Manhattan Multifamily Sales Stable so Far, Signs of Softening in Some Sectors

By Anuradha Kher, Online News EditorNew York–Prices for Manhattan condominiums and co-ops exhibited stability during the third quarter of 2008, although some sectors showed signs of softening, according to the Brown Harris Stevens 3rd Quarter Manhattan Residential Market Report. The report is based on 3,165 reported Manhattan multifamily sales including condos, co-ops and condo-ops (a term used for condo buildings that have some co-op units).The average price of $1,473,351 was 12 percent higher than a year ago, but down slightly from the previous quarter, the report found.While the number of closings decreased by 14 percent compared to the same period a year ago, the median price of $910,000 posted a 12 percent increase from the third quarter of 2007, and was the second highest figure on record. According to Hall. F. Willkie, president of Brown Harris Stevens, “In recent years we have seen record growth and high-end developments, such as 15 Central Park West and The Plaza, which sharply drove up average prices. Yet despite today’s turmoil in the financial services sector, our real estate market fundamentals are solid, reinforced by limited inventory, a low percentage of investor-owned properties and tremendous equity due to cooperatives restricting financing.” The market share of new developments increased once again, and comprised 39 percent of condo, co-ops and condo-ops sales, and 70 percent of only condominium sales during the third quarter of 2008. These new development units posted an average price of $1,669,216. The average price for condominiums overall was $1,651,677; however if 15 Central Park West and The Plaza are factored out, the adjusted figure of $1,541,806 represents a 7 percent decrease from the previous quarter. The average price for cooperatives during the third quarter of 2008 was $1,199,909, a decline of 7 percent from the previous quarter but up 14 percent from the same period a year ago. This softening of prices along with the financial crisis and slowing economy is signaling a gradual market shift in Manhattan that may or may not affect rents in the city. “There are two ways of looking at how this might affect the rental market,” Greg Heym, chief economist for Brown Harris Stevens, tells MHN. “Either that people who have been thinking of buying will put their plans off and continue to rent, or that when the economy is slowing and jobs are being lost, the number of renters will go down.” The Manhattan rental market hasn’t seen the kind of boom witnessed in its sales market because of low interest rates. “In fact the rental market does not follow the sales market in that regard and is strongly related to job growth,” says Heym.Currently, he says, a lot of property managers and owners in Manhattan are offering incentives to renters but not just yet lowering rents. “That may or may not happen, based on the number of jobs lost due to the crisis on Wall Street. Even if rents come down, certain buildings might remain isolated from this,” says Heym. One factor that is in favor of property managers and owners is that Manhattan hasn’t seen a lot of rental construction but it remains very much a rental city.