Price is what you pay. Value is what you get.” Warren Buffett’s wise words handily sum up a dominant theme in New York’s residential market these days — which is to say, despite all the talk of glitzy new condos and penthouses with astronomical prices, buyers and brokers are increasingly chasing value.
The phenomenon is playing out across all price points, and it applies to first-time homebuyers on the lowest end of the price spectrum to foreign investors seeking a “safe haven” for their money at the high end.
This month, The Real Deal dissected the market under $10 million, zeroing in on three key price brackets: $1 million to $3 million, $3 million to $5 million and $5 million to $10 million. What we found was that each of those markets is behaving very differently in this transitioning market.
$1 million to $3 million
Not surprisingly, properties between in this segment are flying off the shelves. As prices rise across the board, this category is absorbing a growing number of buyers who are finding themselves priced out of more expensive apartments. And the majority of buyers in this range know that they need to act fast because there is a line of competing buyers who will grab the property if they don’t.
This segment is currently seeing more action than its high-priced counterparts — by a long shot.
In fact, homes between $1 million and $3 million logged more than 1,300 sales during the third quarter — more than double the number of residential sales between $3 million and $10 million.
$3 million to $5 million
Higher up on the ladder — in both the $3 million to $5 million range and the $5 million to $10 million market — sales have slowed as buyers wade through more choices than they’ve had in years and sellers overreach with asking prices.
Compass agent James Cox put it this way: “We have more listings and more buyers than we did this time last year, but they’re looking for bargains, and sellers are holding out for something better.”
The piece of the market priced between $3 million and $5 million is heavily influenced by the push and pull between old and new.
On the new development side, an influx of new condos has boosted the number of homes for sale. But rather than gobbling up those apartments, buyers in this segment are taking a bit longer to sign on the dotted line.
Meanwhile, many sellers with resale properties are reaching too high. Brokers say they are attempting to achieve new-construction prices and alienating buyers in the process.
In other words, competition from new condos has led to a softer market for co-ops in this price range.
$5 million to $10 million
While the slowing of the ultra-luxury market has been well-documented, some sellers are dismayed to see that even buyers who can afford to spend up to $10 million on a New York City home are looking for a good deal. And the yawning divide between buyers and sellers has left pricey homes sitting on the market for months on end.
In fact, more than 70 percent of the listings priced between $5 million and $10 million that are currently on the market have had a price cut at some point, according to data compiled for TRD by listings portal StreetEasy.
“Sellers in the last year have become more disconnected with the market, meaning they’re more optimistic and aggressive in their pricing,” said Jonathan Miller, president of appraisal firm Miller Samuel.
Brokers said that in recent months, classic co-ops on Fifth and Park avenues have lingered on the market.
Listing agent Brian Lewis of Halstead Property said he advises sellers not to take cues from apartments in their building that may be sitting on the market or from shiny new condos that come with big price tags.
“If you’re pricing something based on your neighbor’s exuberant sale in the winter or spring of 2014, you may want to pause and know you have fewer buyers looking right now,” he said.