Manhattan sales prices are still higher than last year, but plummeting sales volume and spiking inventory from the previous quarter could mean dark times ahead for the city’s real estate market.
For the third quarter in a row, Manhattan saw a double-digit decrease in apartment sales, with the number of sales dropping 24.1 percent to 2,654 units from 3,499 in the same period last year, according to today’s report prepared by Miller Samuel for Prudential Douglas Elliman. Meanwhile, listing inventory leaped 34.6 percent to 7,003 from 5,204 last year.
Slowing sales volume will likely continue as New York City feels the effects of the credit crisis and the current maelstrom in the financial markets.
“I’m concerned about every segment of the market because of the lack of availability of mortgage money,” said Jonathan Miller, president of Miller Samuel. “This whole bailout situation is a milestone. Going forward, [the market] is all dependent on how quickly the credit crisis is fixed.”
In the third quarter, the median sale price in Manhattan increased 7.4 percent from the same period last year to $928,263, and the average sales price grew 8.1 percent to $1.5 million. The average price per square foot also jumped 4.3 percent to $1,193. But the average sales price declined 11.3 percent from $1.7 million last quarter, while the median sales price fell 9.4 percent and the average price per square foot dropped 5.5percent.
It’s normal for prices to fall between the second and third quarters, but “this go-round, the declines were larger,” Miller said, adding that the credit crisis has made it more difficult for homebuyers to get mortgages, resulting in slower apartment sales and lower prices. “The demand has eased because of credit.”
The reason prices have climbed overall is because a larger percentage of sales are in new developments, which tend to be more expensive, said Gregory Heym, chief economist at Terra Holdings, parent company of Brown Harris Stevens and Halstead Property.
Third-quarter market reports from Brown Harris Stevens and Halstead, which are based on the same data but measure some different aspects of the market, such as neighborhood data, generally echo the trends found in Miller Samuel’s report. The Brown Harris and Halstead reports show that the average price of a Manhattan apartment was $1.47 million, up 12 percent from last year but down 11 percent from last quarter. If sales at very high-end developments 15 Central Park West and The Plaza are removed from the figures, Heym said, the decrease from last quarter was 6 percent.
The 6 percent decline is unusual for Manhattan, which has not yet displayed price decreases like other areas of the country impacted by the housing slump. “Certainly, we haven’t seen something like that in a while,” Heym said. “But I don’t think it’s surprising that prices are starting to soften. We’re a year into the credit crisis — we expect them to slow.”
The credit crisis does have a silver lining, according to Diane Ramirez, president of Halstead, who said fewer new projects in the pipeline will prevent the market form being flooded with inventory. “We have, for more than a year now, had a lessening of development projects coming to the market because developers were having trouble getting financing,” she said. “That is going to bode well for the fact that we won’t have a lot of new supply.”
Figures from the Corcoran Group, which also released its third-quarter market figures today, in partnership with PropertyShark, differed slightly from the Miller Samuel data in that median prices stayed flat from last quarter rather than declined. The Corcoran report showed that the median sales price of a Manhattan apartment increased 10 percent from last year to $975,000, the same price as last quarter, while the median price per square foot rose 6 percent to $1,180 over last year, but fell 6 percent from $1,262 last quarter.