Reports: Luxury Housing Boom May Be Reaching Its Crest

The boom in luxury housing may be reaching its crest and market saturation could drive lenders to cut back on the funding of new projects, first-quarter real estate statistics to be released today by some of the city's largest firms suggest.

"With the inventory coming on, we are reaching a saturation point," an appraiser who is an author of one of the reports, Jonathan Miller, said. "It's significantly different from a year or two ago, when these apartments would sell the second they got built."

Mr. Miller's analysis shows a nearly 16% spike in inventory between the first quarter of 2006 and the last quarter of 2005, and a nearly 60% spike in the number of apartments on the market since the first quarter of 2005,when a hot market led to a record low inventory. Mr. Miller said that if the demand for luxury housing drops due to a spike in mortgage rates or another scenario, it could lead to a glut.

Overall, the reports to be released today show an increase in average and median sales price and price per square foot, although at slower rates than during the record-setting markets of late 2004 and early 2005. Still, analysts say the statistics describe a healthier market than the second half of 2005, when the growth of the residential market slowed considerably, to what experts called more "normal" levels.

Mr. Miller, who produced the quarterly report for Prudential Douglas Elliman, said last quarter's positive figures are skewed by the many high-end sales driven by billions of dollars of Wall Street bonus money doled out at the end of last year.

If one factors out such high-end sales, Mr. Miller said, there was "a very modest appreciation of the market" or else a sideways movement.

The CEO of the Corcoran Group, Pamela Liebman, said the first quarter statistics represent an uptick from the disappointing second half of 2005, and should put an end to speculation that the real estate bubble could soon burst.

Ms. Liebman noted that new condos now make up between 10% and 17% of sales, and that condos now make up more than half of total sales. Ms. Liebman said between 20,000 and 30,000 new condos will come on the market this year, which could put pressure on prices and force developers to do their homework and price the units more realistically.

Because condos are priced higher than co-ops, Ms. Liebman said, "The enormous price appreciation we've seen has a lot to do with the influx of luxury condos in Manhattan."

The author of market reports for Brown Harris Stevens and Halstead, Gregory Heym, said the overall market, driven by a broad-based growth across different sectors, is stronger than in the last two quarters. He said the rise in inventory was not likely to slow new housing starts if the city's economy stays strong.

"Nobody ever accused Manhattan of having too many apartments," Mr. Heym said.

"We are entering a period of more healthy growth," he continued. "I'm more comfortable with the balance between buyers and sellers now. We are not in a buyer's market, but clearly they have more power than before."

According to Mr. Miller's analysis, the average sales price of Manhattan condominiums and co-ops was about $1.3 million last quarter, a rise of 7.1% over the same quarter last year. The median sales price was $825,000, up 17% from a year ago, and the average price per square foot was a record $1,004, up about 10% from a year ago. Apartments spent an average of 138 days on the market, nearly 50% longer than a year ago.