Manhattan apartments are selling for more than $1 million on average for the first time, higher than in any U.S. city, as New York's economic growth outpaced the nation's and the number of apartments for sale declined.
The price for a condominium or a cooperatively owned apartment last quarter rose 4.9 percent from the first three months of the year to $1.05 million, according to a report by residential appraiser Miller Samuel Inc. and Douglas Elliman, a Manhattan real estate brokerage.
New Yorkers are bidding up prices after the city's economy grew at the fastest pace in four years during the first quarter and Wall Street bonuses followed 2003's rally in stocks and bonds. Even as interest rates rise, there's been no slowdown in July, usually one of real estate's quietest months of the year, said Donald Trump Jr., vice president of development for the Trump Organization.
"We're selling to people who are traditionally in the Hamptons or in Europe for the summer," Trump, 26, said in an interview. "They're still here, and they're still buying."
At Trump Park Avenue, 11 apartments sold in June, four more than in May, Trump said. This month, the former Delmonico Hotel in midtown Manhattan that Trump's father, Donald Trump, turned into luxury condominiums with white marble baths and oak floors, sold five units. Apartments in the building range from $800,000 to $30 million, Trump said.
Manhattan apartments' second-quarter average price per square foot rose 7.6 percent to a record $786, and the average size fell 2.5 percent to 1,332 square feet from the prior quarter.
Higher demand reduced buyers' ability to negotiate, Miller said. The so-called discount, the difference between asking and listing prices, fell to 2.3 percent from 2.6 percent. Listing inventory, the number of homes available for sale, shrank 14 percent from the year-ago period to 5,211 units.
New York City's economy grew by a 7 percent annual pace in the first quarter, more than the U.S.'s 4.4 percent rate, according to the latest data available by Comptroller William C. Thompson Jr.
Last quarter, the median Manhattan apartment price, an actual selling price at which half sold for more and half for less, was $674,000, Miller Samuel President Jonathan Miller said in an interview. Average prices are affected by luxury sales, he said.
Manhattan's median is almost four times the national level. The U.S. median price was $173,300 in the first quarter, according to the latest data available from the National Association of Realtors. In Manhattan, it was $625,000, Miller said.
The increase in apartment prices has caused speculation that the market may be in a "bubble," a situation in which price outpaces value. Prices may drop if economic growth declines or a terrorist attack occurs, Paul Purcell, co-owner of brokerage Braddock + Purcell, said in an interview.
The market's growth rate also may slow without hurting prices, said Purcell, the former president of Douglas Elliman. While Manhattan's average apartment price rose 21 percent from the second quarter of last year, in the first quarter the gain was higher at 28 percent.
"At the end of the first quarter, we very much had a bubble in prices -- it was an absolute feeding frenzy," Purcell said. "Hopefully, this slowdown in appreciation means the air is going to be let out slowly."
A three-bedroom apartment at a so-called "pre-war," or built before World War II, building on 139 East 79th Street sold for $4.6 million in January, Purcell said.
Two months later, an apartment one floor above, with the same layout and similar features including high ceilings, crown moldings and hardwood floors, sold for $5.6 million, a gain of 22 percent. On an annualized basis, that would be a 130 percent appreciation rate.
"I would love to see more balance in this market," Purcell said. "It would be better for everyone -- buyers and sellers."
U.S. home prices likely will grow 6.7 percent this year, compared with 2003, according to David Lereah, chief economist of the National Association of Realtors.
The average Manhattan price for a studio condominium was $427,311 in the second quarter, the report showed. A one-bedroom unit was $659,018, a two-bedroom was $1.64 million, a three-bedroom was $3.58 million, and a unit with four or more bedrooms was $3.77 million.
For cooperatively owned apartments, a studio was $280,926, a one-bedroom was $449,925, a two-bedroom was $1.06 million, a three-bedroom was $2.36 million and a unit with four or more bedrooms was $5.5 million.
San Francisco is the second-most expensive U.S. condominium market, with a median price of $629,000 in May, according to DataQuick Information Systems, a real estate information service based in San Diego.
Boston's median condominium sale price in May was $432,500, according to the Warren Group.