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Manhattan Apartment Prices Climb as Buyers Compete Amid Shortage

April 2 (Bloomberg) — Manhattan apartment prices climbed in the first quarter as buyers competed for properties amid the biggest inventory decline in more than a decade.

The median price of all co-ops and condominiums that changed hands in the three months through March 31 rose 5.9 percent from a year earlier to $820,555, appraiser Miller Samuel Inc. and brokerage Douglas Elliman Real Estate said in a report today. Purchases rose 6.3 percent to 2,457, even as the number of properties on the market plunged 34 percent, the most in more than 12 years of record keeping.

“The defining characteristic of the housing market is a lack of supply, and that’s why we’re seeing upward pressure on prices,” Jonathan Miller, president of New York-based Miller Samuel, said in an interview.

Prospective buyers, spurred by record-low interest rates and apartment rents that are poised to surpass their 2006 peak, are finding little to choose from. Owners are in no rush to list their homes in a market where prices have remained relatively flat for three years, according to Miller. Those who bought during Manhattan’s market peak and saw their values drop in the slump may not have built up enough equity to sell, he said. The supply of newly constructed units is also thin, after builders halted projects following the credit crisis.

In the first quarter, 17 percent of all deals were at or higher than the asking price, Miller said.

‘Frustrated Buyer’

This “is the year of the frustrated buyer,” said Sofia Song, vice president of research for StreetEasy.com, a property- listings website, which also released a report on the Manhattan sales market today. “You have all this pent-up demand, people who have been holding back, watching the market, watching our site, ready to pounce.”

Buyers signed more than 3,000 purchase contracts in the first three months of the year, the highest of any first quarter since 2008, when StreetEasy began tracking the data, Song said. There was a 27 percent jump in the number of listings where sellers increased their initial asking price, according to the StreetEasy report.

StreetEasy data showed a 2.5 percent drop in the median price to $765,000 as transactions for more than $3 million fell 34 percent, Song said. The decline in high-end deals was the result of a frenzy to offload luxury property in the the fourth quarter ahead of an expected capital-gains tax hike, she said.

Other reports issued today on the Manhattan sales market showed a decrease in the median price following a drop in super- luxury sales, and a shortage of inventory that may translate into future price increases.

Deal ‘Hangover’

Corcoran Group said inventory tumbled 26 percent in the first quarter from a year earlier to 6,225 homes. It was the eighth consecutive year-over-year supply decline. Sales increased 1 percent to 2,800, while the median price of those deals fell 1 percent to $790,000.

Brown Harris Stevens said purchases increased 3 percent from a year earlier to 1,846, while the median price dropped 5 percent to $780,000. Sales for more than $10 million declined 47 percent to just nine deals, said Gregory Heym, chief economist at Terra Holdings LLC, owner of Brown Harris.

“It’s a hangover from the fourth quarter, with the tax law changes that were coming,” he said. “It’s a mistake to look at this and assume that prices are declining or stagnant, because that’s not what’s going on in the market right now.”

Luxury Listings

Listings for luxury apartments, the top 10 percent of all sales by price, didn’t decline as sharply as the broader market as owners were inspired to try their luck after record prices paid for co-ops and condos in 2012, Miller said. Luxury listings fell 15 percent to 1,025, Miller Samuel and Douglas Elliman said, while the median price of completed deals fell 2.7 percent to $4.02 million.

Steven A. Cohen, the billionaire founder of SAC Capital Advisors LP, is seeking to sell his 10,000-square-foot (930- square-meter) duplex at One Beacon Court for $115 million, two people familiar with the matter said last week.

A triplex penthouse at the Pierre hotel that belonged to Martin Zweig, who predicted the 1987 stock market crash, is also on the market, for $125 million, the New York Times reported March 29.

In new developments, the inventory of apartments fell 42 percent in the first quarter from a year earlier, Miller Samuel and Douglas Elliman said. The median sale price climbed 36 percent to $1.33 million.

Shut Out

Dottie Herman, president and chief executive officer of Douglas Elliman, was interested in purchasing a two-bedroom condo at Extell Development Co.’s Helmsley Carlton House, which began showing units to prospective buyers on March 28. Herman arrived two days later to have a look.

“They were gone,” she said of the two-bedroom units, most of which were listed for $4 million to $4.5 million and have two full baths and views of Madison Avenue.

“The best time to buy was last year,” Herman said of the Manhattan apartment market. “But at this point, if you’re seriously looking to buy something, people know it’s not going to get cheaper.”

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