Q4 2010 Manhattan Market Report

Douglas Elliman and Miller Samuels have released their Q4 2010 sales report.

The data suggests that the market for Manhattan condos and co-ops has stabilized. Buyers have grown comfortable with purchasing at current price levels. Sellers have realized that they must either adjust to the post-bubble reality, or their apartments will languish. The report’s findings:

• The average price of a Manhattan apartment was $1.48    million, a jump of 14.4% compared with the year-ago quarter.

• The number of sales fell by 13.8% in the fourth quarter compared with the previous quarter, and 7.2% compared with the year-earlier quarter.

• The median sale price of $845,000 in the fourth quarter was off by 7.5% from the previous quarter and up
  4.3% from a year earlier, the report found.


According to Miller, the number of sales and listings on the market has returned to their averages of the past decade. "Now we are exiting this gyration we have gone through over the last two years to a more normal distribution of sales," he intoned.

So how can one explain a jump in the average price but a drop in the median price? How can a drop in sales volume suggest increased market stability?

In 2009 and 2010, the Federal home buyer tax credit of $8000 for first-time home buyers and $6,500 for repeat buyers increased demand for starter apartments (generally studios and 1BRs in the $300 - $500K range). Congress’ announcement last summer that it would not extend the program beyond October 2010 spurred a last minute surge and a subsequent drop in closings for this market segment.

Meanwhile, with prices stabilizing at levels 15% to 20% off peak, and interest rates at historic lows, buyers for two and three bedroom apartments are re-entering the market. Thus, in the last two months of 2010, total volume declined while both the relative and actual number of higher end purchases increased, driving up the average sales price.

As for my forecast for upcoming quarters, I do not see a return to pre-Lehman prices anytime soon. I will explain my reasoning in a separate post. However, stability and affordability, combined with brisk sales volume, should be celebrated rather bemoaned. A 15% decline from 300% to 400% run from 1997 to 2007 is a natural and welcome correction that will allow purchasers, and in particularly young families, to live in a comfortable home without having to stretch to a financial breaking point.