July 1st 2014
The Wall Street Journal
After a run-up in prices over much of the past year, the Manhattan apartment market slowed during the second quarter, with inventory rising above record lows in recent quarters, and the number of contracts signed falling, brokers say.
Market reports released on Monday showed that median sales prices in Manhattan were off from the first quarter, but remained well above the levels posted in the second quarter last year.
The downward momentum shift was attributed to buyer resistance to rising prices, as well as the lingering effects of low inventory.
Some analysts said it augured a return to a more-measured pace of activity, after record sales last year when buyers, worried about the economy and government gridlock, returned to the apartment market.
Despite some hot spots of activity—particularly among lower priced co-ops—they expected to see the pace of sales to slow in the months ahead, and remain below the torrid pace of activity last year.
Gregory J. Heym, an economist who prepared market reports for Brown Harris Stevens and Halstead, said that “down the road there may be a slowdown” but he attributed it to high prices that were triggered by low inventory of apartments on the market.
During the second quarter, deal making usually reaches a peak in Manhattan. But this year, the pace of sales of expensive new condominiums slowed, compared with the second quarter of 2013 and 2012, according to a report by Corcoran Group.
The Corcoran report found that the number of contracts signed during the second quarter, 3,593, fell 22% from the same quarter in 2013.
Condo contracts were down by 31%, and made up only 40% of contracts signed, the lowest share since the second quarter of 2009.
Corcoran President Pam Liebman said that a 20% increase in average prices since last year’s second quarter was causing some buyers “to pause and wait a little bit until they find something they fall in love with.”
“The big picture is we are not seeing as much activity as we have been,” she said. “There is some buyer fatigue.”
After inventory fell last year to the lowest record recorded in many years, the number of listings on the market began rising in the first quarter and increased again during the second period to 5,912 apartments. In recent years, inventory has fallen during the second quarter as sales pick up.
A report by Douglas Elliman found that the median sale price during the second quarter was $910,000, off 6.4% from the first quarter. The report put the average price of Manhattan apartment at $1.68 million.
The median price of a condo, $1.26 million, was off by 7% from the first quarter, while the median price of a condo in a new development, $1.58 million, was off by 8.7%, the report found.
Jonathan Miller, an appraiser who prepared the market report for Douglas Elliman, said that last year was “an anomaly” with a “release in pent-up demand that led to record sales volume.” This year he said the market was returning to a more normal pattern.
He said that condo buyers looking at new buildings know that there is more inventory coming down the pipeline.
“The sense of urgency has left,” Mr. Miller said.
Frederick Peters, the president of Warburg Realty, said that despite the price-drive market pause among large new condos, there was still “a frenzy” in the market in smaller apartments, priced below $2 million, in Manhattan and parts of Brooklyn.