Big numbers bode well for ’07

Oct.October 22, 2007 11:18 AM

If the surprisingly high fourth-quarter numbers in Manhattan’s residential market offer any hint of what’s to be expected during the first months of 2007, brokers will be extremely busy.

Historically a slow period, the fourth quarter had 2,441 sales — up 55.1 percent from the 1,574 recorded sales transactions of 2005’s fourth quarter. Sales were also up 15.5 percent from the quarter before, according to a report by appraisal firm Miller Samuel.

“I was away after Christmas and came home from my trip four days early because we were that busy,” said Prudential Douglas Elliman executive vice president Darren Sukenik in late January. “It’s been steady, constant and serious since the first week in November. It hasn’t let up at all, there have been no breaks.”

Buzz about Wall Street bonus money and declining interest rates are responsible for the 15.5 percent increase in sales activity, brokers say. The average rate for a 30-year, fixed mortgage dropped to around 6.04 percent last month from 6.8 percent during the summer.

“Sales under $1 million were interest-rate sensitive and sales under $2 million were bonus driven,” Sukenik said.

But downward-trending mortgage rates didn’t really result in much change in affordability, according to Miller Samuel president and CEO Jonathan Miller.

“It was more symbolic for a tremendous amount of people on the sidelines concerned about the future,” he added.

Wall Street notched a second consecutive record year for bonuses, the fourth consecutive year-over-year increase. However, market watchers say some of the recent bonus-boosted deals are residual.

“Wall Street market money trickles in,” said Dottie Herman, president and CEO of Prudential Douglas Elliman. “Some people spend it right before, some spend it right after, some spend it over the next year or decide not to spend it at all.”

Although it took a while, sellers finally adjusted to the changing market, brokers said. The third quarter of 2005 marked the end of the housing boom, but it wasn’t until the end of 2006 that sellers became realistic about how much educated buyers were willing to pay in a competitive market.

“The way you characterize the 2006 market is some properties were selling but a lot weren’t because they were overpriced. Sellers had a name-your-price mentality and thought a buyer would come along,” Miller said. “But it took a little time to sell in the current market, and if it isn’t priced right, then it simply won’t sell.”

As 2006 came to a close, the average sales price of $1,224,840 in the fourth quarter had dropped 5 percent from the third quarter price of $1,288,748, according to Miller Samuel. Miller said the quarterly decrease is due to a seasonal effect experienced each year going back for the last 16 years.

More importantly, the average gap between the sales price and asking price tightened between the third and fourth quarter — a sign the disconnect between sellers asking too much for their apartments and buyers not willing to pay that amount had diminished.

According to Sukenik, his clients who finally adjusted their prices down by 5 to 7 percent during the fourth quarter were able to sell.

“Sellers had to adjust their expectations,” Sukenik said. “Buyers want to feel like they’re perceiving value that’s fairly and appropriately priced.”

The improving real estate market was also marked by the declining supply of inventory. Between the third and fourth quarter, Miller Samuel data reported a 22.2 percent drop in the number of apartments for sale to 5,934 in the final quarter.

Inventory will grow during the first quarter of 2007, predicted Miller. But the majority of housing stock currently out on the market isn’t impressive, say some brokers.

“There is a low amount of good inventory. It’s mostly B- housing stock in C- locations,” Sukenik said.

Another reason for buyers to purchase was declining prices per square foot. Fourth-quarter data reported a 5 percent drop in the average price per square foot to $998, down from $1,050 in the prior quarter, Miller Samuel found. However, the number was only a 0.4 percent drop from the same time the prior year.

“Some buyers are consciously putting themselves in the position to purchase apartments early on,” said Louise Phillips Forbes, a senior vice president at Halstead. “A handful of people don’t want to compete with bonus buyers and pulled the trigger in November.”

Brokers predict the annual appreciation during the first two quarters of 2007 will rise.

“I have a couple clients awaiting Wall Street bonuses who want to move quickly. I’m encouraging them to make a move in January or February instead of March, April or May. January can still be pretty sleepy,” said Bellmarc broker Bill Milvaney. “This bonus year is going to have a stronger effect than ever before. Everyone is aware of it today.”

Go to chart: Manhattan apartment sales up, prices down


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