Gregory J. Heym
Executive Vice President, Chief Economist
By CHRISTINE HAUGHNEY
Declining prices, rising inventory and increasing foreclosure rates may have hobbled many of the nation’s housing markets, but they have not yet reached Manhattan and brownstone Brooklyn.
The people who closed on co-ops, condominiums and town houses there paid more than ever, on average, for real estate in the third quarter of this year.
Four reports issued yesterday by the city’s major residential real estate brokerage firms showed that apartments closing in Manhattan in July, August and September sold for the highest average sale price ever and that the inventory of homes for sale declined over all.
On average, buyers spent $1.37 million for a Manhattan apartment, a 6.3 percent increase from the corresponding period last year, according to one report, by Prudential Douglas Elliman. The number of apartments on the market fell by nearly a third, to 5,204, in the last quarter, compared with 7,623 a year earlier, the report said.
These numbers indicate that the real estate market was even stronger in the summer, traditionally a slower season for real estate, than it was in the spring, when prices rose in some segments of the market — like new condominiums and the largest apartments — but not all.
Two brokerage firms — Brown Harris Stevens and Halstead Property — said in their reports that prices had risen for nearly every type of apartment in almost every neighborhood of Manhattan, from bare-bones studios in the borough’s northernmost reaches to luxurious four-bedroom apartments on the Upper East Side. Prices in Brooklyn, which had dipped in the second quarter, rose by 11 percent last quarter for apartments and town houses.
“This is one of the best quarters that we’ve ever had,” said Pamela Liebman, president of the Corcoran Group, which also released a report yesterday.
But brokers and the economists who prepared the reports stressed that the numbers mainly reflected buyers who went to contract for apartments weeks before the national credit crisis hit and before many people grew more cautious about buying. For instance, many of the co-ops that closed in the last quarter actually went into contract during the spring, and many buyers of newly built condos put down payments on their apartments months, even years, before their units were finished this summer.
Jonathan Miller, executive vice president and director of research for Radar Logic Inc., which tracked the numbers for Prudential Douglas Elliman, said that any qualms buyers might have had because of the credit crisis this summer would not have shown up in the third-quarter data.
“Housing is a trailing indicator of economic conditions,” Mr. Miller said. “We most likely won’t see a reaction until after the new year to the credit crunch.”
But buyers in neighborhoods in some parts of Brooklyn and Queens have already been hit. The number of foreclosure auctions jumped by 64 percent last quarter, to 698, compared with the same period last year, out of some three million households in New York City, according to PropertyShark.com.
These foreclosures are concentrated in a few neighborhoods, notably Jamaica and Howard Beach in Queens and Bedford-Stuyvesant in Brooklyn.
Still, brokers said that prices in Manhattan have held up far better than in the rest of the country because co-ops, which make up roughly 70 percent of the city’s housing stock, have rules that can prevent buyers from using the riskier mortgages that were prevalent elsewhere in the country.
“More than any other market in the country, there is tremendous equity in our homes,” said Hall F. Willkie, the president of Brown Harris Stevens. “It’s a strong, solid market with a lot of equity, not a lot of inventory and strong demand.”
While sales prices for Manhattan co-ops lagged far behind condos in the second quarter, as is typical, they rose in the third quarter because there were far fewer co-ops to choose from as inventory declined, said Dottie Herman, president of Prudential Douglas Elliman.
“They’re not building co-ops anymore,” she said. “So there’s a finite number.”
The biggest gains in prices in Manhattan were for three- and four-bedroom apartments and the most expensive apartments on the market.
On the Upper East Side, apartments with four bedrooms or more cost an average of $6.6 million — 17 percent more than a year ago, according to data released by Brown Harris Stevens. On the Upper West Side, apartments with three or more bedrooms cost an average of $4.5 million, a 46 percent jump from last year.
Prices for the most expensive Manhattan apartments — the top 10 percent of sales — were the second highest on record. The average sale price for a luxury apartment was $5 million, behind only the second quarter of 2005, when it was $5.2 million.
In Brooklyn, the number of sales rose. Buyers in Brooklyn closed on 311 condos and 173 co-ops last quarter, compared with 210 condos and 167 co-ops a year earlier, according to data tracked by the Corcoran Group.
“Brooklyn is finally starting to reap the rewards of all the new construction,” said Ms. Liebman, the Corcoran Group president.
The number of sales of single-family houses and town houses in Brooklyn rose by 63 percent from the previous year. That might have been partly because prices in the borough are much more attractive than in Manhattan: The average single-family home in Brooklyn sold for $1.6 million, compared with $5.8 million in downtown Manhattan.
Gregory J. Heym, an economist who prepared the market studies for Brown Harris Stevens and Halstead Property, said that New Yorkers will not know where the market is headed until the effects of the credit crisis are clear: Jobs may be lost on Wall Street and bonuses may shrink.
“In the rest of the country, housing markets are doing poorly because there’s too much inventory, people are having a hard time getting mortgages and local economies are beginning to slow — none of which has happened here yet,” Mr. Heym said.
For New York to see a downturn, he added, “something more dramatic is going to have to happen.”
Tuesday, October 02, 2007