Despite Financial Volatility, Tight Credit and Downgrade of U.S. Debt, Manhattan Fared Better Than Most U.S. Metros in 3Q

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According to a new report by Prudential Douglas Elliman, housing prices in Manhattan continued to remain stable in the third quarter.

The median sales price of a Manhattan apartment was $911,333 in the third quarter, essentially unchanged from $914,000 in the prior year quarter and up 7.2% from $850,000 in the prior quarter. The other price indicators offset each other.

Average sales price slipped 1.5% to $1,464,528 from $1,487,472 in the same period last year and edged above $1,455,098 from the prior quarter. Price per square foot increased 3.2% to $1,130 from $1,095 in the prior year quarter and increased 5.8% from $1,068 in the prior quarter.

There were 3,106 sales in the third quarter, 16.7% more than 2,661 in the prior year quarter. While the gain is significant, the increase is partly due to the below trend level of activity in the prior year quarter after the expiration of the federal homebuyers tax credit last year. The other factor playing into the increase came from the condo market, which has gained favor in recent quarters.

Part of the increase in condo sales is likely attributable to the influx of demand from foreign buyers as a result of the continued weakness of the US dollar. Approximately 56% of all sales were below the $1,000,000 threshold in the third quarter, unchanged from the same period last year but down sharply from the recent high of 62% in the first quarter of 2011. There were 7,726 active listings at the end of the third quarter, 4.9% fewer than 8,123 listings in the same period last year and 4.3% less than 8,070 listings in the prior quarter.

The tightness of active inventory has been reflected in the increase in the market share of apartments that sold for list price or above list price to 29.6% in the third quarter from 24% in the prior year quarter. Consistent with the decline in inventory, the time to sell an apartment and the discount from list price have also declined. Days on market fell to 119 days from 125 days and the discount from the list price at time of sales slipped to 4.4% from 5.8%, both from the same period last year.

Despite the volatility of the financial markets, tight credit conditions, static unemployment levels and the ratings downgrade of US debt, the Manhattan housing market continues to fare better than most US metro markets. Financial-services-related income, falling mortgage rates, manageable inventory and the weak US dollar continue to serve as an offset for weak US economic conditions.



Co-Op Market

There was a shift in market share of entry-level apartments to 53.7% in the third quarter from 50.6% in the same period last year. However, the price indicators showed weakness in trend. The median sales price declined 9.3% to $705,000 from $777,500 in the prior year quarter. Price per square foot remained essentially unchanged at $991 while average sales price declined 3.6% to $1,206,770 over the same period. Co-op sales accounted for 42.4% of all apartment sales in the quarter, the lowest market share since the first quarter of 2009 as condo sales activity surged. Active listings accounted for 54.2% of all apartment inventory. Only 2.1% of active inventory was considered new development. Sales activity continued to remain stable. There were 1,317 sales in the third quarter, similar to the 1,320 sales total in the prior year quarter. Because active inventory expanded 3% to 4,187 in the third quarter over the same period, the absorption rate slowed to 9.5 months from 9.2 months. Both the average number of days on market and listing discount remained relatively stable over the past year. The time to sell an apartment slipped 3 days to 103 and the discount between the list price at time of contract and the contract price was down nominally to 2.6% from 2.8% last year during the same period.



Condo Market

After three consecutive quarters with less than half the sales activity of all apartments, condos accounted for a 57.6% market share in the third quarter, the highest since the first quarter of 2009, shortly after the Lehman "credit crunch" tipping point near the end of 2008. There were 1,789 sales in the third quarter, 33.4% more than the prior year quarter total of 1,341. Over the same period, active inventory fell 12.8% to 3,539 in the third quarter from 4,058 in the same period last year. Condo inventory was 45.8% of all active apartment inventory in the third quarter and accounted for the sharp drop in the absorption rate to 5.9 months from 9.1 months over the same period. The price indicators were mixed as entry-level units gained market share, reaching 44.3%, up from 38.5% in the prior year quarter, marking a return to levels more consistent with historic patterns. Median sales price was $1,050,000, down 6.3% from $1,120,000 in the prior year quarter. Price per square foot increased 2.8% to $1,233 while average sales price declined 3.8% to $1,654,280 over the same period.



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