Real Estate Listings Selling For Less

As the summer heat intensifies, the Manhattan real estate market is cooling down, and the languid season could present unexpected opportunities for savvy buyers. An emerging trend shows an increasing number of properties being listed at prices lower than their previous sale prices. This phenomenon offers a chance to secure homes with potentially less downside risk and more upside potential should the market’s nascent pricing recovery continue.

Pricing Opportunities

Recent Manhattan data indicates a significant upward trend in the percentage of new listings priced below their previous sale prices. This trend has accelerated in 2024, reaching 9.5% by the third quarter. Historically, this is a marked increase from just 1.7% back in Q 2014. This data underscores a growing opportunity for buyers as the market adjusts and consolidates from its previous highs.

Condos and Co-ops by Neighborhood

#1: Condos

The trend of condo listings below previous sale prices varies across Manhattan neighborhoods. Downtown, Midtown, the Upper East Side, the Upper West Side, and Upper Manhattan all show significant increases, with the Upper East Side peaking at 31.6% in July 2023.

#2: Co-ops

The more stable co-op market mirrors this trend, albeit at lower levels, with notable increases across all neighborhoods. Midtown and Downtown have seen substantial jumps, reaching 18.7% and 21.0% respectively by Q2 2024.

Year of Previous Sale

Analyzing the data further, we see a pattern where the majority of listings now priced below their previous sale were originally purchased during market peaks. The period of 2014 to 2018, which saw a frenzied rally peaking in the years 2016 and 2017, represents the bulk of units, with nearly 600 homes listed for sale this year seeking to sell at a loss.

Brooklyn Value Creation

While Manhattan has seen a notable increase in the percentage of new listings priced below their previous sale prices, Brooklyn tells a different story. The percentage in Brooklyn remains significantly lower, speaking to the incredible value creation in the borough over the last decade as prices have steadily risen in response to incessant demand. Despite market peaks and troughs, over the last decade, buyers in Brooklyn have done exceedingly well and may continue to do so even if prices remain stable, hence the level of units selling at a loss in Brooklyn remains far lower than that of Manhattan.

Risk Padding

When markets are hot, buy-side competition is at its most intense, supply is scarce, and asking prices tend to rise quickly, reflecting a seller’s market premium over and above the fair market price that buyers have to pay if they want a deal. However, as markets slow, that premium is the first to evaporate. Slower markets, like the one we are experiencing today, offer buyers a chance to buy without having to embed a premium in their price due to intense buy-side competition, offering a kind of risk padding as there is likely to be less price volatility in the near future due to a downshift in market sentiment. This risk padding means that buyers who enter the market now could see more stable property values over time, reducing the chances of sharp price drops that were more common following the market peaks of the past.

Current Manhattan Market

A look at what’s currently on offer shows a handful of opportunities for buyers. Out of nearly 6,800 active listings, 537 are priced lower than their previous sale prices, reflecting an average loss of 12% compared to the previous sale price. In particular, homes sold in 2017 and 2018 make up the largest segments of such listings, with 81 and 45 units on the market, respectively. For those hunting for bargains, the data implies that focusing on properties bought between 2015 and 2018, particularly in areas with higher inventory, might yield the best opportunities for finding a new home at a reduced price relative to what it once traded at and could potentially trade at again.

Conclusion

In conclusion, the summer slowdown is slowly uncovering some interesting pricing opportunities across Manhattan. Whether you’re eyeing a condo or a co-op, the data suggests now might be an opportune time to buy homes others paid significantly more for not too long ago.

Moreover, today’s market slowdown may offer an additional layer of security for Manhattan buyers. With less frothiness and reduced competition, there is likely to be less price volatility in the future, providing a cushion against market fluctuations. Meanwhile, Brooklyn’s relatively low percentage of new listings priced below their previous sale prices showcases the borough’s unrelenting demand and highlights its strength.

Ultimately, current market conditions may provide a unique opportunity for some buyers to secure properties at attractive prices, with reduced risk and potential for future value appreciation.