Gregory J. Heym
Executive Vice President, Chief Economist
By Tom Acitelli
Let's call it a housing bounce this time around.
The Manhattan apartment market, laden only last year with satisfied predictions of a steady decline, appears on the up and up, if the latest batch of quarterly market reports are any guide (they are—though, they are not meant to be understood in real time, but instead cover deals negotiated months ago and closed in the first quarter of 2010).
According to the report from Prudential Douglas Elliman and Miller Samuel, half the apartments traded in Manhattan in the first quarter went for at least $868,000. That's a median price up over 7 percent from the quarter before, and one comparable to median prices seen during the last boom. Pick a quarter—in the first one of 2007, the median was $835,000. The average price was also up by quarter, to $1,426,994. Granted, it was $1,825,847 a year ago, but what's $398,853 in Manhattan?
Other reports detail similar price bumps since the end of 2009. The Corcoran Group shows the median up 3 percent and the average up 2 percent, to $820,000 and $1,393,000, respectively. Halstead Property also puts the median at $820,000, higher than the quarter before; the average was $1,396,883, the highest in a year.
And. And! Despite the higher prices—or maybe because of them, this being the nation's most sadistic real estate environment—sales activity and buyer interest appears to have spiked going into the spring. StreetEasy noted that an average of 397 new listings hit the market every week in the first quarter, a nearly 43 percent increase over the end of 2009. "There were a total of 14,282 listings that were available at some point in this quarter, a 2.6 percent incrased since last quarter..."
Higher prices. Brisker sales. What's going on here? A legitimate boom? Normalcy? Another bubble? Paging Robert Shiller...
Or Donald Trump. In October 2004, regarding the housing market, Mr. Trump told The New York Times, ''The market has never been better, that I remember it; that's the good news. It's also very dependent on interest rates. If they do go up, the market will truly tank."
The sentiment is echoed almost six years later by Jonathan Miller, the ace expert behind the Douglas Elliman report. In an analysis of the latest quarterly numbers, he cites rates as both a catalyst of the sales activity and as a tipping point for it. "There remains concern in 2010 over the potential for rising mortgage rates, expiration of tax credits and an economy that has not established significant improvements in unemployment and mortgage financing terms."
It's somewhat appropriate that the Manhattan housing market should be so dependent on the cost of money. Should that cost remain low—something the government has signaled is quite likely for quite a while longer—the market will continue to bounce along, keenly aware of why it does so.
That awareness was missing during the boom. So many consecutive quarters of price growth; copious condo development, spurred by cheap loans; steady inventory; exotic mortgages; leaps and bounds in Wall Street compensation; a rapacious mentality throughout the industry—people began to believe what they wanted to about Manhattan real estate; and the beliefs were echoed back to them.
It was like, I don't know, living in a bubble.
Friday, April 02, 2010