Manhattan Apartment Sales Cool Slightly

Manhattan may never qualify as a true “buyer’s market” when it comes to real estate, but at least it is shifting slightly in that direction.

Sales of Manhattan apartments dropped and the inventory of available units piled up in the fourth quarter of 2005, reflecting a cooling of the market in the priciest of the five New York City boroughs, even as per-square-foot prices hit a record.

New released by an influential residential real estate analysys suggesteed that while Manhattan real estate prices — always among the nation’s steepest — were still gaining in value in 2005, they were doing so at merely a fraction of the rate compared with 2004. This was the conclusion of the highly regarded Prudential Douglas Elliman Manhattan Market Overview for the fourth quarter. The numbers echo a slew of real estate reports released this week.

• Apartments were smaller and the price-per-square-foot rose steadily, breaking the thousand-dollar mark at $1,002.
• This figure crept up from $984 the previous quarter of this year, and marks an increase from $780 in the fourth quarter of 2004.
• The number of sales fell by more than 27 percent year over the past year, however.

“It’s not a buyer’s market, but we’re close to equilibrium,” said Jonathan Miller, president of real estate appraisal and consultant firm Miller Samuel, Inc., and the author of the report.

Prospective New York buyers took longer to commit to a purchase in late 2005, while the number of available apartments for sale soared. As observed elsewhere across the nation’s housing landscape, the buyers are pausing, and the sellers have not quite clued into that fact yet, thus their properties remain unsold longer. The Miller Samuel report reflects the number of homes sold during the quarter — but contracts to buy those properties were signed up to three months earlier, when fears of a bursting housing bubble abounded.

Many economists are now debating whether the hottest U.S. housing markets (such as Arizona and California real estate) will decline gradually rather than dramatically from its record performance over the past two years.

• The average price of a Manhattan apartment rose 3.3 percent from the third quarter and 20.3 percent from 2004, to $1,187,404.
• The median Manhattan apartment price inched up 1.3 percent from the third quarter and 25.6 percent from the previous year, to $760,000.

Prices of luxury apartments, those in the top 10 percent of sales, rebounded in the fourth quarter with an 8.2 percent bump from the third quarter and 12.8 percent rise from 2004, finishing at a ghastly median price of $4,138,270. But the overall number of Manhattan apartment sales fell 21.2 percent from the prior quarter and 27.2 percent from the prior year, according to the Prudential report.

The number of apartments for sale rose 3.5 percent compared with the third quarter and a surprising 52.1 percent from 2004, to 5,964 total units. That translates into a supply of 11.4 months worth of sales, compared to a range of six to nine months available in the past year or two, Miller said. The number of days it took to sell an apartment rose to 137 days, four longer than the prior quarter and 41 days more than it took a place to change hands in 2004.

Nevertheless, sales prices ended up only about 2.5 percent lower than the initial asking price, up slightly from 2.2 percent last quarter and 1.5 percent in 2004. Miller said he expects the market to rebound somewhat in the first half of 2006 as many city residents’ big Wall Street bonuses translate into home sales. Buyers sort of came back as the year ended, buoyed by bonus money that may carry over into 1Q 2006.

A lot will depend on the national mortgage rates, which experts believe will rise slightly in the first half of 2006. They are not expected to top 7 percent, however, still low by historical standards. If the U.S. economy slows in the second half, as some have speculated, the Federal Reserve may even ease interest rates. That could be enough to keep some of the nation’s hottest markets — New York, California, Nevada, Florida real estate and more — gaining strength, albeit a bit more modestly than last year.