Wall Street Journal:
check out the change in taxes in 10 years:
http://streeteasy.com/sale/86993
http://streeteasy.com/building/136-baxter-street-new_york/5c

what source will you look at to define if any crash happens? SE Condo Index? Quarterly Market reports and their PPSF/MED SALE price stats? If the answer is yes, then this game is pretty easy. Q1, Q2 and Q3 2017 #s have a higher than average chance of showing pretty steep YoY declines when those #s come out in the future.

The reason is the surge in new dev condo closings that spiked up Q1, Q2, Q3 2016 #s; deals signed 12-18+ months prior but had to wait for bldg completion. 1/3 condo closings in Q1-2016 was new dev. Discussed here in more detail - https://www.urbandigs.com/blog/manhattans-2016-narrative-5-main-themes-to-know/

We are now showing quarter to quarter declines from Q1 record #s, an artificial and temporary record peak, that will dissipate as new dev closings wane down.

Now, what goes in must come out right? What happens Q1-2017 if they dont have the steroids of those high end closings? YoY #s relative to Q1-2016 peak could very well show 10%-20% declines. We at UD think that is the case, we just dont know (i) when, which qtr in 2017 will show it and (ii) just how severe it will be. Im betting at least 10%+ declines by Q2-2017 YoY for med sale price + ppsf, especially for condo segments. Not so much for coop sector which is closer in trends to existing resale mkt.

So in this regard, yea, I think a shift down is coming in lagging future reports due to statistical dynamics of YoY comparison relative to an artificially made peak. In reality, the shift already occurred. The high end is already crashed relative to late 2014/early 2015. Done. Happened. Maybe its down 20% maybe 25%, who knows, but sellers simply cant sell 10M+ property anywhere near late 2014 and early 2015 levels. Buyers in this sector have more leverage and a nice discount relative to peak than in the past 3-5 years. Not so much in 2m and under, which is softer than 2015 for sure, but has held on tight. Just my 2 cents..

Happy new year all!!

Urban, Thanks for your comments.

I like SE condo index as it is based on resale of the same units and strips out first sale of new development which is where the bubble is/was. I do not expect it to go down or up by a large number in 2017 (+/- 3% range). Average PPSF is not so meaningful due to continuous newly built high priced supply.

I am glad some one with DATA on this board is agreeing with me that new developments are already down significantly from their original expectations.

@ 300 - agreed on SE Condo Index. Its a great tool. Im curious to see how that pans out relative to quarterly mkt wide stats.

There is softness in the not-so-high-end as well. Take a look at 1 Manhattan Square - they have been on the market about a year (in Asia, anyway) and as far as I know have only gotten about 10% into contract.

1 Manhattan square is hardly a benchmark of anything. Location is experimental. For the location, I would consider is very high-end.

Here is another example of high-end price cuts. Now it should move at 1800 per sq ft which seems good value to me.

http://streeteasy.com/building/400-park-avenue-south-new_york/23c

Interested in the thoughts of folks more knowledgeable that I about how you interpret the period thus far in 2017. Seems that a lot of deals were getting done, and then it slowed down in the last couple weeks. Any thoughts on what the future holds?

I have been thinking the same about the market in general.

- $3-5mm non new-development range is moving again but I am still seeing price cuts.
-$2mm range never slowed down.
- New developments are finally moving but there are haves and have nots.

Overall, I think a good sign for stabilization but too early to call new-development downwards pressure over. In my opinion, it will take another year and more price cuts for new development downwards pressure to abate as the supply still keeps coming. For example, Hudson Yards supply.

I'll throw some stats out there.

RESALE MARKET PENDING SALES (measure of contract activity/demand)
<600k mkt: down 16% yoy
600k-1m mkt: +7.4% yoy
1-2m mkt: +5.7% yoy
2-5m mkt: +10.9% yoy
5-10m mkt: +4.4% yoy
10m+ mkt: -20% yoy

In general, most price points are active..the 10M+ resale sector is more affected by low vol and the fact that our pending sales measure looks back 6 months. I do see a good month for March contract activity for the 10M+ resale sector. So while its down 20% yoy, i see 10 deals signed in march alone for 10m+ resale sector. Below 2m, supply still tight, demand robust, but buyers price sensitive. It is NOT how it was in mid/late 2014 to early 2015, where tight supply meant bidding wars and tons of sales over ask. Buyers have more leverage today than back then, but that is more pronounced the higher the price point you go

We are very busy across all segments (up to $6M). It never slowed down in our little world, perhaps a breather from Passover through Easter. However I was negotiating deals and fielding calls while my daughter was running after eggs on Easter Sunday ): Some softness is mediocre locations, new condos certainly picking up for the most part.
Noah is spot on with what we are experiencing, though bidding wars have ticked up for the most desirable homes. It's no 2014 but it ain't easy either....

Keith Burkhardt
www.theburkhardtgroup.com

I think continued low rates have to be helpful. Not sure they will remain so low. 10y at 2.20. Down 40bps from the recent peak when the sky was falling.

I'm a boutique so I have fewer data points, but anecdotally: starter Brooklyn ON FIRE. You could sell a doghouse in Bed-Stuy at this point. Downtown Manhattan moving reasonably; uptown, renovated apartments going quickly; while uptown units in need of renovation salable, but not at the lightspeed of two years ago.

ali r.
Upstairs Realty

Interesting thoughts. Thanks to you.