Manhattan’s inventory of homes for sale plunged to the lowest in at least 12 years, a sign that prices may rise in 2013 if buyer demand intensifies.
There were 4,749 apartments on the market at the end of December, a 34 percent decline from a year earlier and the lowest number since Miller Samuel Inc. began tracking the data in 2000, the appraiser said today in a report with Douglas Elliman Real Estate. Fourth-quarter sales surged 29 percent to 2,598, the highest for the period since at least 1987, as buyers rushed to finish deals before expected tax increases this year.
“Inventory has fallen precipitously to the point where there’s only one way for pricing to go, and that is to see an upward trend in 2013,” Jonathan Miller, president of New York- based Miller Samuel, said in an interview.
Prospective buyers are finding that owners are in no rush to list their properties for sale in a market where prices have remained relatively flat for three years. Those who bought during Manhattan’s market peak and saw their values drop may not have built up enough equity to sell, Miller said. In the fourth quarter, the median price of apartments sold fell 2 percent to $837,500, the report showed.
Surging rents also may be deterring would-be sellers. Homeowners who can trade up are finding limited options to buy, leaving them to face a leasing market where rates are poised to surpass their 2006 peak, Miller said.
“It’s a big question for so many sellers: Where are you going to go?” said Sofia Song, vice president of research for StreetEasy.com, a property-listings website, which also released a report on the Manhattan market today.
StreetEasy reported a 14 percent decline in inventory for the fourth quarter compared with a year earlier, and a 10 percent increase in the median price of all sales to $819,000.
A recovery in values may be limited as the lack of inventory artificially increases prices, Song said. “This would be at best, a nascent, fragile recovery because you don’t have the healthy market dynamics where sellers want to enter the market and buyers can get financing and close on those transactions,” she said. “Once the prices appreciate enough, you’ll have some sellers enter the market. But when you have that increased supply, then prices will flatten.”
Nick Rafello, a broker with the Corcoran Group, had a client from San Francisco with a week to find a one-bedroom apartment in Manhattan in late August, as a way to defer taxes on a similar property she sold back home. The client was paying cash, and Rafello didn’t think it would be hard to find a place for her — until they started searching.
“There was always stuff out there to go look at and then all of a sudden, within the blink of an eye, I was like, wait, where’d it go?” Rafello said. “It was like, boom, they’re done, they’ve sold everything.”
With a budget of as much as $1.2 million, the search for a condo yielded fifth-floor walk-ups, fixer-uppers and “junkyard specials” — and even those weren’t plentiful, Rafello said. The hunt prompted her to extend her stay in town to try to find a home within the required time for the tax incentive. The one property she liked, a one-bedroom loft on East 87th Street listed for $1.045 million, already had an offer on it when the client viewed it. She eventually bought it for $999,000 in cash, and the promise to lease it to the sellers through February while they renovated a home that they purchased. The deal was completed in the fourth quarter.
Other reports issued today on the Manhattan apartment market showed shrinking inventory and an appetite among buyers to acquire what’s left. Corcoran Group said inventory was at its lowest point since 2005, with 6,514 available listings. Sales increased 20 percent to 3,172 from a year earlier, while the median price of those deals climbed 8 percent to $827,000.
Brown Harris Stevens and its sister brokerage, Halstead Property LLC, reported a 40 percent jump in the number of sales to 2,297 before the expected tax increase. The median price climbed 6 percent to $836,000, the companies said.
“There was tremendous pressure on deals, especially high- end deals, to get them closed before Dec. 31,” Hall Willkie, president of Brown Harris Stevens, said in an interview. “I would assume that it did steal some sales that would normally be in the first quarter.”
The fiscal bill passed by Congress on Jan. 1 increases tax rates on dividends and capital gains for households earning more than $450,000 to 20 percent from 15 percent. A provision of the 2010 health-care law that took effect at the beginning of the year adds another 3.8 percent to the rate.
The new taxes could further restrict Manhattan inventory in 2013, as sellers wait until their home appreciates further to offset the increase in capital gains taxes, Song of StreetEasy said.
“For sellers, it’s going to be more expensive to sell,” she said. “It will definitely put a crimp on the market the fact that people will be taking home less.” Listings for luxury apartments, the top 10 percent of all sales by price, didn’t decline as sharply as the broader market as owners were inspired to try their luck after record prices paid for co-ops and condos in 2012, Miller said.
In May, a duplex penthouse at Extell Development Co.’s under-construction One57 tower went into contract for more than $90 million, the highest price for a single residence in Manhattan. That same month, Oaktree Capital Group LLC (OAK) Chairman Howard Marks bought a duplex at 740 Park Ave. for $52.5 million, a record for a Manhattan co-op.
“It was interpreted by many to be where the luxury market was at, so they were throwing listings out there to see what they could get,” Miller said. The inventory of luxury apartments, defined in the fourth quarter as anything priced at more than $3.03 million, dropped 9.6 percent from a year earlier to 953 listings, according to Miller Samuel and Prudential. The median sale price climbed 7 percent to $4.4 million.