Winter is usually the slowest time of year for Manhattan real estate sales. This season, however, the continued strength of the luxury market — paired with the pending change in tax rates for capital gains — prompted a spike in sales activity.
In the fourth quarter of 2012, there were 2,598 closed sales in Manhattan, according to Douglas Elliman’s latest market report, which was prepared by appraisal firm Miller Samuel. That’s up a dramatic 29.2 percent from the fourth quarter of 2011. Listing inventory, meanwhile, plummeted 34.2 percent to 4,749 from 7,221 at the same time last year.
Real estate appraiser Jonathan Miller of Miller Samuel said if this level of activity keeps up, rising prices are likely to follow in the first quarter of 2013.
That hasn’t happened just yet, though.
Average sales prices across the borough stayed largely flat in the fourth quarter, increasing just 1.1 percent to $1.46 million, up from $1.45 million in the same period of 2011. The median sales price, meanwhile, fell 2 percent to $837,500 from $855,000 in the prior-year quarter.
But Miller said it’s only a matter of time. “When you have sales rising modestly, listing inventory falling sharply and less product available, the result eventually is rising prices,” he said.
He also noted that Manhattan’s monthly absorption rate — the amount of time it would take to sell all the listings on the market — was 5.5 months in the fourth quarter, a 49.1 percent decrease from the same period of 2011. Miller said it was second-lowest absorption rate since he began tracking data 12 years ago.
Miller attributed the uptick in sales — and subsequent drop in inventory — in part to falling interest rates. Data released by the Mortgage Bankers Association last month shows that 30-year fixed-rate mortgages fell gradually throughout 2012, sliding from 3.9 percent in the first quarter to 3.5 percent by the end of the third quarter.
“This trend has been occurring for a couple years [but] accelerated because interest rates have fallen,” Miller said.
Another factor driving the market is the flurry of high-end sales, which has been prompted by the expected rise in capital gains taxes.
“We expected to see a strong December in high-priced apartments as a result of the pending change in capital gains rates,” said Neil Binder, president of the Bellmarc Group. Even so, he said, “we have been pleasantly surprised to see that the normal December lull has been less than we expected.”
In another market report last month, the brokerage Olshan Realty reported that 42 contracts priced above $4 million had been signed in a period of two weeks in December — the best holiday season since the firm began tracking the luxury market in 2007.
Perhaps as a result of this heightened sales activity, Manhattan rents have finally reversed course and begun to drop, while the availability of rental apartments has inched higher, brokers said.
Average Manhattan rental prices peaked at historic highs in 2012’s third quarter after steadily increasing from January to August, according to market data from the brokerage Citi Habitats. In the fall, however, rents began to slide. The average Manhattan apartment rented for $3,368 in November, $76 less than the previous month, the Citi Habitats data showed.
The Manhattan rental vacancy rate, meanwhile, grew to 1.38 percent in November, up slightly from 1.16 percent in the same month of 2011, according to the firm.
Still, the rental market continues to be active, driven by still-low vacancy rates, brokers said.
“The cold-weather months are typically less competitive, but this year there continues to be a lot of competition among renters,” said Douglas Wagner, executive director of leasing at Bond New York.
Andrew Barrocas, CEO of MNS, said there is still “a lot of demand” for rentals, despite the softening of rents. “A building that would normally be filled within a month is now being filled in a week,” he said.
At the same time, however, luxury rental prices in November swelled. A rental report compiled by Miller showed that median luxury prices (the top 5 percent of the rental market) in November had increased 19.6 percent from the year before, and 17.1 percent from October.