T
he asking price of a property may be set by the seller, but its decline is driven by market forces. As listings linger on the market, buyers' pressure mounts, urgency fades, and expectations adjust.

    Sellers optimize for two variables: price and time. However, in reality, these factors are intertwined. Time on the market isn't free; it imposes a discount, similar to holding an asset too long incurs costs in finance. We've quantified this risk by tracking how asking prices deteriorate as listings age, resulting in what we call asking price decay.

    This concept mirrors the financial world's "theta," which measures the loss of value in an option as time passes. In real estate, time on market is a similar drag on listing prices. The longer a home sits unsold, the more likely it is to be discounted, often sharply.

    We analyzed the Manhattan and Brooklyn markets over 20+ years, revealing that the median discount from the original asking price increases with time on market. This curve plays out regardless of macro environment or demand shifts, with buyers penalizing listings exceeding a two-to-four-week threshold as weakness.

    Not all markets decay at the same pace. In hot markets, listings can sit for 30 to 45 days with minimal discounting, while in weak markets, discounts appear quickly. Today's market is neither hot nor cold, so the present asking price decay curve likely resembles the overall average.

    Property type also affects the decay curve, but not as expected. Apartments show a consistent shape, suggesting that market liquidity drives the phenomenon. Coops and condos have flatter curves due to a larger pool of buyers, while townhouses experience steeper declines in pricing power over time.

    To use this information tactically:

    1. Act fast or reprice quickly, as the window for a full-price sale is tight.

    2. Watch the curve for regime change; a flattening decay curve suggests improving liquidity and can be seen as a bullish signal.

    3. Use the curve to predict market health; fast decay indicates fear and thin demand, while slow decay shows conviction and competition.

    Time is a tax that erodes asking prices week by week, with the biggest impact on less liquid segments like Manhattan townhouses. Understanding this concept is crucial for sellers, who should price realistically and move quickly to avoid the long tail of discounting.