The average price for a Manhattan apartment fell 16% to $1.2 million in the first quarter from the year-earlier period as looming tax increases spurred owners to accelerate sales of expensive properties by year-end, according to new market data.
Declines were most apparent in the co-op market, where prices fell an average of 22% compared with the previous first quarter, a report by brokerage firm Brown Harris Stevens said. Also making comparisons difficult with the 2012 period: Last year’s first quarter included the record $88 million sale of a penthouse at 15 Central Park West.
“The closings in the first quarter of 2013 have fewer of these bigger deals, so average price is somewhat down,” says Hall Willkie, president of Brown Harris.
Still, industry analysts expect the Manhattan housing market to improve this year as the inventory of units available on the market shrinks, and as low interest rates and growing consumer confidence bolster demand.
“People are feeling more secure in their own financial situation,” says Pamela Liebman, chief executive of Corcoran Group, which compiled its own data. “They’re feeling better about the economy.”
Also driving the demand are foreign buyers, she says. While some are using the properties as investments, others are buying apartments for their children, who are coming to New York for school. While closings were flat in the first quarter, Ms. Liebman points to a 24% increase in the number of signed contracts during the period compared with the 2012 quarter.
At the same time, inventory in Manhattan fell 26% during the quarter from the year-earlier period, marking the eighth consecutive quarter of year-over-year declines.
“The severe lack of inventory is causing a lot of aggravation for buyers who are consistently getting beat out for the apartments they want,” says Ms. Liebman.
Scott Trahan, a 55-year-old owner of a petrochemical-service company in Dallas, and his wife Kelly, have struck out a few times when shopping for a secondary residence in Manhattan.
“Several units we looked at we missed out on,” says Mr. Trahan, who started looking six months ago and made several trips to the city. “My wife and I were both getting a little frustrated.”
Last month, they looked at a prewar, three-bedroom condo on the Upper East Side. “We told the representative for the seller we wanted to buy it and made the deal right there,” Mr. Trahan says. The price: roughly $4 million.
Brokerage firms have voiced concerns about declining inventory since development slowed as a result of the recession.
Diane Ramirez, president of Halstead Property, says that brokers are getting creative about finding solutions. Some are asking apartment owners who live next to units that have gone on the market whether they would consider selling. In addition, they are “telling buyers to consider looking at the townhouse market in conjunction with the apartment search,” she says.
Industry watchers expect prices to rise but not at the rates they did prior to the recession. “We’re not seeing panic or insanity like in the housing boom,” says Jonathan Miller, an appraiser and president of Miller Samuel Inc.
He adds, “The tightness of credit is keeping the market from becoming too irrational. I don’t know how long that will last, but that’s what we’re seeing right now.”