Predictions of a significant slump in the Manhattan apartment market in 2006 appear to have been wrong, according to separate reports to be released today by three of the city's largest real estate brokerages.
Real estate analysts say 2006 represented a downshift in price appreciation from 2004 and 2005, but they characterize it as a "soft landing," far more tame than the downturn faced by the national housing market, or the "bubble burst" that some feared for New York City.
Overall, the three reports show a moderate increase in major price indicators for the fourth quarter of this year as compared to the same quarter last year. The average sales price for condominiums and co-ops increased between 3.2% and 8% depending on which report you look at, and median sales price increased between 5.1% and 11%. The number of sales are also picking up, according to the reports, produced by the Corcoran Group, Prudential Douglas Elliman, and Halstead Property.
In the second half of 2005, the market cooled off significantly after several quarters of soaring prices. In the first half of 2006, the market rebounded slightly but an increase in the number of apartments on the market prompted fears that it had been oversaturated with new luxury development and that a glut could occur if demand fell off, driven down by rising mortgage rates or a weakening economy.
Looking ahead, real estate analysts say a strong local economy, a record year of Wall Street bonus money pouring into the city, and relatively low mortgage rates bode well for a strong 2007.
The CEO of the Corcoran Group, Pamela Liebman, said the buying pool for New York City apartments is deepening, elevating demand. Foreign investors are increasingly drawn to the city by favorable currency rates and "empty nesters" from the suburbs are moving into the city. Lower mortgage rates are bringing first time buyers back to the market, and the Wall Street bonus money will make a splash, she said.
"The doom and gloom we heard early in the year never materialized. The experts who predicted the big crash of '06 were proven wrong," Ms. Liebman said. "People underestimated the strength of the New York City market."
An economist for Halstead who produced its market report, Gregory Heym, said the price appreciation in 2006 is more in line with historical norms.
"It is sort of like a soft landing. We see price growth but at more moderate levels," Mr. Heym said. "Concerns about too much supply haven't played out yet."
The Halstead report released today showed a slight increase in prices in the fourth quarter from the third quarter. The Corcoran and Prudential Douglas Elliman reports showed prices falling slightly since September. An appraiser who produced the market report for Prudential Douglas Elliman, Jonathan Miller, said the quarterly decrease is due to a seasonal effect experienced each year going back for the last 16 years. Mr. Miller, the president of Miller Samuel, said more properties are selling and inventory is falling as sellers are pricing their apartments more realistically.
"The prices they are setting are closer to the market, and there is less friction between buyer and seller," Mr. Miller said.
Looking ahead to 2007, Mr. Miller said he is "relatively optimistic" but not "euphoric."
He said the conditions exist on the demand side for another boom in prices, but an increasing supply of apartments will limit price appreciation.
"Next year the market will characterized by more transactions and prices trending up, but it won't be a boom, with double-digit increases," Mr. Miller said. "What tempers the market from going into a housing boom is the new development coming online. The oversupply of new development will keep the market in check somewhat."
Ms. Liebman said an oversupply of luxury development has undergone a natural market correction and in the last few months developers have moved towards building commercial buildings, hotels, or rental apartments.
"The good products are being absorbed quickly. Overpriced or weak product will linger," Ms. Liebman said.