Manhattan apartment prices hold steady in Q1, while inventory continues to plummet

New development units went into contract 52.9 percent quicker than same period in 2012

Manhattan apartment contracts signed (Courtesy: the Corcoran Group)
Manhattan apartment contracts signed (Courtesy: the Corcoran Group)

Manhattan apartment prices held steady in the first quarter of 2013, while inventory continued to plummet dramatically during the same period, according to a quarterly market report released today by Douglas Elliman. The average sales price in the quarter was $1.35 million, rising just 1 percent year-over-year, the report says. Overall, 2,457 units were sold in the first quarter of 2013, up 6.3 percent from the first quarter of 2012 when 2,311 units sold, according to the report.

The median sales price increased 5.9 percent year-over-year, to $820,555, marking the highest such increase since the collapse of Lehman Brothers in September 2008, with the exception of two quarters in 2010 that were skewed by the federal home buyer tax credit, said Jonathan Miller, president of Miller Samuel and the author of the Elliman report.

“This is what happens when you take both hands and choke off supply by the throat,” Miller said.

Indeed, Manhattan inventory fell 34.4 percent year-over-year to 4,960 units from 7,560; quarter-over-quarter, inventory increased by 4.4 percent. But in the luxury market — representing the priciest 10 percent of properties — inventory was down just 15.4 percent to 1,025 units, and up 7.6 percent quarter-over-quarter, according to the Elliman report.

Meanwhile, the absorption rate — the number of months it would take to sell all the homes currently on the market — fell 37.8 percent year-over-year to 6.1 months, the report says. Units spent an average of 132 days on the market, going 13.2 percent quicker than they did in the same period last year.

Miller deemed the market’s unusual behavior — where tight credit was actually causing housing prices to rise — a “precovery,” rather than a recovery.

“You’re stimulating interest in the market, and the hope is that in the next couple of years, there’s a soft handoff between this artificial environment and real economic improvement,” he said.

Halstead Property’s first quarter report, meanwhile, shows that the average price of a Manhattan apartment fell 16 percent year-over-year to $1.25 million. The median sales price decreased just 5 percent last year, the report says.

The large drop in price, said Halstead’s president Diane Ramirez, was an “aberration” triggered by the so-called fiscal cliff, which led to a flurry of deals in the last quarter of 2012.

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“Many sales artificially closed in Q4 of 2012 when they really would have closed in the first quarter of 2013,” Ramirez said.

The decline in high-end activity was most evident in the co-op market, the report states, where the average price fell 22 percent year-over-year, largely due to a 31 percent drop in the average price for three-bedroom and larger co-ops.

Ramirez predicted a solid year ahead, with a renaissance of the resale market — “which was dead in the water because everyone was sitting tight,” she said — and an increase in overall sales. A lack of inventory, however, would “continue to be a story,” she said.

Hall Willkie, president of residential sales at Brown Harris Stevens, which uses the same data as sister brokerage Halstead, said in the report that with low interest rates, a strong economy and a decline in inventory, “we continue to see a healthy level of activity with well-priced homes selling quickly.”

The Corcoran Group’s data showed a 24 percent increase in the number of signed contracts compared to the prior year quarter, underscoring the “exceptional sales momentum” of the last three months and representing the strongest sales performance of any first quarter since 2007.

And StreetEasy data reveal that there were 3,066 new contracts in the first quarter of 2013, a 15 percent year-over-year increase and an 18.4 percent quarter-over-quarter increase.

Apartment prices in new developments rose 12.5 percent year-over-year to $1.92 million, or $1,332 per square foot, according to the Elliman report. New development units spent an average of 131 days on the market, going 52.9 percent quicker than they did in the same period last year.

“We’re looking at more projects coming up,” Miller said, “but they are generally targeting the top 10 percent of the market.”