Apartment market a bit worse than it looks

May 2006

Some Manhattan price and volume numbers stay high, but can't hide sharp inventory growth
By Tom Acitelli


Source: Miller Samuel Appraisers Manhattan's apartment market is now not moving up nor down, but rather "sideways," according to brokers and appraisers.

While the most recent apartment data shows what appears to be a continuation of the boom times -- with the median price of a Manhattan apartment and the average price per square foot setting records in the first quarter of 2006 -- the effect on the broader market is more ambiguous. Despite strong numbers posted as a result of Wall Street bonus money, the number of listings on the market -- and the time they stay there -- is climbing significantly.

The median sales price hit an all-time record of $825,000 in the first quarter, up 8.6 percent from the fourth quarter of 2005. The average price per square foot was $1,004, up $2 from the quarter before, according to a report from appraisal firm Miller Samuel and brokerage Prudential Douglas Elliman.

The number of sales jumped an impressive 27.4 percent, but the number of listings rose 16 percent over the quarter before and is up sharply from the same time last year -- by more than 60 percent.

"We have an upside on some of the statistics, but some of them are a little misleading," said Jonathan Miller, president of appraisal firm Miller Samuel. "I would characterize the market overall as moving sideways."

Miller said the annual wave of Wall Street bonus money boosted sales volume and gave the appearance of prices heading upward, but that was because those buyers purchased larger apartments.

"Like prior first quarters, this quarter was about the influx of Wall Street bonus money," he said. "You had a gain in market share of larger apartments. It wasn't that they were appreciating. It's that there were more of those types of units sold."

Fifty-one percent of all apartments sold in the first three months of the year in Manhattan were two-bedrooms or larger; that's up from 45 percent in the fourth quarter of 2005. Larger condos, especially, were popular among buyers. Nearly 60 percent of condo deals closed in the first quarter were for units with at least two-bedrooms, about a 12 percentage increase over the larger-condo market share in the fourth quarter.

Still, the most notable statistic Miller pointed out for the quarter was also the most gloomy -- the rise in listings on the market. There were 6,904 apartments available for sale during the first quarter, a huge jump from the same time last year.

"Probably the biggest story of the first quarter has been the surge of listing inventory," he said. "It's something other than mortgage rates we have to look at closely.

"The number of listings available for sale was up 60 percent over the same quarter last year," he added. "However, the 60 percent figure is somewhat exaggerated in that the prior year quarter results were at near record lows."

But there is a silver lining: Apartment prices are still ahead of last year. The average sales price for a Manhattan apartment stood at $1,300,928 at the end of the first quarter, up 9.6 percent from the fourth quarter and still up 7 percent over the first quarter of 2005, according to Miller Samuel.

Meanwhile, the average number of days it takes to sell an apartment increased slightly during the first quarter, going to 138 days compared to 137 the quarter before. That's well above the average of 94 days during the first quarter of 2005.

Prices of both co-ops and condos increased at the start of the year.

The average price of a co-op went up 7.2 percent over the fourth quarter to $1,093,361, according to Miller Samuel. The average price of a Manhattan condo went 7.1 percent higher quarter over quarter to $1,481,219. This figure still represented a dip compared to the first quarter of 2005, however.

And while the beginning of the year was about larger apartment sales as a result of Wall Street bonus money, brokers say the summer market will be about smaller apartments.

"Summer is usually a time for the smaller apartments," said Diane Ramirez, president of brokerage Halstead Property. "It's when people are looking to buy their first apartment or maybe even move up to their second one -- they tend to have a little more time at their workplaces during the summer. So they typically feel they can look more."

In three out of the last five years -- 2001, 2003, and 2004 -- sales closed have increased from the spring to the summer, though this may be more of a reflection of deals that went into contract in the spring, which is usually the strongest time of year in terms of sales.

In both 2003 and 2004, nearly 30 percent of all apartment sales in the borough closed over the summer, according to Miller Samuel. From 2001 through 2005, at least 24 percent of the sales for each year were summer deals.

Ariel Cohen, a broker with the Shvo Group, deals mostly with smaller apartments, two-bedrooms through studios. He said that, like Ramirez from Halstead, smaller apartments are going to dominate Manhattan summer sales. The sales market won't necessarily be any busier than it was in the first months of 2006, Cohen said, but will nonetheless be brisk. "It all depends," he said, "on what the price is."