Another Condo Bubble Bites the Dust

[marmar]

Another Condo Bubble Bites the Dust
by Wolf Richter • May 8, 2016


[font color="blue"]Luxury condo boom in Lower Manhattan turns to glut, prices sag[/font]

In Lower Manhattan, 31 towers with over 5,000 apartments are sprouting up. They’re not exactly in the “affordable” category. The median price for condos – half sell for more, half sell for less – has soared 77% since 2013, to $2.43 million, while the median price in the overall Manhattan condo market has shot up “only” 54% to $1.84 million.

These are stunning numbers, even for those of us who’ve become inured to stunning numbers by being exposed on a daily basis to the craziness in San Francisco.

.....(snip).....

Soaring condo prices induce developers to build more, and they gravitate toward the top end. Why? Because that’s where the money is. Cheap credit funds their ambitions. It takes years to take a condo tower from planning to completion. Once the process is far enough advanced, it’s difficult and costly to stop it. And these towers keep growing and adding new supply, long after demand has started sagging. That’s why condo gluts are so terrible – particularly for lenders.

And demand in that space is now sagging: The number of condos sold at over $4 million plunged to their “lowest level since 2012.” To get things moving, the prices of a third of the 261 penthouses on the market in April – 261 penthouses on the market! – was cut by an average of 10%. And some prices were slashed a lot more. The FT:

In Chelsea, the asking price for a 5,995 sq ft penthouse in Walker Tower, a refurbished art deco project, fell from $70 million to $55 million in the 10 months to March, according to StreetEasy. In SoHo, a 5,912 sq ft penthouse with a private rooftop deck has been on sale for almost nine months and the price has been reduced from $26.5 million to $22.5 million.

..................(more)

http://wolfstreet.com/2016/05/08/manhattan-luxury-condo-bubble-bites-dust-sales-and-prices-fall/