Manhattan Home Prices Soaring to an Average 1.37 Million Dollars
Manhattan home prices and volume soared in the summer month as inventory shrunk during what is normally the slow season. With most of the country witnessing falling or stagnant prices and exploding inventory Manhattan is providing to be the outlier.
Others are concerned that the velocity of the market occurred before the credit crunch. Manhattan properties typically have a long closing window as co-op boards have to approve sales in their buildings. Jonathan Miller is quoted as saying that the fall volume may slow down when sales start being effected by credit concerns.
What Manhattan has going for it though is that the inventory of available properties is way down at just over 5,200 units. With inventory constraints buyers are forced to move quickly. If inventory starts to creep up then buyers can be more picky as we have seen in the rest of the country and the velocity of the Manhattan real estate market will slow down.
On average, buyers spent $1.37 million for a Manhattan apartment, a 6.3 percent increase from the corresponding period last year, according to one report, by Prudential Douglas Elliman. The number of apartments on the market fell by nearly a third, to 5,204, in the last quarter, compared with 7,623 a year earlier, the report said.
These numbers indicate that the real estate market was even stronger in the summer, traditionally a slower season for real estate, than it was in the spring, when prices rose in some segments of the market — like new condominiums and the largest apartments — but not all.
Two brokerage firms — Brown Harris Stevens and Halstead Property — said in their reports that prices had risen for nearly every type of apartment in almost every neighborhood of Manhattan, from bare-bones studios in the borough’s northernmost reaches to luxurious four-bedroom apartments on the Upper East Side. Prices in Brooklyn, which had dipped in the second quarter, rose by 11 percent last quarter for apartments and town houses. via New York Times.
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Comment by Dan Goldey on 9 October 2007:
There are a number of reasons why the Manhattan real estate market has continued to thrive while the rest of the nation suffers from the sub-prime mortgage crisis. Please take a look at my 5-part series “Manhattan Real Estate: Examining a Contrarian Market” at http://blog.onboardllc.com/.
The most oft-cited reasons are two years of record Wall Street bonuses and an influx of foreign investments due to the weak dollar. However, increased demand from these sources has probably been focused at the top end of the market, not the smaller (i.e. studio, 1-bedroom) units that comprise the overwhelming majority of Manhattan inventory. As noted in the The New York Times article you quoted above, prices have risen for the studios and 1-bedroom apartments that make up the overwhelming majority of the market, not just the luxury penthouses and 4-bedroom townhouses pursued by the hedge fund crowd.
I think a more significant cause of the Manhattan market’s continued strength is that there were never as many subprime or adjustable-rate mortgages here to begin with. For starters, 70% of the apartments in Manhattan are co-ops, which generally prohibit the use of riskier mortgages. Furthermore, there is a element of self-selection at work here–the low-income and/or poor-credit folks who take out most sub-prime mortgages generally can’t afford Manhattan’s exhorbitant prices ($500k for a studio?!?) to begin with. So, while the rest of the country–and some neighborhoods in NYC’s outer boroughs–suffers from high foreclosure rates and a glut of stagnant inventory, Manhattan has largely escaped such problems.
As I describe in my article, however, none of these reasons is the real driving force behind Manhattan’s perpetually rising prices. Come take a look to find out what is…
Dan Goldey
Consultant
OnBoard LLC
http://www.onboardllc.com