Gregory J. Heym
Executive Vice President, Chief Economist
The average sale price of a Manhattan apartment hit $1.7 million in the first quarter, up 33% from 1Q 2007, according to one report.
Apartment prices in Manhattan continued their sizzling pace in the first quarter, but one analyst reported a sharp decline in the number of sales and an increase in inventory--two signs that point to lower prices in the future.
The average sale price of a Manhattan apartment hit $1.7 million during the first three months of the year, up 33.5% from the same period in 2007, according to real estate firm Prudential Douglas Elliman.
However, the number of transactions plunged 34% to 2,282. Meanwhile the number of listings jumped 5% to 6,194 and the amount of time it took to close a sale jumped 12% to 146 days.
“The market is in a period of transition,” says Jonathan Miller, chief executive of Miller Samuel Real Estate Appraisers, who prepared the data for Prudential Douglas Elliman. “When you see fewer transactions it usually leads to lower prices.”
However, other analyses don’t show a sharp decline in sales transactions. Halstead Property found that the number of transactions slipped 1% to 2,857 while the Corcoran Group said volume increased 5% to 2,785.
Mr. Miller uses a combination of sources for his report, including city records and Prudential Douglas Elliman data. Halstead uses city records as well as its own proprietary information. Corcoran develops its report from its own data and information from Mitchell, Maxwell & Jackson, an appraisal firm.
Mr. Miller says that even if prices don’t decline, they certainly will not advance as sharply as they have in the past. The last time there was a decline in sales transactions was in the second quarter of 2006, when the number of sales fell 15%. And while sales prices didn’t fall after that, the rate of increase slowed. Prices rose an average of 6% in 2006, down from the 22% jump in 2005. Last year prices increased 4.3%.
Analysts agree that 2008 won’t match last year’s performance as fears of recession and Wall Street’s woes crimp sales.
Thousands of highly-paid financial executives are expected to lose their jobs in the aftermath of the collapse of Bear Stearns Cos. and its pending acquisition by J.P. Morgan Chase & Co. Lehman Brothers Holdings Inc. and Citigroup Inc. have announced layoffs, and more firms are expected to follow suit.
“There is a lot of information to process,” says Mr. Miller. “It is going to take time for people to get comfortable.”
The price of ultra expensive apartments is expected to climb, analysts said, because those who purchase abodes for more than $10 million won’t be affected by the stock market.
During the quarter, the number of apartments that sold for more than $10 million surged 318% to 71, according to Halstead. There were four sales for more than $30 million and two for more than $40 million, including one for $45 million at 15 Central Park West. Indeed, sales at that building and The Plaza helped drive Manhattan prices higher.
Mr. Miller says that if you removed sales from those two building, the average apartment price would have jumped 19% to $1.5 million.
Outside of Manhattan, markets are showing signs of softening. The price of an apartment in Brooklyn fell an average 2% to $615,000 in the first quarter.
“Brooklyn created quite a lot of excitement in the last few years. Prices grew very quickly,” says Pam Liebman, Cororan’s chief executive. “And when markets soften, those markets soften first.”
Wednesday, April 02, 2008