Bidding Wars Decline And Sanity Returns To The Manhattan Condo Market
Buyers breathe a sigh of relief as luxury Manhattan condos sell at and sometimes below asking price
Bidding wars. Brokers and sellers love them. Buyers hate them. It amounts to a game of real estate Russian roulette. Bid the asking price or slightly above and you risk losing the property. However, there’s no firm way to know whether the realtor is calling your bluff with their talk of “a higher priced offer.” The good news for buyers is that in the final quarter of 2016, Manhattan apartment bidding wars dropped to their lowest in four years, according to a just released market analysis from Douglas Elliman. And that might signal that sanity may actually be returning to the Big Apple.
The report states that approximately 12.6 percent of apartments sold above their listed price in the last quarter of 2016. That’s half as many as the same time for the previous year.
“It’s a great thing for the sustainability of the market,” said real estate expert Jonathan Miller, who authored the Elliman report. The decline means that the pendulum is swinging over to favor buyers—specifically, according to the data where higher priced apartments are concerned. New constructions saw no bidding wars. It could also signal the over saturation of the market of new condos on—or about to come onto—the market. The lower priced co-op market was, conversely, still competitive, with 19 percent of apartments selling for above the asking price.
Tellingly, Frederick Peters, CEO of Warburg Realty stated in his own market report: “On the listing side, 2016 was a year of price drops, often multiple, to position the subject properties for sale in the changed marketplace. While the year began with sellers firmly in charge of the market, December saw almost every sale negotiated, often from prices which had already been reduced several times.”
Despite the slowing down on the luxury, upper end of the market, on the lower side robust activity prevailed. Only studio prices showed double-digit growth, jumping more than 24 percent over the past year to $523,250.
“Smaller apartments drove real estate markets in every borough throughout the year,” Peters wrote.
The data from the Elliman report shows sales prices for one and two-bedroom units for under $2 million outperforming all other types of apartments in volume and sales. Prices across the city and sales in general were up eight percent over the previous year. However, the data could be misleading. Many of the new condos sold actually went into contract a couple of years ago, when construction on new developments began. They only closed in the last quarter of 2016, when the developments were completed. Many of the luxury developments, Peters says, have been dropping their prices.
Miller believes that in 2017, the lower end of the market is where the action will be.
“It’s like a layer cake. When the top layer is melting, it melts into the next layer,” he said. “But the further you move away from the high end, the less of an effect you see.”
It’s generally perceived that younger buyers drive the lower end of the real estate market, buying studios and one bedrooms downtown as opposed to mid and uptown. To the that end, downtown had the largest share of new development closings. It’s a stat shared in a report from Halstead Property, which showed neighborhoods below 14th street were busiest for sales.
If bidding wars frustrate buyers in the U.S., in the UK (excluding the sane Scots), they have system which is like bidding wars on acid, something known as “Guzumping”. It may sound like a term from a Harry Potter novel, but there’s no magic involved. Rather, it’s a nasty little loophole which dates back a century and allows a higher priced offer to be accepted from a seller, even after they have have previously accepted a lower offer.
It is kind of like accepting a proposal to get married and then finding someone better looking and reneging on the first proposal and accepting a second. It doesn’t account for the legal costs and survey charges the buyer may have gone through to be able to make an offer. Thankfully, there is talk of England and Wales, catching up with the Scots and outlawing gazumping. After it’s gone, a bidding war would probably seem quaint and endearing by comparison.
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