April 1 (Bloomberg) -- Manhattan apartment prices dropped in the first quarter as condominium sales plummeted and new-development deals made up the smallest share of the market in almost seven years.
The median price of all properties that changed hands in the quarter fell 9.9 percent from a year earlier to $782,071, appraiser Miller Samuel Inc. and broker Prudential Douglas Elliman Real Estate said in a report today. Total sales were little changed at 2,394 as demand for co-operative apartments offset the plunge in purchases of condos, which tend to be more expensive, said Miller Samuel President Jonathan Miller.
“The co-op and condo market seemed to be polar opposites this quarter,” he said in an interview. “The disparity between the two forms of ownership is probably temporary, but clearly was a primary cause of the overall decline in price indicators compared to last year.”
Overall sales held steady as New York City’s jobless rate stayed at 8.9 percent in February, unchanged from the prior month and a percentage point lower than a year earlier. The city’s private job count rose by 11,100 in February, as employment in the financial industry increased, according to the state Labor Department.
The shift in apartment demand sent condo transactions down 24 percent in the first quarter from a year earlier to 964, according to Miller Samuel and Prudential. Sales of co-ops climbed 29 percent to 1,430. New developments, which are primarily comprised of condos, accounted for 14.5 percent of the sales market, the lowest since the third quarter of 2004.
Residents in co-ops buy shares in a corporation that owns the building, rather than having a deed to the property itself. Co-ops tend to be in older buildings and often are lower priced because they are smaller-sized on average, and their boards maintain more restrictive rules on who may purchase and how those deals may be financed, Miller said.
“I’m not so sure it’s suggesting a change in buyer sentiment, it’s just what happened,” he said. “I would characterize this housing market as relatively stable but fragile.”
Noah Rosenblatt, founder of UrbanDigs.com, a real estate analytics and consulting company in New York, said the decline in condo sales was because of a lack of properties on the market rather than falling demand.
“There’s just not as much condo supply as there was a year ago,” Rosenblatt said. “If condo supply is down, of course you’re going to see fewer condo sales. The pace of sales is relative to the pace of supply.”
The inventory of condos listed for sale fell 15 percent in the quarter, according to Miller Samuel, while co-op supply increased 5 percent. Apartments on average stayed on the market for 127 days, four days longer than a year earlier.
The absorption rate, or the length of time it would take to sell all the inventory at the current pace of sales, was 9.5 months, down from 10.1 months in the year-earlier quarter.
“There’s more security for people with their jobs, overall finances,’ said Pamela Liebman, chief executive officer of the Corcoran Group brokerage. “A majority of people do not believe that prices are going to go down any further. You’re just seeing more people spending money again.”
Five reports issued today showed declines in closing prices in Manhattan. Brown Harris Stevens and its sister firm, Halstead Property LLC, reported a median price of $787,500 for apartments that sold in the quarter, a 4 percent decrease from a year earlier.
The Corcoran Group said the median price fell 2 percent from a year earlier to $800,000. StreetEasy.com, a service that compiles broker listings, put the median drop at 7.8 percent.
The reports from Brown Harris, Halstead and StreetEasy showed a drop in sales in the quarter as buyers were no longer motivated by incentives such as the federal tax credit that expired in 2010. Wall Street cash bonuses, which are also linked to housing purchases, fell 8 percent last year from 2009, New York State Comptroller Thomas DiNapoli said last month.
“Buyers don’t have that sense of urgency to purchase,” said Sofia Song, vice president of research for StreetEasy.com “Wall Street bonuses weren’t that great this year. And mortgage rates, they’re pretty stably low so there wasn’t any urgency for buyers. They’re taking a wait and see attitude.”
Listing discounts, which measure the amount of money sellers subtracted from their last asking price to strike a deal, fell to 4.5 percent in the first quarter from 5.3 percent a year earlier, according to Miller Samuel and Prudential. About 60 percent of all price cuts in the period were for co-operative apartments, whose prices were reduced on average by 6.2 percent, the StreetEasy report showed.
Two-bedroom apartments comprised 38 percent of properties that sold in the quarter, according to Miller. One-bedrooms accounted for 36 percent of sales. Three and four bedrooms had a 13 percent share, as did studios.
The median sales price of luxury apartments, defined as the top 10 percent by price, fell 14 percent to $3.95 million, even as the number of sales climbed 1.7 percent to 239 deals, according to Miller Samuel and Prudential.
“Buyers are buying when they perceive good value,” said Hall Willkie, president of brokerage Brown Harris Stevens. “There’s been a cultural change. The idea that it doesn’t matter what they pay because it’s going to be worth more tomorrow, people don’t feel that.”
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