Posted by Jonathan J. Miller -Tuesday, April 3, 2012, 12:57 PM
The Elliman report for the 1Q 2012 Manhattan Market that I author was released today and there was a lot of commentary thrown around that I thought I’d apply actual data to. They relate to the topic of “bidding wars” and some sort of upward price skew cause by the closing of the $88M sale this quarter (contract signed in December).
More “bidding wars”
What’s being projected as market conditions The chart above is my attempt to quantify this phenomenon. When a property is sold above the list price at the time of contract, then it’s reasonable to assume there was intense competition between buyers that drove the property over list aka “bidding war”. I doubt there are many buyers on earth who would pay over list price unless there is more to the story.
What’s our take on the story? We estimate that 8.4% of all sales in the quarter were sold above list price and therefore were subject to a “bidding war.” However it’s probably a bit higher than that since 11% of the sale sold for list price. There might have been a bidding war up to the list price and the buyer with the best terms (i.e. cash) won the bid. However I would not characterize the market as rampant with bidding war activity right now. It’s been steadily rising since 2Q 2009 but still remains about half the levels seen just before the credit crunch began in 2008.
The $88M sale skewed the overall numbers higher
What’s being said about the record sale’s impact to the market results The record sale at 15 Central Park West closed for $88M during 1Q 2012 and there was concern that this simply skewed the numbers and overstated the results.
What’s our take on the story? This is not the case. When removing the $88M sale from the mix, the median sales price of $775k remains unchanged. That’s because median sales price slices from the top and bottom until it meets in the middle. There were 10 sales that sold for $775,000 this quarter and therefore the removal of this high sale had no impact on the middle. Average sales price was skewed 2.7% higher than it would otherwise would have been. Still not a big deal and it would be inappropriate to remove the $88M from the data set – otherwise the $48M and $36M sale in the year ago quarter would also need to be purged.
It is what it is.