Manhattan apartment downturn short-lived: report

By Ilaina Jonas
Wednesday, January 3, 2007; 1:53 AM

NEW YORK (Reuters) - The decline in the Manhattan apartment market seems to have been over in a New York minute in contrast to the sluggish U.S. housing market, according to an influential property report released on Wednesday.

And the Manhattan market could be set for a surge in 2007, according to the author of the report, Jonathan Miller president of real estate appraisal and consultant firm, Miller Samuel Inc.

"It would not be unreasonable to see a brisk real estate market in '07 based on early signs in the fourth quarter and the economic stimulus that we're expecting to see from bonus money and low unemployment," Miller said.

While most of the rest of the U.S. housing market saw prices drop and sales fall dramatically in 2006, the New York City condominium and co-operative market experienced only a mild hiccup that lasted only a few months in the fall.

"The housing bubble burst thing didn't really touch this market," Miller said.

In the fourth-quarter, the median price of a home in Manhattan rose 5.1 over the year-ago period, according to the report, the Prudential Douglas Elliman Manhattan Market Overview.

The number of sales during the fourth-quarter rose 15.5 percent to 2,441 from the prior quarter and 55 percent from the year ago quarter. The inventory of homes shrunk 22.2 percent from the third quarter to 5,934 and 0.5 percent from the year ago quarter.

Sale prices slipped 5 percent to $1,187,404 in the fourth quarter from $1,288,748 in the third quarter 2006, but Miller attributed that to seasonality. The price drop has happened in each of the past 16 years, he noted.

The average price per square foot fell 0.4 percent to $998 in the fourth quarter of '06. That was 5 percent below the third quarter's $1,050 per square foot.

Meanwhile, the median sales price, in which half the units sold were more expensive and half were less, rose 5.1 percent to $799,000 from $760,000 the prior year but was 5.5 percent below the third quarter 2006 median sales.

Mortgage rates, which have held within a narrow band, and a strong local economy have supported New York apartment prices. But the market's blessing, Miller said, has been the lack of speculators who bought with the intention to quickly sell.

Such investors, bid up prices in other markets such as San Diego, California, Las Vegas, Nevada, and parts of Northern California and Florida, and then hurt the markets there when they left, driving sales down in certain markets by as 50 percent.

Dottie Herman, chief executive of residential brokerage company Prudential Douglas Elliman said New York apartment prices in 2007 could be as strong as prices seen in the boom times of 2004-2005 if inventory continues to decline, and Wall Street bonuses get spent on apartments.

"If you see inventory going down any further, you're going see what happened in 2004," Herman said. She was referring to the 20-plus percent price hikes seen in much of 2004 and 2005.

"There was virtually no inventory then," she said. "Right now it looks healthy and balanced. You've got to watch now."

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