Shortage of new projects may drive up home prices, experts say

As the market moves towards a recovery, brokers and developers are saying New York City will soon face a shortage of new development projects, which can drive home prices up, the New York Times reported. Last year, through November, the city issued permits for only 10 new residential buildings, for a total of 505 new units, 95 percent fewer apartments than for the same period in 2008, when permits were filed for 9,448 units in 147 buildings, according to census data. “We tend to go through these cycles where, when you finally come out of a recession, there’s a shortage of inventory,” said Gregory Heym, the chief economist for Halstead Property and Brown Harris Stevens. “You usually expect the slowdown to come over a couple years, but this was like slamming on the brakes. So to start up again may take awhile.” Experts say that real estate values in Manhattan will continue to grow at a measured rate through 2011. But starting in 2012, after most or all the new projects that were stalled or delayed have sold out, the supply of new apartments will decrease, and prices could start to rise significantly again. “Once we work through the existing inventory and there’s nothing new coming on line, there’s going to be a major shift in the market,” said Kelly Mack, president of Corcoran Sunshine Marketing Group. “Prices may start going up significantly in 2012, in anticipation of the shift in inventory.” [NYT]