The Manhattan residential market by October dropped into what could be called a more realistic state, closing off an era of earth-rattling records.
The average sales price for a Manhattan apartment dropped almost 13 percent from the second quarter to the third quarter of 2005, according to a report released in early October by appraisal firm Miller Samuel and brokerage Prudential Douglas Elliman.
Also, the amount of time it took to sell a home shot up 30.4 percent over the same period, the report showed, and the high end of the market appeared the weakest, with the average sales price dropping 26 percent due to a decline in sales of properties priced above $10 million. Studio and one-bedroom prices were up over the second quarter, while large apartments all experienced average price declines.
So, are the boom times over?
Not really. In fact, the price per square foot for a Manhattan apartment set an all-time record in the third quarter, bouncing to $984. That’s a 1.4 percent increase over the second quarter and a 22.5 percent increase over the same period last year.
What’s happened, then, is a return to normalcy for now. Potential record Wall Street bonuses in December could send the market surging in the late winter and spring. But, at the moment, things seem to have stabilized after many heady months.
“I don’t see a gloom-and-doom scenario,” said Jonathan Miller, CEO of Miller Samuel. “What I see is a downshift from double-digit gains to single-digit gains.”
The average sales price for a Manhattan apartment was nearly $1.15 million in the third quarter, according to Miller’s firm. The median sales price went from $775,000 in the second quarter to $750,000, as the number of sales also declined over the third quarter down 8.4 percent from the previous quarter and 17.8 percent from the same time period in 2004.
At the topmost of the Manhattan residential market those luxury condos and co-ops priced at more than $10 million the third quarter was especially rough. The average sales price dropped from the record of more than $5.1 million to $3.8 million, which was also a drop from the third quarter in 2004. At $1,477, the price per square foot in that market now mirrors that of the third quarter 2004, when Miller Samuel had it averaged at $1,415.
While the top of the market struggled, smaller units saw general price increases. The average sales price of a studio went up 12.8 percent over the second quarter to more than $428,000, and the average price of a one-bedroom rose 9.8 percent to $687,744.
“The sales market, we’re finding, especially on the high end, there’s been some objections to the high prices and they’ve come down a bit,” said David Schlamm, CEO of City Connections Realty. He said he’s seen the most drop-off in demand recently in apartments priced above $2 million. “But the studios and the one-bedrooms in the moderate-priced market although not as crazy, where you may get 300 people at an open house the first day it’s still very strong.”
The strength of the studio and one-bedroom market the entry-level market is, indeed, one of the main reasons the average sales price for a Manhattan apartment dropped sharply in the third quarter, Miller said. The greater number of these smaller transactions simply weighted down the final overall numbers. The market share of entry-level apartments increased 5 percent, he said, while, at the same time, activity in the higher-end of the market dropped off.
There were, for instance, 17 sales of at least $10 million in the second quarter; in the third quarter, only four closed.
The increase in entry-level market activity may be a result of rising mortgage rates and fears of inflation, Miller said. Entry-level buyers want to get into the market before it gets more difficult to borrow money; at the higher end, people are simply watching the economy in New York and the nation before they cut further deals. The conundrum, then, creates the inactivity.
“I think the key here is that the Manhattan residential market in the third quarter saw a more modest rate of appreciation,” Miller said, “and a surge in entry-level sales, combined with lighter activity at the upper end of the market.”