by Wolf Richter, Wolf Street:
Why a real estate insider thinks era of “aspirational pricing” is over.
Luxury real estate got battered in 2016 in some of the toniest markets – in Manhattan, in the Hamptons, in Aspen, in Miami, etc., but then some sales closed this year, and traffic ticked up in some places, and the meme cropped up that the soaring stock market or whatever was pulling luxury real estate out of its funk.
Last month, Bloomberg explained the phenomenon this way:
Manhattan’s luxury apartment market is seeing sparks of life after sputtering for much of last year as a construction surge created an abundance of choices for the well-heeled. The first two weeks of January marked the strongest start to a year since 2014 for sales at $4 million or higher, with 50 contracts in that range signed, according to a report from Olshan Realty Inc. The increase in deals, coinciding with a stock-market euphoria and developers’ greater price flexibility, follows a year in which luxury contracts fell by 18% from 2015….
But it may just be that sellers, after watching their properties languish on the market, swallowed the bitter medicine and slashed the price they’re willing to take in order to make a deal.
“Nearly every time we read about a high priced sale, there is usually a big discount associated with it,” explained Jonathan Miller, CEO of real estate appraisal firm Miller Samuel, in his newsletter. It doesn’t mean the luxury end of the housing market is suddenly recovering, but “that the property was significantly overpriced, to begin with, and after a lengthy marketing time, the seller came down and joined current market conditions.”
Aspen ran into trouble in 2016. According to the Elliman Report, luxury sales in Q4 dropped 11% year-over-year to 25 houses. And the median price plunged 29% to $4.8 million.
So it was a huge relief in 2017 when the sale of a 14,000-square-foot, eight-bedroom, 11-bathroom house closed at a price that was slightly above the most expensive sale in 2016, according to Mansion Global. A turnaround of the market?
The house, which had languished on the market since August 2015, sold for $24.4 million: 32% below original asking price!
And Aspen’s most expensive sale of 2016? It closed in November at $24 million, 26% below the original asking price!
In the Hamptons, a playground for the well-heeled, a similar scenario played out. Judi Desiderio, CEO of real estate broker Town & Country, told Reuters: “The high end sank like a stone in 2016.”
In her annual list of the top ten sales in the Hamptons, the most expensive home sold for $70 million – less than half the record of $147 million during boom-year 2014. The lowest-price home on her top-ten list changed hands at $15.99 million, the lowest since 2010, she said.
But traffic to the eight offices of her brokerage was up in January, and indications suggest a better 2017, she told Reuters.
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