Prices for Manhattan real estate took their biggest plunge since the 2008 financial crisis, according to a new report.
The average sale price for a Manhattan apartment fell 14% in the third quarter, according to a report from Douglas Elliman and Miller Samuel. That was the steepest drop since 2010, when the city was still in the grips of the financial crisis, according to Jonathan Miller, CEO of Miller Samuel, the appraisal and research firm.
The average price of a Manhattan apartment is still not cheap — falling to $1.7 million. But brokers and real estate analysts say there is little sign of a bottom after nearly two years of declines.
"There is a lot of uncertainty in the air," Miller said. "It's going to be a slow grind over the next year or two."
A continued drop in foreign buyers, changes in the federal tax laws that make it more expensive to live in high-tax states and a glut of high-priced condos have created the worst real estate market in Manhattan in a decade. Sales in the third quarter dropped by 14%.
Some of the decline was due to the timing of a new tax on high-priced Manhattan real estate. The so-called mansion tax on apartments over $2 million took effect July 1, so many buyers rushed to close on deals before the tax, effectively stealing demand from the third quarter.
Yet the number of apartments coming onto the market suggests a continued oversupply and softening prices — especially at the high end. The supply of luxury listings — or those in the top 10% by price — hit the highest level since data started being recorded 15 years ago, Miller said, with nearly 2,000 apartments listed for over $3 million. There is now nearly a two-year supply of luxury apartments.
One bright spot: lower mortgage rates. Typically, Manhattan doesn't benefit much from lower rates since more than half of all purchases are done with cash. But in the third quarter, as mortgage rates fell, only 44% of deals were done with cash.
"Lower rates have mitigated the slowdown to a certain degree," Miller said.