Manhattan Closings Up, Prices Down

Brokers Express Cautious Optimism

by Inman News

Sales of Manhattan apartments increased while prices fell year-over-year in the fourth quarter of 2009, according to two quarterly market reports.

The number of sales rose 8.4 percent to 2,473 sales from 2,282 sales in the prior year’s fourth quarter, and increased 10.9 percent from 2,230 units in 2009’s third quarter, according to a Manhattan market report prepared by Miller Samuel Real Estate Appraisers for Prudential Douglas Elliman.

A separate quarterly report prepared by Terra Holdings, parent company of Brown Harris Stevens and Halstead Property, said the 2,519 sales reported during the fourth quarter were a 9 percent improvement from the same period in 2008. The report noted that closings have been increasing since the second quarter of 2009, when they were down 53 percent year-over-year.

Both reports are based on public record data. The Miller Samuel report also includes data that it and Prudential Douglas Elliman collect.

The average sales price was $1.3 million in fourth-quarter 2009, down 12.7 percent from $1.49 million in fourth-quarter 2008, and down 2.1 percent from $1.32 million in third-quarter 2009, according to Miller Samuel.

“We’re seeing a real uptick in the market, both in terms of closings and, more importantly, in terms of new deals that will be closing in the next few months. Many people held back and delayed their decision as long as they could, but economic indicators are positive, and they have more confidence,” said Hall Wilkie, president of Brown Harris Stevens.

“In the first half of the year, we were very busy — people wanted to see properties but nobody had the courage to make an offer. Now they’re stepping up to the plate,” said Charles Homet, Halstead’s senior vice president.

New York City’s housing market has unique features that have helped it recover, Wilkie said. Because most properties are rentals and land is scarce, there is less inventory available for sale, which keeps prices from falling drastically.

“New York City is the capital of the world. There’s always tremendous pressure of people wanting to be here,” Wilkie said.

He also cites a large percentage of co-ops and a small percentage of investors as factors that mean owners are less likely to dump properties on the Manhattan market.

Boards of directors must approve purchases at co-ops and they often restrict financing and require a purchaser to have a certain amount in liquid assets. Wall Street’s rebound has also helped, he said.

“The city’s unemployment rate in November was at its lowest level in five months. The education and health care sectors have provided unexpected strength over the past few months.

Wall Street’s rapid turnaround has also played a significant role in this improvement,” said Gregory Heym, chief economist of Terra Holdings, in a statement.

According to Miller Samuel, total listing inventory declined 24.6 percent to 6,851 units from 9,081 units in 2008’s fourth quarter and fell 18.3 percent from 8,389 units in 2009’s third quarter.

Days on market increased to 204 days, from 159 days for the same quarter last year. Listing discounts averaged 12.8 percent, up from 7.3 percent in the same period in 2008. The calculated absorption rate was 8.3 months, similar to the rate in late 2007.

Brokers in the Manhattan market saw higher sales activity in lower price ranges in the first half of 2009.

“The only thing that we were selling in the first three quarters were $200,000 to $700,000 starter apartments. In the fourth quarter we started to sell things up to $1.2 million. Move-up buyers are also starting to move in,” said Jim Mazzeo, broker-owner of Weichert, Realtors-Mazzeo Agency. “Customers are more confident that things are not going to fall off the end of the earth,” he added.

“The first part of (2009) was all about value, no question about that. And in the latter part of the year, it was unique properties like co-ops. Also popular were condominiums near the $1 million mark. When people are putting 25 percent down, they’re able to get a high conforming rate and get very good loans,” Halstead’s Homet said.

Loans beyond the conforming rate limit of $729,750 for high-cost areas are considered jumbo loans and have higher interest rates, according to Fannie Mae.

Brokers say the increase in sales is directly tied to lower prices in the overall market.

“There was a lot of pent-up demand and once prices adjusted, that brought buyers in from the sidelines. In the first half of the year, sellers weren’t willing to adjust prices. Last quarter saw a pickup all across the marketplace, including a lot of high-end deals in the latter part of the year,” said Gary Malin, president of Citi Habitats.

“Interest rates were still attractive, so a lot of people felt that now was the time to act.” Contrary to the usual fourth-quarter slowdown, Malin said the brokerage’s business volume was three times higher at the end of the year than at the beginning of the year.

According to Miller Samuel, the average price for co-ops during fourth-quarter 2009 was $990,921, down 10 percent from the year before, but 6 percent higher than in the third quarter.

The median sales price of a co-op in the fourth quarter was $630,000, down 6.7 percent from $675,000 in the prior year quarter, and the number of sales increased by 28.3 percent to 1,264 units, from 985 sales in the prior year quarter.

The biggest price declines occurred in three-bedroom and larger homes, Terra Holdings said, with declines 30 percent below fourth-quarter 2008. Although the West Side fared slightly better, both the East Side and the West Side saw these declines in larger apartments.

Co-ops made up 51.1 percent of all apartment sales and 44.8 percent of all listings in the fourth quarter, the report said. Condo sales made up the rest.

At $1.73 million, the average condo price overall was up slightly year-over-year. This number is impacted by an increase in the number of larger condominiums sold during the quarter, Terra Holdings’ report said.

The median sales price of a condo in the fourth quarter was $995,000, however, down 11.2 percent from the prior year, Miller Samuel said. Unlike co-op sales, the total number of condo sales slipped a bit in the fourth quarter. Sales fell 6.8 percent to 1,209 units, from 1,297 units in the same period the year before.

The upper 10 percent of co-op and condo sales, based on the minimum limit of $2.55 million, is Manhattan’s luxury market. The median sales price in this market was $3.78 million, down 8.5 percent from $4.13 million in the prior year’s quarter. Listings in this market were discounted 4.3 percent, down from 7.5 percent at the same time the year before.

In contrast to other markets, which showed an absorption rate of less than a year, the rate for this market was 16.8 months, Miller Samuel said. Sales rose 10.8 percent from the prior quarter and 8.3 percent year-over-year.

The housing market’s performance “will hinge on the overall economy. Until hiring takes hold, it’s hard to see a sustained improvement. If interest rates go up, it will be interesting to see how consumers react. Rates would still be lower and, with well-priced apartments, could still be attractive,” Citi Habitat’s Malin said.