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Townhouse prices sag slightly in 2011

The Manhattan townhouse market held steady last year. By the end of the year, prices were down only slightly and only then due to an increase in the number of sales of lower-priced three-to-five-family houses dragging down the average, according to a new report released Thursday.

In all there were 240 townhouse sales in 2011, up 21.8% from the previous year, according to a report by Prudential Douglas Elliman and Miller Samuel Inc. That was the biggest one-year total since the collapse of Lehman Brothers in 2008. Last year’s figure was also a stones throw from the 10-year annual average of 250 sales. Townhouse sales represented a mere 2.3% of all Manhattan sales last year.

“Townhouses represent a tiny sliver of the market but they are by default priced at the top of the market,” said Jonathan Miller, CEO of appraisal firm Miller Samuel. “The top of the market has seen more demand relative to balance of the market (in recent months).”

Despite the strong demand, the median sale price dipped 5.1% to about $3.7 million last year, while the average sales price slid 9.4% to roughly $5 million. The decline was largely a result of a steep rise in sales of three-to-five-family houses, which represented 38.3% of all sales last year, compared to 22.3% in 2010.

Mr. Miller attributed the increase in sales of this house type to a boom in the rental market, which is emboldening some buyers of three-to-five-family houses. He notes that many of them are user-owners who plan to switch their property into a single-family home at some point, but in the mean time will rent out a floor or two to “defray costs until they are ready to convert.”

Those three-to-five-family houses also tend to be smaller in size than single-family houses. Over the last decade, single-family homes averaged 4,837 square feet and three-to-five-family houses average 4,420 square feet.

Despite the dip in prices last year, townhouse prices have handily outpaced the overall residential market in terms of price growth this past decade. Townhouse median sales prices have more than doubled since 2002, while median sales prices in Manhattan overall have risen 89% to $850,000. “Inventory has stayed unbelievably steady for the past 10 years,” said Steven James, president of Manhattan brokerage for Prudential Douglas Elliman. “Townhouse buyers are longer term. They don’t jump in and out of that property type.”

Listing inventory for townhouses was 507 last year, up 9% from 2002.

Mr. James also notes that within the past two years, townhouses have attracted many foreign buyers. In the most famous example of that phenomenon, in 2010 Mexican billionaire Carlos Slim snapped up the 27-foot-wide Duke-Semans mansion at 1009 Fifth Avenue, for $44 million. “Foreign buyers are parking their cash in New York townhouses,” he said.

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