In The News

Tracy McLaughlin and Alan Mark Featured in the WSJ

A slowdown in luxury-home sales leaves the market awash in lavish condominiums and speculative homes. Now, relative bargains abound.

THERE AREN’T ANY 2-for-1 deals or rebates yet, but high-end home sellers across the country are offering discounts as the luxury market softens.

“Buyers are very price sensitive,” says Donna Olshan, a Manhattan-based real-estate agent who publishes a weekly report on the luxury market. “If it’s not priced right it’s going to sit until the cows come home .”

In cities like New York and Miami, where an unprecedented luxury building boom over the past five years created an abundance of lavish condominiums and speculative homes, the mar­ ket is in the midst of a full-on slowdown. In other regions, like Southern California, agents say the market is still hot but there’s concern about a potential supply glut on the horizon.

At Sterling Mason, a new luxury condo building in Manhattan’s Tribeca neighborhood, the first two penthouses sold before the building’s 2016 completion for more than $20 million each. The third was originally priced at $20 million, but recently came back on the market for $18.95 million. On the Upper East Side, an apartment was listed in April for $120 mil­ lion. Today, it’s offered at $96 mil­ lion-a $24 million discount.

John Burger, a Brown Harris Stevens agent who has the $96 million listing, says many buyers who took a pause during the fren­ zied election cycle are now resum­ ing their plans to shop for real es­ tate. The property, owned by Susan Gutfreund, the widow of former Salomon Brothers CEO John Gutfreund, is still available. “I’ve seen a serious pickup since the first week of January,” Mr. Burger says.

At One57, a 90-story condomin­ ium building in midtown that is fa­ mous for both its design and re­ cord-breaking prices, the developer is offering 10% to 15% discounts on lower-level units, priced between $4 million and $12 million. Pricier, upper-level condos are seeing even deeper price cuts. In December, a 6,200-square-foot four-bedroom unit on the 83rd floor sold for $45.8 million, a more than 20% discount off its $58 mil­ lion asking price.

“We’ve priced to account for to­ day’s market,” says developer Gary Barnett. “The market wants to see some discounting.”

In Miami Beach, Fla., a home with eight bedrooms and eight bathrooms came on the market a year ago for $11.95 million. Listing agent Nelson Gonzalez recently cut the price by $1 million.

Craig Studnicky, principal at Mi­ ami-based real-estate brokerage ISG, says global events have af ­ fected sales. “If you had told me that Great Britain would vote yes on Brexit and Donald Trump would be our next president a year ago, I would have thought you were out of your mind,” says Mr. Studnicky.

The strength of the U.S. dollar has also turned away some over­ seas buyers, which had been a large part of the market for high­ end condos in Miami and in some new developments in Manhattan.

With developments like Echo Aventura, a 190-unit building in Miami that is discounting units, which range from $2.5 million to $3.3 million, by as much as 15% to 20%, “it’s a great opportunity to buy that condo on the water you always wanted at a ridiculous deal,” Mr. Studnicky says.

Ryan Shear of developer PMG, which built Echo Aventura, says condos are still selling, but poten ­ tial buyers are taking six months or longer to decide, with those coming from overseas often wa­ vering based on the strength of the dollar.

Agents say sellers need to ad­ just their expectations. Nationally, the median asking price in the third quarter of 2016 for homes in the top 5% of listings reached $1.2 million-up 18% from the same pe­ riod the previous year, according

to real-estate website But the actual sale prices in this slice of the market only grew by 3% during the same period. Luxury listings also took longer to sell than homes in the overall mar­ ket-a median 131 days, about 4% slower than the previous year. (News Corp, owner of The Wall Street Journal, also operates Real­ under license from the Na­ tional Association of Realtors.)

“The smart sellers today are pricing for now, not 2014,” says Jeff Adler, of New York’s Douglas Elliman. “An $88 million apart­ ment went into contract three years ago and just sold. Would they get $88 million today? Proba­ bly not.” He and his business part­ ners, Howard Margolis and Marie Espinal, recently relisted a 4,400- square-foot Manhattan penthouse near the Flatiron District with 2,000 square feet of outdoor ter­ race space for $14.95 million­ down from $18.95 million.

Tracy McLaughlin, an agent based in Marin County, Calif., says expensive trophy estates have gen­ erally become challenging to sell to today’s younger Bay Area buyers. So she encouraged a client to break up his 3-acre lot in Ross, Calif., into two smaller parcels to appeal to buyers shopping in lower price cat­ egories, which are selling better.

The homeowner, Al Grujic, a 49- year-old former investment banker and technology consultant, spent $14 million to buy the property in 2009 and another $4 million on improvements . The lower portion of the property, which includes a swimming pool and approved plans to build a home, was listed last year for $5 million and is cur­ rently under contract. The second parcel, which includes the main house, will come on the market in the spring after renovations, for around $12 million, Mr. Grujic says.

“These behemoth trophy prop­erties have become very hard to sell to the people who can afford them,” says Ms. McLaughlin. “You have to get creative.”

In San Francisco, where a tech boom and housing shortage have fueled a real-estate gold rush, the peak of the market was summer 2015, says Alan Mark, president of the Mark Co., which does market­ ing and sales for new develop­ ments. New-condo prices are down 3% compared with a year ago, and a few developers are offering in­ centives like higher commissions for brokers or free upgrades for buyers. But prices, he says, will likely hold steady since overall supply is still low. There are about 700 new condo units under con­ struction that will hit the market this year-well below the peak of new construction in 2007, when 3,000 new units hit the market .

Stephen Shapiro, CEO of West­side Estate Agency in Beverly Hills, says the market for homes priced higher than $25 million is particu­ larly strong in the L.A. area. And the ultraluxury spec-home building spree shows no signs of slowing. A couple of new properties will test the strength of the market, includ­ ing a newly built home asking $250 million that hit the market last month-now the most expen­ sive listing in the U.S. Though many real-estate agents doubt the home will sell for anything close to its asking price, even a sale at a 50% discount would still set a re­ cord in California.

Mr. Shapiro says that over the next three to six months, a number of fully furnished spec homes in the Trousdale Estates area are slated to hit the market, all priced in the $20-million-plus range. “They’re all building the same house,” he says, which may result in some discount­ ing. “So maybe developers will make $5 million profit on a home instead of $10 million.”

Sasha Galbraith, who runs a strategy and organizational-design consulting firm, has two proper­ ties on the market in Colorado- a condominium at the Four Seasons in Denver and a contemporary ski home in Breckenridge-that she thought were priced to sell at $1.8 million and $4.75 million, respec­ tively. The Denver property went on the market in October, and the Breckenridge property has been on the market for 16 months.

Even though Denver overall saw an 11.4% increase in year-to-year median sale prices in 2016, the top end of the market has shown signs of softening, according to the Den­ ver Metro Association of Realtors. The number of $1 million-plus homes sold in December dropped over 26% from the previous year, with prices down 4.85%.

Tired of tidying up the proper­ties for showings and ready to move on financially, Ms. Galbraith decided to auction both properties with New York-based Concierge Auctions. There will be no reserve, or minimum, price set. “It’s a risky process, there’s no question,” says Ms. Galbraith, who is 57. On Feb. 27, the auction date, “either I’ll be needing a box of Kleenex or pop­ping a bottle of Champagne.”

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