Developers (Finally) Reducing Prices, Not Just Negotiating Them
(Christine Toes posting here)
In November of 2007 I posted about developers starting to offer incentives for buyers to purchase in their buildings. In June 2008 I wrote that it was time for developers & landlords to stop throwing the kitchen sink at buyers and to just reduce the prices already. Seven months of concessions later, I am finally seeing developers not just NEGOTIATE on prices, but actually REDUCE their prices.
One example of a building that significantly reduced their prices is Maison East, which is trying to sell out their last few units. Prices were reduced in mid December.
Apt 3A sold for $800K. After starting at an asking price of $850K, 6A sold for $805K in August of 2008. The developer is now offering Apt 4A for $695K.
In another example, 24A sold for $995K in 12/07 and 25A was reduced to $895K a few days ago.
Even better, developers are catering to buyers and even trying to make them happy! I remember going to new developments with buyers in 2005-2006 and basically, you paid the asking price for the apartment (maybe 1%-2% less on anything under $1M) as well as the transfer taxes (maybe the developer would split them with you if you were buying a line in the building that wasn't selling that well). One of my customers even got screwed out of a shower door. Times have changed!
I recently had customers sign contracts in a new development on the Upper East Side. It was the most refreshing experience! My customers paid $40K less for their apartment than their downstairs neighbor paid, they didn't pay any transfer taxes or the developer's attorneys fees, and they got a storage unit for half price. The developer agreed to build out a home office for them and build in shelving in a hallway. In the past, you would be laughed at if you wanted any customization done in a one bedroom apartment. Maybe if you bought and combined two apartments they'd hook you up a little bit, but not in a one bedroom.
My second new development deal this month (I thank my lucky stars every night that sales are actually happening) is in a small walk up condo in Brooklyn, where the developer had dropped the price on the last few units units by about 10% at the start of the new year. I don't want to jinx the deal until contracts are executed and her downstairs neighbor would cry if he/she knew what my customer is paying. So lets just say that she isn't paying the asking price or transfer taxes. This apt was already hands down the best deal for her under $350K budget in Williamsburg. (Finding a condo under $350K is still like finding a needle in a haystack). My customer is also getting a "seller's concession" to help cover her closing costs. We did try to get the developer to provide the washer/dryer (right now there is just a w/d hook-up), and to install a toilet paper holder, towel bar, and new vanity in the bath, but no luck. There are only 10 units in the building and seven are already sold, so I "get" that the developer doesn't want to bother with minutea. It was worth a try, though!
One other new development in Brooklyn that we had looked into had dropped prices on some units from $499K to $399K.
Toes says: Everything you read on UrbanDigs about prices being down 10% and deals actually being done 5-10% below that is true - at least that is what I am seeing in my own business. Most of the buyers right now are entry level buyers (under $1M), so apts in higher price points are seeing more significant price cuts in some cases.
Toes says: Don't be afraid to ask for the moon, you just might get it!
Comments (21)
This has nothing to do with the article but I thought readers might enjoy it. This is the rental pricing history for a 2-bed in the Archstone, one of the new developments at Lincoln Square (101 West End). I ask the brokers out there, is the Elliman guy/gal with this listing out of his mind?
StreetEasy History
04/02/2006 Listed in StreetEasy by Elliman at $12,500
05/06/2006 Price decreased to $11,500
05/14/2006 Price decreased to $10,500
06/08/2006 Price decreased to $10,000
08/30/2006 Price decreased to $9,500
09/20/2006 Price increased to $12,500
09/29/2006 Price increased to $15,000
01/03/2007 Price decreased to $9,500
03/12/2007 Price increased to $10,000
04/28/2007 Price decreased to $9,500
05/30/2007 Price decreased to $8,500
07/14/2007 Price increased to $10,000
09/21/2007 Price increased to $12,000
01/09/2008 Price decreased to $11,500
02/27/2008 Price decreased to $10,000
04/02/2008 Price decreased to $9,500
04/22/2008 Price decreased to $9,000
05/08/2008 Price increased to $12,000
05/21/2008 Price decreased to $9,995
06/03/2008 Price decreased to $9,500
06/16/2008 Price increased to $9,995
06/23/2008 Price decreased to $8,995
06/26/2008 Price decreased to $8,500
07/15/2008 Price increased to $9,000
07/28/2008 Price decreased to $8,000
07/29/2008 Price increased to $9,000
08/12/2008 Price decreased to $8,500
08/17/2008 Price decreased to $7,995
08/22/2008 Price decreased to $7,500
11/14/2008 Price increased to $8,500
12/11/2008 Price decreased to $7,500
12/25/2008 Price decreased to $6,950
Posted by OT | February 2, 2009 1:50 PM
7000 would have had a deal done in '06 which means that they have so far given up at least 20 or so months or 140,000k.
Posted by AvUWS | February 2, 2009 2:04 PM
Christine Toes,
Very helpful posting. Which transfer tax did the developer pay? NYC Real Property Transfer Tax or NYC Transfer Tax? Thanks.
Posted by Apple Tree | February 2, 2009 2:48 PM
The Millenium, a very, very upscale condo building in San Francisco developed by Tishman Spears, a couple of weeks ago cut their prices by 15% AND reduced all signed, but not yet closed, contracts by the same 15%.
I suspect more of this in NYC as Christine suggests.
Posted by lars | February 2, 2009 3:54 PM
Is 7k really a typical rent for a nice 2BR?
That seems very expensive.
Posted by Thisson | February 2, 2009 4:15 PM
Absolutely agree with Christine. The landscape has now changed. I attended a few developer open houses in prime locations in Manhattan this weekend. I followed up and made an offer on a 2 bed 2 bath, the price is currently 400,000 under the price the buyer on the floor above closed on 2 months ago.
Posted by Smudger | February 2, 2009 4:23 PM
@ OT.
That 2 bedroom must have some super lux. features for that price!! No way would I pay over 3k to 4k for a 2 bed.
Posted by SlapMeAgin | February 2, 2009 4:40 PM
Christine - do you know whether lenders to developers are modifying loans to permit greater pricing flexibility by developers, or whether lenders are changing their stance in any other way?
Btw - seems many listings are more than 10% below peak pricing. But hey, you've definitely changed your tune since "The Sky Is NOT Falling, People". ;)
Posted by anon | February 2, 2009 5:48 PM
I knew someone had to go there!
Posted by Office - Noah | February 2, 2009 5:55 PM
Death by a thousand cuts. 10% reduction followed by 2% monthly price reductions going forward. This party's just getting started.
Posted by mike | February 2, 2009 6:13 PM
I guess everyone who has been estimating a bottom based on mortgage/rent ratios will need to go back to the drawing board.
Posted by Buyer | February 2, 2009 7:17 PM
Christine,
nice insights. despite my nurse comment on a January post, I remain a fan of your editorial points. keep up the good work!
Posted by old timer | February 2, 2009 9:03 PM
They way I see it, most new devs were already overpriced by 10-15% to begin with, so the recent price reductions don't really represent any REAL savings. Given the trauma to the economy in terms of lost jobs, lowered bonuses and reduced financing options, I would expect prices to have SIGNIFICANTLY more room to fall before reaching a clearing equilibrium. Developers are not only in competition with other new developments and with the secondary market, but with the slew of rental properties out there as well. Rental buildings require no significant upfront cost (downpayment), no long-term commitment (you don't have to worry about the market value of your home if you ever wanted to move), no financing hurdles to overcome (no mortgage approval process) - all things that have become significantly more attractive features in today's economy.
Posted by Shank-o-potamus | February 3, 2009 2:50 AM
yo Digs: How come this big price cut in San Fran hasn't got any big time press? I thought this would have been all the talk yesterday on all the Boards. I thought the Brompton, Lucids, Harrison, linden, Pine, Chelsea Beaver et.al. buyers would have been all over this. Strange the quiet. The main point was that not only did they cut all prices 15%, but did it retroactive to ALL buyers!. NY could use a bunch of that.
Posted by Anonymous | February 3, 2009 7:37 AM
here is some good insight on aftermath of financial crisis
http://www.economics.harvard.edu/faculty/rogoff/files/Aftermath.pdf
Posted by baileybee | February 3, 2009 9:14 AM
Anon - not sure. That is interesting but arguably SF is ahead of is in the slowdown by a few years. We just got hit in Fall of last year, although I have been arguing that it started about 6-8 months earlier.
I dont think developers are at the point yet to do that. But they very well might in the next quarter or two.
Posted by Office - Noah | February 3, 2009 9:48 AM
Toes,
IMHO, your past posts have been much too optimistic about the real estate market.
My question to you is how many contracts have you signed in 2009 where the price was cut 10 to 15%?
Anything less than 6 out of 6 is not statistically signicant and therefore meaningless.
Posted by Anonymous | February 3, 2009 10:12 AM
Hi Apple Tree, the developer paid both NYC/NYS transfer taxes.
Anon, I'd like to meet you in person sometime. It must be really nice to be anonymous and just get to criticize me all of the time. I think you should just stop reading my posts.
Posted by Christine Toes | February 3, 2009 3:54 PM
The Hit Factory's sales office advertised that they "dramatically" reduced prices on one of their last three units: a 2 bed 2.5 bath - was $2.125M and is now $1.925, a 9.4% drop. Not sure I would call that a "dramatic" price reduction in this market!
Posted by Christine Toes | February 3, 2009 5:03 PM
The prices need to come down a lot more.
Finance is dead. The other local industries don't pay wages high enough to support these prices.
Let's be realistic: in NYC you have to pay maintenance on top of mortgage. Prices have to come down to about 3x median income. And median income is decreasing.
Who has investment gains over the last year? Who's getting a big bonus?
Nobody I know.
Posted by Thisson | February 4, 2009 11:29 AM
Good article
Always good to get deals in anything and everything. Better yet regarding properties and the like. I've got my eye on that new project on 9th Ave . The "Galerie", looks like its a great value. From what I understand its prices seem do parallel what was said above. For everything you get, its going to be a good buy.
Posted by Thomas | February 18, 2009 12:48 PM