New York City real estate reached a new high last month: A unit at the exclusive Midtown co-op River House hit the market for a whopping $130 million, becoming Manhattan’s priciest-ever residential listing.
Meanwhile, Manhattan sales activity is through the roof: the borough saw 3,837 closed sales in the third quarter, a dramatic 30 percent increase from 2,952 in the same period of last year, according to a market report released by the brokerage Douglas Elliman.
So why are overall sales and rental prices declining?
The average price of a Manhattan apartment in the third quarter was $1.43 million, a 0.7 percent decline from $1.44 million in the same quarter of last year, according to Elliman’s report. The median price, meanwhile, dropped 2 percent year-over-year to $872,000, down from $890,000.
Miller Samuel’s Jonathan Miller, who prepared the Elliman report, cited mortgage rates as the explanation for these seemingly incongruent trends.
Mortgage rates have been steadily rising since May, which Miller said has pushed previously undecided homebuyers off the fence as they rush to take advantage of low rates. Most of these buyers, for whom interest rates can make a big difference in the affordability of a new home, are at the low end of the market, he said. As a result, apartments that traded in the third quarter tended to be smaller than those that sold in the same period of last year — hence the drop in overall prices.
Rents are also on the decline, meanwhile, after months of rapid increases. The average monthly rent for a Manhattan apartment reached an all-time high of $3,461 in August of last year, but had dropped to $3,434 in August of this year, according to a report from Citi Habitats, the largest rental brokerage in the city. Meanwhile, the vacancy rate for rental apartments climbed to 1.31 percent in August, up from 1.19 in the same month of last year.
One reason rents have finally started to decline, said Elliman broker Ariel Cohen, is that tenants have finally had enough of the stubbornly high rents and fast-paced market, and are buying apartments instead.
But the sales market is also tight, with listing inventory still on the decline. In the third quarter, the number of available sales listings dropped 21.9 percent to 4,567, down from 5,847 at this time last year. That, combined with the recent uptick in activity, means competition for apartments is intense, Miller said.
“The inventory shortage is not easing, and it’s made it more challenging because we’ve had this sharp increase in sales in 2013,” Miller explained. “You’re taking inventory that was already low and you’re confronting it with a much heavier sales volume, which is making the market move even faster.”
Cohen agreed. “This whole year has been characterized by high demand and low inventory,” he said, “and that’s only going to continue.”
But that doesn’t mean the palatial River House listing is going to fetch its asking price. The property joins three other Manhattan homes currently on the market with nine-figure prices: the $125 million penthouse at the Pierre, the $115 million penthouse at the One Beacon Court on 58th Street, and the $100 million CitySpire penthouse.
Miller said these eye-popping prices are calculated to make headlines rather than reflect the units’ true market value.
“Now that you’ve got four properties [priced at] $100 million or over, the gimmick to attract eyeballs in this realm has been overplayed,” he said. “These properties have been languishing for a long time, so it’s not clear whether this $100 million threshold has been supported by the market.”