Crazy for condos

Demand for new construction drives prices to new highs as inventory drops to unprecedented lows

Manhattan new-construction condos have reached a new price threshold, topping even boom-time highs, brokers said.

The average price per square foot for a Manhattan new development in the first quarter was $1,332, according to a Douglas Elliman market report compiled by Miller Samuel Real Estate Appraisers. That’s up from $1,263 in the first quarter of last year, and from $1,132 in the first quarter of 2007, at the height of the real estate boom.

And in some new development buildings, prices are reaching as much as $2,200 to $2,300 per square foot, a price point previously reserved for penthouses, according to Douglas Elliman broker Frances Katzen.

“These are numbers we never even considered in 2006,” Katzen said.

The price spike is attributed, at least in part, to several new high-end condos hitting the market, including much-hyped new developments 150 Charles Street, 56 Leonard Street and 432 Park Avenue. According to the Olshan Luxury Market Report, most of the 63 contracts over $4 million signed during the week of March 11 were deals at 150 Charles and 56 Leonard (see related story, “56 Leonard: Back from the brink”).

These pricey new projects are coming to market at a time when buyers are starved for new inventory, in the wake of a construction slowdown following the financial crisis.

“There isn’t a large number of new units coming to market, since developers backed off during the Great Recession,” said Veronica Raehse, a broker at the Bellmarc Group. “There is large demand and few new projects.”

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Indeed, new development inventory fell 41.7 percent year-over-year to 872 from 1,495, Elliman’s report showed. And overall Manhattan inventory continued to fall to “unprecedented” lows, said Miller Samuel CEO Jonathan Miller. The number of listings dropped 34.4 percent in the first quarter to 4,960 units, down from 7,560 units in the same period of last year.

“This market has choked off supply with two hands,” Miller said. “That’s providing upward pressure [on prices], and we don’t anticipate much relief this year in terms of new supply.”

As a result, buyers are willing to pay a premium for the few brand-new homes available.

“Bottom line: supply and demand,” Katzen said. “And the consumer is prepared to pay. As much as [developers are] pushing, the buyers are prepared to engage.”

Another reason for the high prices, Miller said, is that the majority of the new developments currently hitting the market are targeted at über-wealthy buyers.

Overall, home prices in Manhattan increased slightly year-over-year but declined from the fourth quarter’s end-of-the-year closing madness. The average Manhattan sales price in the first quarter was $1.35 million — a 7.3 percent decline from last quarter’s $1.46 million, but a 1 percent increase from $1.34 million in the first quarter of last year, the report said. The median sales price, meanwhile, grew 5.9 percent year-over-year from $775,000 to $820,555.

Meanwhile, there were 2,457 closed sales in Manhattan in the first quarter, the report said. That’s up 6.3 percent from 2,311 a year prior.