Even though the national housing market is suffering and jobs on Wall Street are being lost every day, Manhattan real estate prices are higher now than they were a year ago.
The average price of a Manhattan apartment rose slightly to $1.5 million in the third quarter of this year compared with the same period last year, propelled largely by a few purchases at the high end of the market, according to reports released yesterday by four large real estate brokerages.
But the average price has fallen from the first quarter, when it reached $1.7 million. And data tracked by the brokerages indicates that the market has slowed: there are fewer sales than in the last five years, there are more apartments for sale now than in the past eight years, and more sales contracts are being canceled. Even the pace of growth for luxury apartments, long the strongest segment of the Manhattan market, has slowed.
“I have great concern about 2009,” said Jonathan Miller, chief executive of Miller Samuel Incorporated, the real estate research company tracking these numbers for the brokerage Prudential Douglas Elliman. “At some point, you’re going to see prices erode.”
The reports, which track deals made by buyers who went to contract before the national financial crisis of recent weeks, showed that the average sales price was 8 percent higher than at this time last year, according to data tracked by Miller Samuel. The increase was driven at least partly by closings in the last quarter on four Upper East Side co-ops for more than $30 million each.
Brokers predict that real estate prices are unlikely to drop as much as they have in other parts of the nation because the market is filled with co-op owners who have more equity in their properties and because there is a limited supply of apartments in New York City.
“You will start to see a softening in prices over the next two quarters, but it’s not going to be dramatic,” said Pamela Liebman, chief executive of the Corcoran Group. “The predictions of a full-scale drop in New York will not happen.”
It is already a pretty drastic decline from the beginning of this year. At that time, the record was attributed to a large number of condo sales at buildings like 15 Central Park West and the Plaza.
The number of multimillion-dollar closings has become smaller, but is still significant. The number of apartments that closed in those two buildings dropped to 34 in the third quarter from 81 in the second quarter, according to Gregory J. Heym, the chief economist for the brokerages Halstead Property and Brown Harris Stevens.
But these numbers do not reflect the impact of the latest financial crisis, because they track deals that were in the works for many months. It is also too soon to know whether people facing financial trouble will have to sell their homes.
“It’s going to be some time to process what happened,” Mr. Heym said. “It’s not like 35,000 people were given pink slips and have to sell their apartments.”
After the stock market crash of 1987, it took two years for Manhattan real estate prices to drop, according to Mr. Miller.
When they did drop, the market became more troubled because the slowdown coincided with developers taking advantage of tax incentives to build thousands of new apartments. At the same time, thousands of rentals were being converted into co-ops. Many builders had concentrated on building only smaller apartments that were attractive to investors looking to rent them out. All of this inventory meant that it took until the mid-1990s for prices to recover from overbuilding.
Although the city has experienced a building boom in the last several years, brokers and data trackers say that the market is in better shape because fewer units have been built and developers have designed a greater mix of apartment sizes.
“We had a huge abundance of investor-type apartments,” said Diane M. Ramirez, the president of Halstead Property. “We don’t have that now. Our inventory has been so well thought out.”
Prices for apartments of certain sizes and in certain neighborhoods have held their value, and in some cases have thrived. Apartments along Park Avenue on the Upper East Side have had their median sales price jump by 57 percent, and the average price of an Upper East Side apartment with four or more bedrooms jumped by 95 percent, while other apartments in the neighborhood saw small price increases.
Sales prices for downtown apartments remained flat except for apartments with three bedrooms or more, which dropped by 19 percent.
Fewer apartments are selling than in the last five years. Data tracked by the Corcoran Group showed that the number of apartments that closed dropped to 2,982 sales in the third quarter, compared with nearly 4,976 at the same time last year.
The number of Manhattan apartments sitting on the market is higher than it has been in the past eight years, according to the Corcoran Group. By last month, the number of listings had grown to 10,761 from 8,444 in September 2007. At the same time, far fewer of those apartments actually sold. Just 727 listings were absorbed in September 2008 compared with 858 in September 2007.
Some buyers have grown so concerned that they started to back out of deals. In September, the number of New Yorkers who canceled contracts jumped by nearly 40 percent, affecting 130 contracts, according to the real estate Web site StreetEasy.com, which also released a report.
According to Mr. Miller, the key indicator to watch in the coming months is Manhattan’s inventory.
“When we’re going into this weaker period of housing, we&rsq
uo;re going in at a relatively low level of inventory,” Mr. Miller said. “But inventory could rise fairly quickly if the level of sales continues to remain low.”