With inventory at near-record lows and prices inching up, all signs are pointing toward a seller’s market for Manhattan real estate this spring.
The number of apartments for sale dropped 34.4 percent to 4,960 listings in the first three months of the year — the largest year-over-year decline in 12 years, according to a report by the Douglas Elliman brokerage firm. At the same time, the number of sales went up 6.3 percent to 2,457 and prices increased across all categories, with the median sales price at $820,555, up 5.9 percent, according to the report.
With the exception of the second and third quarter of 2010, when prices were buoyed by the homeowners’ tax credit, “that is the largest year-over-year increase since Lehman fell” in 2008, said Jonathan J. Miller, the president of the appraisal firm Miller Samuel and the author of Douglas Elliman’s report. “If you choke supply by the throat,” he added, the inevitable outcome is that “prices rise.”
All of this means a tough time for those looking to buy. “The demand is across the board from studios to $50 million apartments, and there is not enough supply,” said Pamela Liebman, the chief executive of the Corcoran Group, which reported the median price was stable for the first three months of the year compared with the same period in 2012. “There are more bidding wars. There’s more frustration.”
While the average price was down 10 percent, Corcoran attributed that dip to a shift in market share toward smaller apartments and resale co-ops as more entry-level buyers, enticed by low mortgage rates, decided to buy.
Reports by Brown Harris Stevens and Halstead Property, however, showed the median price down by 5 percent to $780,000 in the first quarter of 2013 compared with the same period the previous year, a decrease that the firms consider an aberration caused by a rush of high-end closings at the end of 2012 in anticipation of changes to tax laws.
“All these deals that normally would have closed in January, February and March were pushed forward,” said Hall F. Willkie, president of Brown Harris Stevens Residential. “As a firm, our closings were three times what our high had ever been in the month of December,” he added.
Average prices skewed lower as well, down 16 percent to $1,252,081, in part because last year’s average was inflated by an $88 million closing at 15 Central Park West. Looking ahead, Mr. Willkie noted, “Our new deals are considerably above where they were in the first quarter of last year, which was our record year.”
Overall, there were 3,066 new contracts signed in the first quarter, up 15 percent compared with the first three months of 2012, according to StreetEasy.com. The Web site’s analysis also showed prices going up 26.8 percent in the first quarter compared with last year, and a 41.3 percent drop in price cuts.
Strong demand for new apartments means many new developments are selling inventory based on floor plans, before the buildings are completed. The sales center at 56 Leonard Street, a new luxury tower in TriBeCa, opened in February, and half the building is already sold, with more than $450 million in signed contracts. The median price of new development units also jumped 37 percent to $1.3 million in the first quarter from the same period last year, according to Corcoran.
And with construction costs high, new development is meant to attract luxury buyers, offering little relief to the rest of the market.
Brokers expect supply to begin to loosen up as prices rise, because homeowners with little or negative equity who have been holding back may finally put their homes up for sale as prices appreciate. “People are looking to move on with their life,” said Diane M. Ramirez, president of Halstead Property. “I think we’ll see more resale product come on in a more normal way.” She added, “I’m optimistic the balance will not get too much worse.”
But buyers who wait could face higher prices as mortgage rates and prices are expected to rise. “You might have more inventory to look at next year, but financing costs might be higher and home prices will certainly be higher than right now,” said Stan Humphries, the chief economist of Zillow.com.
While all of this means sellers currently have the upper hand, brokers caution against raising prices too quickly. “We hope that we don’t see crazy price increases,” said Dottie Herman, the chief executive of Douglas Elliman. “You want them to rise in a smart way and not just based on a shortage of inventory,” she continued. “You want them to rise in a fashion that doesn’t create a bubble.”