If the boom peaked in Manhattan’s housing market at the end of 2005, the second quarter of 2006 quietly shut the door behind it.
Prices were up for the three months ending June 30, but sales plunged year over year, listing inventory set a record, and the number of days an apartment sits on the market increased by nearly a week on average.
Also, for the second consecutive quarter and for only the second time in the last five years, condominiums in Manhattan outsold co-operatives, dragging down the overall number of apartment deals in the borough. Rising mortgage rates played a role in the slumping sales, even as rising prices showed that buyers are willing to pay more when they do close a deal.
The average Manhattan apartment sales price hit a record of $1,386,193 in the second quarter, according to appraiser Miller Samuel and brokerage Prudential Douglas Elliman. That is 6.6 percent higher than the first quarter of this year and 5.2 percent higher than the second quarter of 2005.The average price per square foot for a Manhattan apartment set a record, too, in the second quarter, rising 7.9 percent from the first quarter to reach $1,083.
The lingering effects of a record Wall Street bonus season six months before and the strong city economy helped drive these price increases, according to Miller Samuel president and CEO Jonathan Miller.
But while prices rose, sales dropped and inventory spiked due to rising mortgage rates and the slowdown in co-op sales. The average rate on a 30-year, fixed-rate mortgage was 6.78 percent by the last week in June, according to Freddie Mac, its highest since 2002.
If the second quarter numbers read a little like d j vu, that’s understandable. Sales also dropped and inventory rose at the end of 2005, a time when the media and market analysts started their postmortems on the Manhattan housing boom. Apartment sales dropped 21.2 percent from the third quarter of 2005 to the fourth quarter, and inventory went up nearly 4 percent during the same period.
The second-quarter numbers suggest that what started at the end of last year was fully realized in the first six months of this year.
“I think we’re not really in a boom anymore,” said Dottie Herman, president and CEO of Prudential Douglas Elliman. “There’s a lot more inventory, so days on the market are going to be longer. And, when people have more things to look at, they don’t make decisions as quickly. There’s no sense of urgency anymore.”
In the second quarter, the number of sales declined to the lowest second-quarter level in five years. That’s an especially telling indicator of the broader market because the second quarter is generally the busiest one for sales in Manhattan.
A decline in co-op sales drove the overall drop in sales to 1,934 in the second quarter — a 3.5 percent decrease from the first quarter and a 14.8 percent drop from the same period last year, according to Miller Samuel. Co-ops accounted for 43 percent of all apartment sales in the second quarter, and condos for 57 percent.
The first quarter marked the first time since at least 2000 that condos outsold co-ops in Manhattan, according to Miller Samuel. Usually, co-ops outsell condos by wide margins. For instance, in 2003, co-ops accounted for 65.8 percent of Manhattan apartment sales; in 2004, for 60 percent.
Co-ops represent about 70 percent of housing stock in Manhattan, making the fact that condos outsold co-ops during the first six months of 2006 a telling indicator that total sales are slowing sharply.
“The overall decline [in apartment sales] was due to the drop in the number of co-op sales, which more than offset the rise in the number of condo sales,” said Miller Samuel president Jonathan Miller.
At the same time as these sales drop-offs, listing inventory for Manhattan expanded 10.7 percent from the first quarter to a record 7,640 units. This number was also a remarkable 53.9 percent increase over the inventory in the second quarter of 2005, when, again, the borough’s housing market stood in the midst of its much-ballyhooed boom.
The number of days it takes to sell a Manhattan apartment also rose in the second quarter. Over the three-month stretch, it climbed to an average of 144 days, up six days from the first three months of the year.
When a property did sell in the second quarter, it commanded a better average price if it was a co-op rather than a condo. The average sales price of a Manhattan co-op increased 18.6 percent over the first quarter and 17.6 percent over the second quarter of 2005 to $1,296,452. The price of a condo, however, dropped 1.9 percent from the previous quarter and 7.4 percent from the same quarter last year to finish the second quarter at $1,453,803.
But this decline shouldn’t worry those who make a living from the ebb and the flow of what remains a healthy Manhattan housing market — albeit a much slower one than it was during this time last year.
“Even if the average sales price were a million,” said Elliman’s Herman, “would that be so terrible?”