Manhattan Apartment Market Cools
This article is from the archive of The New York Sun before the launch of its new website in 2022. The Sun has neither altered nor updated such articles but will seek to correct any errors, mis-categorizations or other problems introduced during transfer.
The market for apartments in Manhattan cooled off in the third quarter after record highs in the first half of the year, reports from two residential brokerages to be released today are expected to show.
Still, while prices fell across the board in different sales categories as compared to the second quarter, they are higher than they were a year ago.
Brokers from the two companies, Prudential Douglas Elliman and Brown Harris Stevens, quickly dismissed speculation that a New York City real estate bubble is finally deflating.
The chief executive of Prudential Douglas Elliman, Dorothy Herman, said that an increase in the number of available apartments caused the “little correction.”
“We had no inventory last year,” Ms. Herman told The New York Sun. “It was an unreal market. There was no supply and when that happened, to get something, buyers have to keep on bidding. Now there are more choices.”
The president of Brown Harris Stevens, Hall Willkie, said that barring a catastrophic event, he does not predict a major correction. He did say he could envision the bubble bursting soon on the speculative residential market, where owners buy multiple units and flip them for a quick profit. “That kind of stuff is scary,” Mr. Willkie said.
The third quarter report by Prudential Douglas Elliman, prepared by Miller Samuel and based on 2,181 sales, said that a number of factors, including the rise in mortgage rates, the potential economic impact of hurricanes Katrina and Rita, record breaking gasoline prices, and mixed economic growth, “weakened affordability and removed an element of enthusiasm from market participants.”
The Brown Harris Stevens report, based on 2,380 reported sales, said the average price of a Manhattan apartment dropped in the third quarter from the second by about 11%. The average price of $1,138,683 is still 13% higher than the same time last year. The median price also dropped slightly from last quarter but has climbed 12% from last year, to $730,000.
The volume of sales also cooled, with the number of sales in the third quarter falling by more than 8%, the Miller Samuel report showed.
Mr. Willkie and Ms. Herman both said that a just few sales can skew the results from a single quarter and that changes from the prior year were a better indicator of a market’s strength.
Further, the chief economist for Brown Harris Stevens, Gregory Heym, noted in the report that a slowdown in the third quarter is typical because fewer deals are negotiated in the summer months. Mr. Willkie said that since Labor Day, he “sensed a decrease in the rate of increase.” He said, “It’s not going up at the same fever-pitch level, nor do I think it is healthy if it did.”
Ms. Herman said she expected continued appreciation of prices next year. She said brokers in California predicted more moderate price increases of between 5% and 7% going forward, and she expects the same. She said, “You will see some appreciation, but not at the same rate of 20% to 25% a year.”