Manhattan residential sales have held flat in the face of a precipitous fall in inventory in the third quarter of 2012, reports from leading brokerages show.
Inventory in Manhattan is down 24.3 percent year-over-year — its lowest level since 2005 — third quarter numbers from Prudential Douglas Elliman show. And while those numbers may not bode well for the market in the immediate-term, they leave open the possibility of a brighter 2013, Jonathan Miller, president of the real estate analytics firm Miller Samuel and author of Elliman’s market report, told The Real Deal.
The drop in inventory is “becoming a chronic problem,” Miller said; he said “sales are in a holding pattern,” despite the drop, which in a healthier market would cause a rise in pricing. “Now we are at this seven-year low and we’ve already worked off ‘the fat’ so to speak — the shadow inventory, the older listings — now we’re lean,” he said.
However, if the outcome of the presidential election, QE3, the ever-worsening European debt situation and the expiration of George Bush’s capital gains taxes don’t disrupt the American housing market, 2013 could look considerably better, Miller said. “The next step is some sort of price appreciation, assuming nothing changes in 2013,” he said.
Still, with lending as tight as it is, there is no dramatic improvement on the horizon, experts warned. “If lending was a little better, you’d have close to a boom again, because you have plenty of foreign money, interest rates like they are giving money away, and rising rents that I don’t see going down,” said Dottie Herman, President and CEO of Elliman.
Herman was more optimistic on pricing, saying she believed home prices could reach levels seen prior to the Lehman Brothers collapse as soon as next year, which would indicate an estimated rise of 12 to 15 percent.
The median sales price for Manhattan co-ops and condominiums in the third quarter was $890,000, down 2.3 percent year-over-year, Elliman’s numbers show. Those numbers differed only slightly from the estimate from Brown Harris Stevens, which showed a median sales price of $865,525, reflecting a 2 percent rise from their third quarter 2011 numbers. The average price per square foot was $1,103, down 2.4 percent, and sales volume was down 5 percent, both for the same period, according to the Elliman report.
But Miller qualified those numbers, pointing to the unusually deceptive statistical practice of looking at year-over-year numbers.
“Even though my metrics show a drop in median price, it’s really stable and flat,” just low compared with last year, when the market abruptly picked up in the third quarter, Miller said. Sales price and volume will likely remain steady in 2012 compared with 2011 overall, he said, but this year saw the strongest numbers near the beginning of the year, while in 2011 the market picked up at the end of the year.
The weakest segment of the market is the lower high-end, experts said. “Certain price points are not selling as much as … in other quarters,” said Diane Ramirez, president of Halstead Property. “But it’s lack of inventory causing it; the inventory level [in the] below $5 million [range] is very low.”
Miller agreed that activity at the bottom of the luxury market, homes in the $3 million to $5 million range, was slowing.
However, the one-bedroom market heated up, Miller said, as record-low interest rates in combination with record-high rents spurred entry-level home seekers to take the plunge. The median price for a Manhattan one-bedroom was $665,000, representing almost 38 percent of the market, the Elliman report shows.
Ramirez emphasized that reasonable pricing was key. “We are advising sellers to well price their apartments,” she said. “If an apartment is in relatively good selling condition, they are selling quick and with multiple bids often.”
Halstead’s numbers for the third quarter differed from those from Elliman, showing the total sales volume — 2,790 units — as the highest since the Lehman Brothers collapse. However, sales over $5 million fell 12 percent in the third quarter, the report said. The BHS report for same period showed the same drop for the same price range.
A decline in inventory for three-bedroom co-ops dragged down the average price for co-ops citywide, Halstead’s numbers show, to $1.104 million — down 6 percent year-over-year.
Corcoran’s report also showed a spike in sales volume, up 17 percent year-over-year. “Transactions, like the summer weather, were heated and record setting,” Corcoran CEO Pam Liebman said in a statement.
That report set the market-wide median price at $850,000 — unchanged from the second quarter of 2012, or the third quarter of 2011.
Miller cautioned against overly optimistic appraisals of the residential sales market, however. “‘Real estate [industry],’ I think, is Latin for ‘exaggeration.'”