The Real Deal New York

Sales heat up in Q3 despite ever-tighter inventory squeeze

Threat of rising mortgage rates drives “fence-sitters” to buy

The intensity of the residential real estate market this summer was enough to make its players sweat. As sales continued to take off in the third quarter, the inventory trough hit a new low, reports released today by Manhattan residential brokerages show. Listing inventory fell to its lowest level since appraisal firm Miller Samuel began tracking it in 2000.

At the same time, sales climbed to the second-highest level in 24 years, as 3,837 sales of Manhattan condos and co-ops closed in the quarter. This is a 22 percent increase over the prior quarter and a 30 percent increase from the prior year, according to Douglas Elliman’s report, which Miller Samuel prepared. The peak of sales occurred in the second quarter of 2007, when 3,939 sales closed.

The median sales price of a Manhattan apartment was $872,000, a slight rise of 0.8 percent from $865,000 last quarter and 2 percent decrease from $890,000 last year, the Elliman report said.

“The expectation of higher mortgage rates pushed an unusual number of consumers into the market,” said Jonathan Miller, president of Miller Samuel.

These buyers, whom Miller termed “fence-sitters,” rushed in with sights set on co-ops and one-bedroom apartments. Co-ops saw the largest market share in nine years, representing 62 percent of transactions. One-bedrooms — both condos and co-ops — had a 15 percent market share, the highest in 15 years.

And the numbers hinted that the fast pace of sales would continue. Buyers signed 4,164 contracts for Manhattan apartments in the third quarter – the highest since 2008, according to the Corcoran Group’s quarterly report.

“Historically low interest rates and a continued influx of all-cash buyers contributed to the highly competitive market this quarter,” said Corcoran CEO Pamela Liebman in a statement.

The active inventory for all co-op and condo sales was 4,567, a 21.9 percent decrease from last year, according to Elliman. For 10 straight quarters now, Manhattan has seen year-over-year inventory declines.

“Inventory is not so depleted to the point that buyers have nothing to look at,” said Jim Gricar, president of Halstead Property. “As long as demand pushes up prices, you’re going to see activity.”

These days of bare-bones inventory signify the end of the transition from the last boom to the start of a wave of new developments, expected to break out next year, Miller said.

As of August, the city had issued more than 60 percent more building permits this year than at the same point in 2012, according to a TOWN Residential report, citing U.S. Census Bureau data.

The average price per square foot for apartments at new developments increased 9 percent year-over-year to $1,342 from $1,221, according to Halstead Property’s report, which uses the same data as sister brokerage Brown Harris Stevens.

However, in Upper Manhattan, a 36 percent decline in new development closings brought the average price lower over the past year for one-bedroom apartments and up, Halstead data show. Upper Manhattan is classified as north of East 96th Street and south of West 110th Street.

The median price of a luxury apartment was $4.15 million, or a 10.7 percent increase from the same time last year, when it was $3.7 million, the TOWN report showed. The luxury market accounts for the priciest 10 percent of sales.

While Downtown emerged from the second quarter as the sole market to see price growth across all apartment size categories, the neighborhoods were more evenly matched in growth this time around, Gricar said.

Of the 10,638 condos and co-ops listed in Manhattan, 2,054 underwent price cuts, 29.3 percent fewer than this time last year, according to StreetEasy’s third-quarter report. Sellers, on the other hand, upped prices at 694 listings, an 8.4 percent year-over-year decrease.