This Is The Breaking Point”—Manhattan Home Sales Plunge Most since 2009
The comments above & below is an edited and abridged synopsis of an article by Tyler Durden
Home prices in the US have rocketed to within 1% of their highs from 2006. Conventional wisdom says that real-estate values in urban centers could never fall. The perception is that world-class cities will never go out of style, and their already high density limits supply.
But what happens when too many people pile into a supposedly safe asset? This happened during the housing crisis, as millions of Americans assumed real-estate valuations could never retreat, but even the world’s trendiest markets have their breaking points.
Analysts have predicted that a correction is looming. Manhattan apartment sales plunged to a 6-year low in January. Bloomberg reports that Manhattan home sales dropped the most since 2009 during the first quarter. Corcoran Group recorded an 11% decrease. The drop was observed across the market, from the ultra-high end to studios apartments.
Any vendor who wanted to close a deal during the first quarter had to lower the asking price. Indeed, 52% of all sales closed during the period were for less than the most recent ask. In 38% of deals, buyers agreed to pay the asking price. But by then, it had already been dramatically reduced.
The median price of all sales that closed in the quarter was $1.095 million, down 5.2% from a year earlier. Three-bedroom apartments saw the biggest drop, with a decline of 7% to a median of $3.82 million. Both new developments and existing home sales have fallen.
Even if there is a strong rebound in Q2, perhaps the most important factor that has been driving the high-end real-estate boom exists outside the US. Chinese buyers are finding it increasingly difficult to move their wealth offshore, as China has cracked down on capital flows and foreign real-estate transactions involving wealthy Chinese.