Signs of a top at the top of NYC's real estate market

Even during the nastiest political campaigns, the Waldorf Astoria hotel in New York has been elegantly bipartisan: Every president since Herbert Hoover has laid his head at the stately Park Avenue hostelry.

Rest assured such presidential trivia -- along with stories of the landmark's other famous guests -- will feature prominently in marketing campaigns to sell luxury condos in the Waldorf Astoria. The hotel will close next spring for a massive renovation by new owners from China that will turn most of the property's 1,400 rooms into residences. Experts expect the condos to be ready in about three years.

Developers currently marketing high-end properties probably would kill for such a marketing edge given the drastic slowdown in luxury apartment sales in New York. For the quarter ended June 26th, the number of contracts signed for city apartments selling for $4 million or more fell 15%, to 343, according to Olshan Realty, which specializes in the luxury market. It was the lowest 2nd-quarter volume since 2012.

At the same time, homes with lofty price tags are lingering on the market longer in New York, with residences sitting around for 274 days, up 24% from the year-earlier period. Last week, for instance, a 3-bedroom, 4,100 square foot penthouse at 400 East 67th Street finally sold after being on the market for more than a year -- and only after the price was cut to $17 million from $21 million.

"There are problems in the luxury market," said Donna Olshan, founder of her eponymous firm. "Prices got too high and there is just too much inventory."

In the wake of a choppy stock market and global uncertainty about the fate of the U.S. economy, the status of the Europe Union and the outcome of the U.S. presidential campaign, would-be buyers of New York's high-priced apartments are opting to take their time when shopping for a place. This newfound restraint comes after developers built tens of thousands of luxury apartments in the city during the recovery.

One such property is the Baccarat Hotel & Residences at 28 West 43rd street. It opened in 2013 with a penthouse sporting a $60 million price tag. It recently sold for $42 million, brokers said.

Such disappointments have developers around the city rethinking their top-of-the-market strategies. For example, Chetrit Group and Clipper Equity bought the 37-story Sony Building at 550 Madison Avenue in 2013 for $1.1 billion and planned to turn the 1980s skyscraper with its distinctive Chippendale-style top it into a hotel and luxury condo complex. Instead, this past spring they sold it for a reported $1.3 billion to British and Saudi investors who plan to keep the property an office building.

The changing sales landscape has other developers reconfiguring their Xanadu-like offerings into slightly less grand abodes. The developers of 432 Park Avenue have turned five full-floor residences into 10 apartments. Similarly, the creator of 10 Sullivan Street has sliced up a penthouse triplex with a $45 million price tag that didn't sell for more than a year into two separate apartments: one is on the market for $11 million and the other costs $29 million.

"Developers are cutting the cake better," said Frances Katzen, a broker at Douglas Elliman. "Developers have to think in terms of what people want to buy."

Buyers' changing tastes have been emerging for at least a year, according to real estate website Streeteasy.com. Prices for luxury homes have declined in each of the last 12 months, while the inventory of luxury homes has increased 5% over the last year. Meantime, the number of price cuts have jumped 11%.

"There is definitely a sobering up that is taking place at the top end of the market," Leonard Steinberg, president of Compass, a real estate brokerage in New York. However, he noted that sales were still strong in lower-priced parts of the market, and that sensibly priced luxury apartments were finding buyers.

Mr. Steinberg said it was unrealistic to think the heady prices of a few years ago would continue. "This is normal," he said. "But when you were at Studio 54 in the heyday, every other party just seems dull."