The Manhattan residential real estate market continued its slow improvement in the first quarter of 2010, according to market reports released today by the city’s major real estate brokerages (see some of the market reports below).
While prices were still far below last year’s levels, they were up from the previous quarter and the number of closed sales nearly doubled from the first quarter of 2009.
“It’s not the market it was, but relative to last year, it’s improved,” said appraiser Jonathan Miller, president and CEO of Miller Samuel and the preparer of Prudential Douglas Elliman’s report.
According to the Elliman report, the average sales price of a Manhattan apartment in the first quarter of 2010 was $1.43 million, a steep drop of 21.8 percent from $1.82 million in the first quarter of last year but a 10 percent increase from $1.3 million in the fourth quarter of 2009. The median sales price was $868,000, down 11 percent from $975,000 in the prior-year-quarter and up 7.2 percent from $810,000 in the previous quarter.
What this somewhat contradictory data means, Miller said, is that prices have stopped their rapid descent and reached a plateau, temporarily at least.
“Prices year-over-year are clearly down, but what’s happening is that prices are not falling anymore,” he said, at least for now.
Similarly, reports from the Corcoran Group, and sister companies Brown Harris Stevens and Halstead Property, as well as real estate data Web site Streeteasy.com, show a drop year-over year, but an uptick from a quarter earlier.
Corcoran, BHS and Halstead determined that average and median sales prices fell around 10 percent from the prior year quarter but rose slightly from the previous quarter.
And Streeteasy.com recorded an average Manhattan sales price of $1.39 million, down 3.3 percent from the prior-year-quarter but up 5.8 percent from the fourth quarter of 2009.
All of the brokerage reports recorded a stunning increase in sales activity between the first quarter of 2010 and the prior-year-quarter. Elliman’s report found that there were 2,384 closed sales in the first quarter of 2010, an increase of 99.5 percent from 1,195 in the same quarter of last year.
That figure is somewhat deceptive, however, since the first quarter of 2009 was unusually slow, thanks to the real estate downturn.
“You have to remember that the first quarter of 2009 was the bleak, dark days of post-Lehman,” Miller said. Now, “sales activity is consistent with historic norms.”
The report also shows that sales activity in the first quarter of this year dipped 3.6 percent from 2,473 in the previous quarter, which Miller attributed to The Fact That Wall Street bonuses played less of a role this year than usual.
Many in the industry hailed the reports as reason for optimism.
“We’re seeing a wonderful recovery,” said Diane Ramirez, president of Halstead. “I think it will continue to recover and get better.”
Hall Willkie, the president of BHS, said: “I’m elated, because a year ago I never thought we could come to this level so quickly.”
One significant change from fourth-quarter 2009 is that sales of larger and more expensive apartments — virtually non-existent during the worst of the downturn — picked up.
“Throughout last year, I was seeing that about 80 percent of all sales were under $2 million,” Willkie said. “Since then, with the improvement of the economy, there’s been a great increase in the market between $2 and $10 million.”
Co-ops sold during the first quarter were an average of 12 percent larger than a year ago, according to the reports released by BHS and Halstead (the two companies, both subsidiaries of privately held Terra Holdings, release separate reports but use the same data.) As a result, the average price for co-ops in the first quarter rose 11 percent to $1.08 million from $974,778 in the prior-year-quarter, the reports say.
In the Elliman report, Miller found that the median price of a resale apartment rose 23 percent year-over-year to $830,000, which he attributed to the fact that studios and one-bedrooms made up 58 percent of the sales in the fourth quarter of 2009, compared to 48 percent in the first quarter of 2010.
One reason that larger apartments are now being sold, brokers said, is because they are now more affordable than they used to be, which has lured some buyers off the sidelines.
“If anyone is looking for a larger apartment, the values are really wonderful,” Ramirez said. “You’re often talking a quality product in a wonderful location at prices you couldn’t have gotten a few years ago. That is the impetus for bringing the buyers out.”
First-time buyers — who usually purchase studios or one-bedrooms — dominated the market in 2009, due to the difficulty of getting jumbo mortgages. So far this year, that is changing, Miller said.
“The strength of the market is still clearly the lower price point, but not to the degree it was last year,” he said. While “2009 was the year of the first-time buyer, 2010 is not going to be the year of the first-time buyer. There will still be first-time buyers, but it’s not going to be skewed so much.”
Ramirez said that Halstead has also seen a number of transactions for apartments priced above $10 million this year.
“What the buyer now realizes is there are values at all price points,” she said. “Every market is coming alive, and that’s very positive.”
But, apartments priced over $20 million are still the slowest segment of the market, Willkie said.
“The higher you go, the less activity we’re seeing,” he said, noting, “a lot of the big [apartments] are overpriced.”
Even new developments, where mortgages were virtually non-existent in the worst of the credit crisis, showed a small amount of improvement in the first three months of the year. The median price of a new condo was $1.16 million in the first quarter, down 23 percent from $1.5 million in the prior-year-quarter but up 3.1 percent from the previous quarter.
Miller also noted that there has been a sharp decline in listing discounts and the average number of days an apartment sits on the market. In the first quarter of 2010, the average listing discount was 5.4 percent, down from 12.4 percent in the prior-year-quarter. Meanwhile, the average number of days a unit sat on the market was 124, down 26.9 percent from the first quarter of last year.
The reason for this, he said, is that after several quarters of steady sales activity and sellers taking their listings off the market, there is now a shortage of well-priced properties on the market. As a result, “the properly priced stuff is selling much more quickly than it would a year ago or even last quarter,” he said, adding that that’s one reason bidding wars have become so common.
Some said the report is evidence that the market has nowhere to go but up.
“I think we’ve seen bottom,” Willkie said, though he noted: “I don’t think the recovery is going to be quick and fast and a huge uptick. I think the price sensitivity is going to be with us for a while.”
But Miller said while conditions are improving, the market is not yet in the recovery phase.
Because unemployment is still high, credit remains tight and foreclosures are on the rise, he said, prices could begin to slide again later this year, when interest rates are expected to inch up.
“Over the next three years, I wouldn’t be surprised if we saw prices slip 10 to 15 percent,” he said. “That’s wholly dependent on unemployment and the credit contraction. If those things significantly improve, we probably won’t see declines. But I’m of the belief that those are going to take a while to repair.”