The number of Manhattan real estate sales fell 19 percent in the third quarter compared with the prior year, as wealthy individuals from the U.S. and overseas pulled back their spending.
There were 2,974 sales in the third quarter, according to a report from Douglas Elliman Real Estate and Miller Samuel, the appraisal firm. Properties sat on the market longer, discounts were up and the inventory of houses listed jumped 11 percent.
The real-estate crunch in Manhattan reflects a broader slowdown in high-end real estate, as markets from Aspen, CO, to the Hamptons see sales decline.
"The Manhattan market is going through a process of resetting from the white-hot conditions of the past several years to something more sustainable in the long run," said Jonathan Miller, CEO of Miller Samuel.
Granted, prices remain strong. The average sale price of $2.03 million in the third quarter was up 17 percent from the same quarter last year. And the median sale price increased 8 percent, to $1.07 million. But the underlying market may be weaker than the third-quarter numbers suggest.
Many of the sales recorded were for new apartments that went under contract during the boom times of 2014 and early 2015, and are just now closing as the buildings are completed. Nearly half of all luxury sales (the top 10 percent of the market) were from new-development closings. That time-lag benefit will likely start wearing off later this year and into the first half of next year.
The bidding wars that became common in Manhattan in 2014 and 2015 are quickly disappearing, Miller said. A year ago, 31 percent of all sales saw bidding wars. Now it's around 17 percent. That's still above the average, but most are in the "lower end" of the Manhattan market, in the under $2 million range.
After the financial crisis, developers rushed to build luxury apartment towers with outsize apartments priced at $10 million or more. Now that they're coming online, many are sitting unsold.
The overseas rich are no longer buying like they were a year ago, as China's economy slows, oil prices hurt Russia and the Middle East, and Latin America suffers recessions. Meanwhile, American buyers are nervous about the November elections and the unsteady stock market.
There is an excess supply of apartments priced at more than $5 million "and more supply continues to come onto the market," Miller said.
The supply of new development is rising three times as fast as existing apartment inventory, he said. Listing inventory of new development jumped 27 percent compared with last year, and the absorption rate increased 36 percent to an eight-month supply.
The average sale price for new development, however, hit $5.4 million — up 57 percent from last year.