Manhattan residential market reports bring good news, experts cautiously optimistic

Third-quarter Manhattan market reports released by the city’s residential brokerages today paint a grim picture compared to the same period last year, but show a marked improvement from earlier this year.

“For New York, the worst is over,” said Dottie Herman, president and CEO of the city’s largest residential brokerage, Prudential Douglas Elliman.

Still, experts caution that while the pace of decline is slowing, recovery is not yet imminent.

“I’m very pleased with what we saw this summer and it’s a step in the right direction, but I still think we have a ways to go,” said real estate appraiser Jonathan Miller, the CEO of Miller Samuel, who prepared Elliman’s report.  

Market reports released by Elliman, the Corcoran Group and sister companies Brown Harris Stevens and Halstead Properties show that average apartment prices fell between 10 and 16 percent in the third quarter from the same period last year.

Elliman’s report found that the average sales price of a Manhattan co-op or condo was $1.32 million, slipping 10.6 percent from $1.48 million in the third quarter of 2008, while the median price was $850,000, down 8.4 percent from the prior year quarter. During the same period, the number of sales fell 16 percent. A report by real estate listings Web site Streeteasy.com found that the average sales price of a Manhattan apartment in the third quarter dropped 16.4 percent to $1.25 million.

Dismal as those figures may sound, they are a clear improvement from the second quarter, when reports showed that the number of sales had dropped a record 50 percent from the same quarter in 2008. Elliman’s second-quarter report showed a 21.4 percent year-over-year drop in average sales price.

Brokers attribute the improvement to a leap in activity this summer, spurred by declining prices, stabilization of the stock market and low interest rates. The number of sales jumped 45.6 percent between the second and third quarters of 2009, Elliman’s report found.

As a result of all the increased activity, experts agree that the steep, post-Lehman drop in prices and activity has come to an end.

“I don’t think you’re going to see any more significant drops,” Herman said.

Miller concurred, but emphasized that prices are still falling, albeit at a slower rate.

“We’ve been seeing a fairly sharp descent — we’re seeing that ease,” Miller said. “That doesn’t mean we won’t fall further, but my sense is that the largest declines have already occurred.”

Weak market fundamentals — such as high unemployment and tightness of credit –continue to prevent an immediate rebound, he said.

“It’s more a rounding-the-corner scenario, with things getting less bad, as opposed to we’re at the bottom,” Miller said. “A bottom infers that shortly thereafter we’ll see prices jump. That appears unlikely.”

Diane Ramirez, the president of Halstead Property, said she is “cautiously optimistic.” Halstead and Brown Harris Stevens’ report found that closing prices in the third quarter averaged $1.27 million, 13 percent less than $1.26 million a year ago.

“I’m optimistic that it’s going to continue to recover, but there are still concerns,” she said.

She agreed with Miller that prices won’t start to rise for a while.

“We’re stabilizing, but we’re not yet stable,” she said. “You need to be stable for prices to rise.”

She likened the current market to a water bed, which could go up or down. “It’s not a hard mattress — we’re not firm yet,” she said.

Another encouraging sign is that there are fewer apartments for sale now than last year at this time. There are currently 8,389 apartments on the market in Manhattan, Elliman’s report says, a drop of 4.6 percent from 8,794 in the prior year quarter, and 10.5 percent from 9,378 in the second quarter. Miller said the drop is a result of the increased sales activity combined with buyers taking their apartments off the market while waiting for the market to recover

Still, inventory is higher than Manhattan’s 10-year average of roughly 7,100, he said.

“Inventory is still high,” Miller said.

For more third-quarter 2009 market report coverage, click here.