Pricing Your Apartment in a Slow Market

For sellers with high hopes, the reality of the current market can be deflating.

Comments: 77

  1. Sellers' unfealistic expectations of the selling price are often a result of ignorance. Every housing market has a guideline figure of price appreciation in percent per year. All it takes to dig into the records, do a simple arithmetic of compound interest, and then hope for the best.

  2. these examples are of apartments that only 1%ers and 5%ers can buy. Middle class people without parents who help financially are continuously outbid by the former.

  3. Except now, in a falling market, that’s not true. Apts are sitting unsold with price reductions. Falling markets are hard to manage: everyone is basically having to decide when to grab a falling knife. If you buy in a collapsing market there is always the chance you will see your equity get further beat up. That means the pool of buyers are more likely those that are willing to wait it out.

  4. The real estate market in many cities remains quite strong, including nearby Boston . . . it would have been helpful to have more information on why the market in NYC is down, even if it is simply the cap on SALT taxes.

  5. They're worrying that New York City is reverting to its 1970s squalor. And this time around, our elected officials, like our more progressive brethren, will continue to shrug at, and so normalize, aberrant and criminal behavior. Politicians will continue to pander to their base, and liberals will continue to congratulate themselves on their tolerance and understanding.

  6. There have been many articles concerning the impact of overbuilding at the high end, SALT and the Mansion tax. Every article can’t summarize months of reporting, nor should it be expected to.

  7. This trend has also hit New Jersey. In 2007 I and a neighbor bought homes for about $1.5M each. In 2017, I sold my home for $1.3M and left NJ. My neighbor put her home on the market a year later for $1.3M. It hasn't sold and she's dropped the price to $1.1M, still with no takers after 18 months on the market. I left NJ because of the high taxes and a government beholden to the unions. It didn't seem fair that our police chief could retire at 45, get a $140K a year pension (free of state income taxes), and get rehired by the town again to do the same job while receiving a pension. That's NJ and I'm glad I'm gone. I'm sure NYC residents are feeling a similar pinch of high taxes with poor returns.

  8. @Matt You left for Montreal, right? if I am not mistaken, the higher taxes in Canada buy its citizens benefits (free higher education, health insurance available to all) this country can only dream of. The constant lament over higher taxation is the reason why this country lags behind its Northern neighbor as well as Western Europe in providing services to the Americans that in the aforementioned countries are treated as their rights.

  9. To be fair, the commenter you are replying to was complaining about corruption wasting tax dollars, not about paying taxes in the first place. The fact that he, apparently, moved to a place also known for high taxes but at the same time a lower rate of corruption supports this reading of his meaning. Taxes aren’t just good or bad: taxes are either used well or poorly. That’s the real issue with taxes.

  10. @Matt Matt, there is the problem. Police cheif retiring at 45. Here in Connecticut the civil employees have destroyed the real estate market with higher taxes. We keep working so they don't have to.

  11. The best way for buyers to properly set up valuation for property currently on the market is to simply ask if I bought this property and rented it out would I earn 4%. For example if an apartment is sold for a million with a maintenance of $2000 then the apartment should be rented out for $5500 to earn 4% return . Of course there maybe a rental fee and or advertising costs and a time that the property is empty. Currently a property that sells for 4 million with a $10,000 maintenance would have to rent for about $25,000 a month to earn 4% with all costs factored in. If you feel that it would not rent for $25,000 do not buy it. Many new luxury condos after purchase would earn less then 1%. Another major fault in purchasing real estate when the market was hot as in 2015 is that it may take fifteen years for the market to come back. The supply of real estate being built in NYC is huge. Prices will not increase for quite awhile.

  12. @Ralph Petrillo There is another way to look at buying. Ask the question "what would be my cost for renting vs. buying?". You have to live someplace. The rents in the area around where I work are high so for me, buying made sense.

  13. @sjs Well if you had simply purchased $5 million of Apple stock five years ago you would have $20 million . If you bought an apartment for $5 million you would have $3.5 million . Sometimes it is better to rent. By the way I am looking forward to auctions. Will use my Apple money to buy a luxury condo that is auctioned.

  14. @Ralph Petrillo All real estate is local. In my area, for me, buying made much more sense. In other places, at other times, renting made more sense. Two more points, first, I bought my place at auction and got a deal, so if things line up right, you can benefit. Second, you have to pick a stock and have it go up to get the benefit/profit. That doesn't always happen.

  15. These same issues are in the Connecticut market and, I would guess, all over America. We are in a buyer's market now.

  16. Except in Maine, where good homes are few and disappear in days partly because instead of selling, owners are turning them into rentals on Airbnb -- and also because buyers then list them on Airbnb, make money off them, and don't sell in 5-7 years as they used to, unable to tolerate the Maine winters they thought they'd enjoy.

  17. @B. Good point. Even in CT, the supply of housing makes a big difference from town to town

  18. @sjs Yes because NYC and CT absolutely dictate the real estate in the rest of the United States. Not. East Coast arrogance strikes again. Do a simple internet search outside your bubble to see what's going on. Or don't. The rest of us will keep navigating the reality of home prices that keep climbing while salaries do not.

  19. This piece doesn't have one word about WHY prices are falling. Is it because of increased supply of housing from so much new construction, decreased demand and/or other market dynamics? A discussion of what's going with the market during a generally strong economy, especially for the wealthy, would have made this piece far more interesting.

  20. @Peter J. Miller You are correct and there is only a $10,000 mortgage deduction.

  21. @Peter J. Miller Well said! I think there is a lingering effect from the cap on property tax deductibility and certainly an abundance of supply.

  22. @Peter J. Miller Sky-high maintenance costs (ours have tripled in the last 30 years) also reduce the value of properties: Whatever a prospective buyer has to pay in maintenance is unavailable to shovel towards the mortgage. This is another reason why all coop owners to be politically active (tax hikes reprensent the greatest share of our increases) and to monitor the spending of coop boards carefully to make sure shareholders are getting value for money.

  23. real estate values are dropping in Connecticut because civil employees are overpaid and retire at 42. But don't worry, I will keep working so they don't have to. And Bernie is the answer?

  24. Oh wonderful. Blame middle-class civil servants for the real estate prices for an entire state. Well-thought out argument.

  25. I wonder what the market for multi-units in boroughs other than Manhattan is looking like. I own a three-family brownstone, and based on the appraisals that I've been getting the prices have just been creeping up and up, while the interest rates have been going down. Needless to say I have refinanced several times, and now I've come to a point where not only am I living in one of the units free, but I am now able to pocket a few hundred dollars per month because the rents exceed the mortgage and taxes. Perhaps this is more of a high-priced neighborhoods phenomenon as opposed to a city-wide one where people are still looking to get their foot in the door but also with some value?

  26. Actually it’s what the market will be doing tomorrow that most defines prices today. We were looking to buy an apartment and decided not to. Many reasons including inflated prices, not getting much for your money, taxes wtd but the clincher was our belief that nyc real estate has hit a peak and that it will take years if not decades to see that peak again. At the end of the day, there’s a finite pool of people that can spend that kind of money. With the potential dems coming up pike taxes will only increase. Why tie up so much capital on what will likely be a depreciated asset when we can just was easily rent or better yet, look in Florida....

  27. @GWE People have been moving to NYC from Florida for many decades. New York has weathered that exodus well. Personally, I prefer NYC where I don't have to spend each hurricane season wondering whether the hurricane is going to turn left or right. Also, I like public transportation, museums, the nearly infinite amount of film screenings each year, theater, restaurants (also a seemingly infinite variety), music, and the variety of people and neighborhoods.

  28. @GWE Last week in the NYT magazine there was an ad for gorgeous condos in Sunny Isles Beach. They started at something like $8 million. And I kept thinking, who is going to buy these condos when the state is sinking into the ocean? When there's flooding every time there's a full moon? And it's only going to get much, much worse. I would rent in Florida, but I can't imagine buying there.

  29. In addition to using recent sales price data, sellers need to look at the trend, which right now is down. Translation - recent sales prices are a lagging indicator and the seller should price accordingly (somewhat less than recent sales) else they will get caught in a downward spiral trying to catch up with falling prices.

  30. I learned a long time ago that the value of a property, be it an apartment, a free standing home, or a business, at any given time is EXACTLY what someone will pay for it that day. I’ve seen all kinds of formulas applied to arriving at the “true value” of that property and most of the time that arrived value is nowhere near the eventual selling price. I have a home that was valued at $1.3 million one year and then $850,000 2 years later. Nothing changed in the condition of the house or the neighborhood. The economy headed south in those 2 years and people wouldn’t pay the higher price. As mentioned by others, VERY recent sales of similar properties in the same neighborhood, better yet, the same street will provide the best “ballpark figure” of possible selling price. But no two properties are the same ( physical condition, exterior views, noise, etc) so even recent sales are of limited value. You pick a number and put it out there. If you get a single offer, that’s what the property is worth to a BUYER that day! It may not be worth it to you to sell at that price, but after the usual haggling for price, whatever the potential buyer is willing to pay is what the property is worth on that given day. Tomorrow? Who knows??

  31. It's not completely true that the price is random. A reasonable estimate is how much it costs to *keep* the apartment without selling it, and then estimating how much money one is losing if one would invest the amount that the market is currently offering. For instance, if the maintenance, taxes etc costs are 30k per year for the owner, it means that if they sell at a discount of 30k it is effectively as if they are "earning" 30k per year after getting rid of the apartment. Bottomline is: buyers will not be willing to pay the current price either, as they are keeping the apartment for many years; so from the side of buyers the calculation is that they want to pay what the apartment will be worth in a few years, otherwise they lose money. To the seller, the best thing in a falling market is: sell it for the highest bidder as long as the amount you are saving by getting rid of the apartment plus the amount you will get by investing the money immediately is reasonable. Being greedy is actually being dumb, the best thing is to be rational.

  32. These original asking prices, the Gutfreund apartment as a prime example, but the others as well, reflect the chutzpah premium.

  33. " 'Welcome to the new normal,' said Nikki Field" . . . . Whose "normal" is this? These prices are crazy and the apartments are only available for the well-to-do. This is the reason why nearly every favorite restaurant and shop has closed over the past 10 years, leaving nothing except empty storefronts, of skin treatment salons. It used to be so much fun to wander New York, finding interesting restaurants, shops, theaters . . All that is gone now, replaced by sterile, over-priced co-ops, condos . . . . and people.

  34. @Postette AMEN.

  35. NYC is no longer NY, now it’s food trucks and pop up stores , boring ...used to be a organic cool place

  36. It's going to get much worse. There are thousands of empty "ghost" apartments that are being held off the market in hopes of better days. But at some point they MUST be sold. The 2015-2016 euphoria was a natural market peak that happens every 5-7 years in real estate. The bursting of that peak, mixed with SALT limitations, over building, a decline in NYC quality of life (more filth, more vagrancy, transportation challenges) that isn't overlooked anymore, the inevitable higher property tax rates on cooperatives and condo buildings (see yesterday's article on this subject), a decline in foreign buyers due to currency issues and Chinese capital outflow controls and more scrutiny of money laundering transactions, and you find a market with considerable and increasing headwinds. Plus, buyers know that any blip in the economy, increase in interest rates, or political instability following the 2020 elections, can decimate prices. It's going to get very bumpy in 2020!

  37. @Will. It's not clear to me how connected the high end luxury market in NYC is to the rest of the market. There certainly seems to be a glut of $10 million and up apartments that seems very susceptible to interest of foreign buyers, but my doorman condo building where prices are in the $1.5 million to $2 million dollar range that caters to successful professionals still has high demand. I don't think we're competing for the same buyers or facing the same constraints.

  38. So, apartment prices have declined in Manhattan. There are likely multiple reasons for this, including that prices may have simply been overinflated a few years ago. Housing prices are very much influenced by what buyers can afford. Even in a high cost market like NYC, everyone has a budget. Recent changes in both local and national tax law has likely had a major effect on the market. The changes in Federal taxation which capped the deducibility of high local income taxes, and the reduction in the mortgage interest deduction for large mortgages has likely left buyers with less to spend on homes. Similarly, New York recently substantially increased the transfer taxes that are due when real estate is sold, leaving less money to spend on the purchase itself. Incidentally, many states don't have such taxes at all. There are also the costs of apartment ownership in NYC, including real estate taxes and monthly assessments levied by coops and condos to cover maintenance and operating costs. In NYC, these are very high. One thing New Yorkers should consider is the 2019 NYC Climate Mobilization Act, which will, over the coming years, likely result in large special assessments by coops and condos to construct the required changes to their buildings to meet the requirements of the law. Construction costs are high in NYC, and city residents should consider whether the environmental benefits are worth the high expenses imposed by this major new legislation on both owners and renters.

  39. Pricing in real estate is about as fluid as it can get. While market conditions prevail, emotions play a big part as do impressions. (Let's not forget the aroma of cookies in the oven). One thing is for sure and that is that real estate pricing is not retail pricing (there is no MSRP), and any discussion of pricing should avoid the word "discount". The price it closes at is what it's worth to the market at that given time and under those individual circumstances.

  40. The sense of entitlement, especially at the high end (but not super luxe, think 5-10 mil), is astonishing. You are not guaranteed a profit on your apartment. Full stop. In fact, you might even have to take a loss, and (gulp) if you’re unlucky, maybe a big one. Fortunately for sellers in a lousy market, they quickly become buyers in a lousy market if they come to their senses and accept a reasonable offer. Otherwise, they will watch prices circle the drain for a few more YEARS as was stated above. The shadow inventory is enormous. The problem is very very bad. And even assuming things turn around today, it would take a long time to recoup the losses. And it isn’t turning around today. Sellers, today is as good as it gets for several years. Look at your comps, which are RECORDED SALES OF COMPARABLE PROPERTIES WITHIN THE LAST FEW MONTHS. Of course, the other problem is the brokers. Yes, there are some good ones out there. But the streets are paved with brokers of middling intelligence, many of whom have never experienced a market correction much less a full-blown collapse. These brokers are bungling these listings day 1, which leads to stale listings, which then leads to gaming of StreetEasy. Here’s a better solution: do your homework and price it right. If the client won’t capitulate then don’t bother because that client is going to fire their first broker after year 1 anyway. It’s time for people to come to their senses, take the loss, and move on.

  41. This type of disappointment could be avoided if people would think of apartments as places to live in, rather than generators of profit.

  42. Not everyone buys/sells based on a profit motive. In terms of overall transactions it’s probably the least of factors. What people need to remember is that, in general, all boats rise and fall with the market. So if you are selling in a lower market it’s likely you are also buying at a lower price. It only affects those that are truly cashing out or leaving to go into another location that is a hot market.

  43. Wish we had NYC problems here. After an extensive gutting and renovation the apartment across the street sold for 4.5 million several months ago. The new owners have not yet moved in but instead began another renovation more to their own tastes.

  44. @Charlie This is the reason I have decided not to update the footprint of my 1950s kitchen. Replaced the stove, dishwasher and oven 15 years ago. Refrigerator 3 years old. The steel cabinets have stayed. The kitchen works very well for my family. Getting ready to sell. See no reason to change it for a buyer whose preferences I do not know.

  45. Charlie, For the most part I agree with your observation but over here in the middle Richmond I have noticed a little bit of slow or no go. Places that sold in a week or less are sitting for a month or two. On the other hand rentals have not gone down. $4500 for decent 3 bed/ 2 bath. Yikes!

  46. @Jana Buyers typically have very poor imaginations. You might consider having your broker or a contractor or architect create some images of the what the kitchen would look like renovated and provide an actual cost estimate. This might get you a higher sale price.

  47. I bought my house in 1991 after it sat on the market for two years and dropped in price by about 35%. In the intervening 29 years its appraised value is now somewhat above what that seller long ago started at. My average annual rate of return is a bit under 2% (before you factor in taxes, maintenance, interest etc.). People in my neighborhood who bought in 2006 - 2008 and selling now are taking a loss. Sometimes a significant one. When you decide to buy, consider how long you plan to be there. If it s a long time, you are buying a place to live. If it is a short time, you are gambling that buying is better than renting. Note that in neither case are you investing. Keep that in mind.

  48. Investing is not the same as creating wealth. Every wealthy person owns - preferably free and clear - real estate. The more real estate one owns the more wealth she has created for herself.

  49. This is not a fact- although it may be something easy to point to with many examples. The fact is- owning property can be a money losing proposition. And it is an investment- the goal of which is always to increase wealth whether the investment be RE, stocks, investing in a share of restaurant ownership, an e-sports team etc etc. Property is a great way that “wealthy” people diversify . But I’ve seen MANY get whacked. RE can be flat for decades. Try timing that market, catching that falling knife-some get lucky...

  50. The constant overbuilding has destroyed prices as I knew it would. It’s created a huge glut, it also destroyed the organic fabric of NYC neighborhoods and what made them unique. This city is like any other now, food trucks, pop up stores and banks and pharmacies on every corner. Many storefronts are also empty.

  51. We are living in the age of HGTV. I think that those shows set unrealistic expectations on the buyer and seller side. Them there is also "Million Dollar Listing LA and NY". To me they are pure entertainment not reality based. Don't forget the majority of these shows, take place in small markets, where you can buy a huge house for 125K and pour in 100K to make it a showplace. Not so in the NYC tri-state area. I have to laugh because, when I was getting estimates for flooring,for my 1200sqft condo, I was quoted 10K!!!! That was carpet for 2 average bedrooms and laminate for living room/dining room area. Not large at all. Forget if you want to sell. Everyine thinks that they have "gold" in their place when you look, you need extensive renovations, just to live there.

  52. We were very fortunate when we sold the house in Queens I had owned for 36 years in 2018. I thought prices had risen to a point that made very little sense, but I had no wisdom to think this was to be a peak; I even considered keeping the house empty for a while, as prices had risen monthly well beyond the cost of maintaining it. But I’ve never been a risk taker and didn’t want to worry about a property I no longer lived in. Choosing a broker is important; when I helped my mom sell her house next door to mine a couple of years before, I chose someone who was a friend of a friend, and in hindsight, I think may have underpriced the house, but perhaps only by 5%. This time, I picked someone with a very recent sale on my block at a record price. I let him set the price despite suggestions that it was too low. One neighbor, also about to list her house after many years in the neighborhood, evidently came to our open house and told my wife we should be asking more because the condition of our house made it special. She was wrong. Just because my house was in somewhat better condition than others didn’t make it more valuable. She listed her house for only 5% more than my ask, but it sat for a year and she wound up selling for 10% less than mine. So, my suggestion is to pick an active broker with recent success; heed advice as to price, and don’t turn down an early offer, because it may be the best you will get.

  53. Hahaha. Non-luxury $1-2 million properties. Are you kidding. What normal people can afford that?

  54. I guess greed isn’t good.

  55. Who on earth could find this article relevant beyond a handful of the super rich? How about some useful information for most of us?

  56. This is a great lesson how capitalism works. For any house or apartment you need one person to buy it from you. Just one but this is depending on so many factors which have nothing to do with what you think you should get for your house or apartment. Supply and demand 101.

  57. This story is like reading about how great the stock market is doing and realizing it doesn't really matter to 99% of us.

  58. It's silly to talk about apartments that sell for $53 million as a bellwether for New York real estate. These properties make up only a tiny fraction of the market and are available to only a very few buyers whose lives are quite different from nearly all other New Yorkers. I would also argue that focusing on a ground-floor apartment for a luxury apartment is a poor example as well. There is enormous bias against ground floor apartments from increased security concerns to noise to lack of views. Most people I know would simply never consider a ground floor apartment. I don't disagree with the general trend the article suggests, but I don't think either of these examples are representative.

  59. How much are the brokers cutting their take - or are they being "greedy" ;-)

  60. :)) If only AOC hadn't pushed Amazon from opening a second-headquarters you would see prices double almost overnight like here in Seattle. And you might want to consider replacing your Russian oligarch money with Chinese billionaires. They have been buying up property here left and right. Enough joking aside. When I hear $4-5 million for an apartment/condo, I just roll my eyes. Why on earth would I want to spend that kind of money to have neighbors share a wall, no yard, etc., when for $2 million, I could have a waterfront home on Lake Washington looking across that pond at Gates/Bezos yard and have a dock...and no state income taxes? And not get busted by the NYPD for a bag of hemp:) Change your tax code and you can attract big money a lot easier.

  61. Could it be that foreign money is slowing down because our president has made it clear that he doesn't like them? This negative outlook is passed on to US Custom and Homeland Security agents, who make it tough on foreign visitors. Who wants to go where they're not wanted?

  62. The Sothebys agent also didn't mention that the apartment at 730 Park had a monthly maintenance of almost $14K.

  63. I thought all the international crooks were parking their cash in LLC Manhattan real estate properties causing inflated prices..... Is that phase over, or did the criminals find more promising markets.

  64. I love that "the market doesn't care what you need" best line from a broker ever.

  65. @Meighan Corbett My buying agent told me that, too - but also, as in real life, it doesn't matter what you think your item is worth if other people aren't going to pay it.

  66. There's only one reason a place doesn't sell. It's because the price is too high. It's definitional. This is how free trade/capitalism works. It's amazing how hard some of the basics are for people to grasp

  67. @charles Incorrect, in a sense! Real Estate, like any other does not sell if the inherent value of the purchase does not make sense. This includes not only the purchase price, but also RE's carrying costs. Today, NYC taxes account now account for over 50% of owner's carrying cost; maintenance, insurance and utilities account for another 1/2 - not to mentioned ever increasing indirect costs of living in NYC. With DeBlasio having doubled NYC's RE taxes in the past 5 years or so, and Mr Trump removing the deductions for local RE taxes and limiting the tax deductibility of mortgage interest, the inherent value of properties have been degraded in general. It's a form of indirect taxation. Double whammy - thank you, our dear politicians!

  68. One can only hope that Trump and Kushner properties suffer the same fate as these described price declines.

  69. Where do normal people live?

  70. Boo, hoo, hoo, the rich lost a million on their coop.

  71. And there is zero mention of the (somewhat spotty but still very important at the high end) tightening of money laundering regulations. Google Geographic Targeting Orders New York City Real Estate Sales. This effort to stop people like El Presidente from getting rich by selling parking spaces for world wide criminals' money has been going on for a few years now. And the parking space restrictions have been getting smaller, from $5 million down to $300,000 in the 2018 reporting regs from FINRA. Look it up. It is shameful that the Times takes up space with these silly articles that don't have basic research in them.

  72. C.J., I represented the buyer of 15 Broad Street #924 and their effective purchase price was actually even lower! They received a commission rebate for $23,000 so they really paid about $1,352,000.

  73. I'm in Akron, Ohio... I see easily we live like kings here in my town. The pricing and move-in costs in NYC are always jarring to me. Cost of living well much lower here...

  74. the title ruined the article. try: “how THEY price THEIR apartments”

  75. When temps rise by two degrees, much of NY, including J.F.K. airport will be underwater. Pricing will be easier then as everything will be worth exactly zero.

  76. This is mostly about the real estate market for co-ops and condos in Manhattan. The city has informed me that they are increasing the valuation of my house in Queens which will result in a higher real estate tax. I would like to see an article on how real estate in the city is faring outside of Manhattan.