Gregory J. Heym
Executive Vice President, Chief Economist
Manhattan apartment prices rose at the slowest pace in three years during the first quarter, more evidence that an increase in mortgage rates has cooled off the most expensive urban real estate market in the U.S.
The average price for condominiums and cooperatives climbed 7.1 percent to $1.3 million from a year earlier, property appraiser Miller Samuel Inc. and broker Prudential Douglas Elliman reported today. Sales fell 1.1 percent and the number of apartments on the market rose 60 percent to a record 6,904.
"Some people are in a panic, putting their units on the market because they're worried about where the market is going,'' said Jonathan Miller, president of Miller Samuel in New York. "We're seeing inventory come on like a conveyor belt, and that means buyers have a lot more room for negotiation.''
New Yorkers are being pinched more than the rest of the U.S. by rising short-term mortgage rates because about 80 percent of buyers rely on the lower initial costs of adjustable-rate loans, according to Paul Purcell, a partner at real estate consultant Braddock & Purcell LLC in New York. That's more than double the rate for the U.S.
Apartment prices in the first quarter appreciated at one third the pace of the fourth quarter's 20 percent increase, Miller said. During the past two years, the average year-over- year gain was 19 percent, he said. The average price reached a record $1.32 million in 2005's second quarter.
Rising Mortgage Rates
Manhattan apartment sales have now declined for three straight quarters, Miller said. U.S. home sales are down since reaching a record annualized rate of 7.19 million in the second quarter of 2005, according to David Berson, chief economist at Fannie Mae.
The average U.S. rate for a 30-year mortgage that adjusts annually rose 1.2 percentage points to 5.3 percent in the first quarter from a year earlier, Berson said. Long-term fixed rates increased less than half a percentage point to 6.2 percent.
The average four-bedroom apartment sold for $7.2 million, up 7.7 percent from a year earlier. Prices for three-bedroom units fell 13 percent to an average $3.3 million and the price for a two-bedroom unit was up 5.8 percent to $1.5 million. One- bedroom apartments went for $700,201 on average, up 18 percent, and studios rose 26 percent to $423,659.
"The high prices were a rude awakening, but it's still better than renting,'' said Tim Robert, 46, a musician and composer whose offer on his first apartment was accepted March 31, after a three-month search.
Manhattan's East Side, a neighborhood popular with Wall Street executives who receive most of their pay in year-end bonuses, saw the biggest increase in apartment prices, according to Greg Heym, chief economist of Terra Holdings, owner of brokerages Brown Harris Stevens and Halstead Property. An East Side two-bedroom apartment sold for an average $1.6 million, up 26 percent from a year ago, he said.
"Bonus money helps the high end the most, but it's not just the multi-million dollar bonus, it's a young banker getting a first bonus and buying a first home too,'' Heym said.
Wall Street gave out a record $21.5 billion in bonuses at the end of 2005 as revenue at firms including Goldman Sachs Group Inc. and Morgan Stanley rose 28 percent, according to New York State Comptroller Alan Hevesi. The average bonus was a record $125,500 per worker.
The "discount,'' or difference between listing and selling prices, was 2.8 percent, compared with 1.3 percent a year ago, Miller said. Time needed to sell was up by more than a month to 138 days in the quarter.
The median price of an apartment, the point at which half the units sold for more and half for less, gained $120,000 to a record $825,000, Miller said. The median price of a U.S. condominium was $214,300 in February, according to the National Association of Realtors.
Bonuses also fueled prices for the 39 single-family houses that sold in Manhattan during the quarter, according to Pamela Liebman, president and chief executive officer of Corcoran Group. The average price of a Manhattan townhouse rose 63 percent to $6.77 million from a year ago, led by the $40 million sale in March of the Duke-Semans mansion, owned by relatives of the late tobacco heiress Doris Duke, to Tamir Sapir, a real estate developer.
"In Manhattan real estate, the hedge-fund managers and Wall Street bankers consider a townhouse to be the ultimate trophy,'' Liebman said in an interview. "We don't have enough supply to meet the demand.''
Tuesday, April 04, 2006