The Average Manhattan Apartment Approaches the $2 Million Frontier

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Manhattan apartment prices jumped to a record in the second quarter, pushed up by competition for a limited number of properties and strength in the luxury market.

The average sale price of all co-ops and condominiums was $1.87 million, up 11 percent from a year earlier and the highest in 26 years of data-keeping, according to a report Wednesday by appraiser Miller Samuel Inc. and brokerage Douglas Elliman Real Estate. Resale apartments and units in new developments each set their own price records amid interest from both investors and buyers who intend to live in the homes.

“Demand is being driven by a vibrant local economy and rising employment, and supply is relatively inelastic,” Jonathan Miller, president of New York-based Miller Samuel and a Bloomberg View contributor, said in an interview. “This has been building for the last year and a half.”

Buyers clamoring to own property in Manhattan found few choices on the market, pushing them into bidding wars, especially for resale apartments. Listings totaled 5,730 at the end of June. While that’s up 1.3 percent from a year earlier, the inventory is still 20 percent below the 10-year average, according to Miller.

Resellers have been hesitant to list their homes because rising prices may leave them unable to trade up, Miller said. At the same time, developers adding new units to the market have focused on building ultra-luxury towers aimed at billionaire investors as a way of recouping their high land costs.

Premiums Paid

The tight supply has forced buyers to stretch the limits of what they’re willing to pay. Fifty-one percent of all sales in the quarter were at or above their list price, the highest portion since the financial crisis, Miller said. The average premium paid was 9.3 percent.

“I’ve never seen more of a disconnect between what demand wants and what is financially possible to build,” Miller said. “We have an affordability crisis, not a housing crisis.”

The previous record average price for a Manhattan apartment was $1.77 million, in the first quarter of 2014. The most-expensive homes have helped to push up that number, with the average price for luxury apartments, or the top 10 percent of the market, surging 13 percent in the second quarter to $8.18 million.

Multiple Bids

The owners of a co-op at 360 W. 20th St. sold the property last month for $700,000 more than they were seeking after a bidding war broke out among 14 interested buyers, said Meris Blumstein, the Corcoran Group broker who sold the Chelsea property.

The sellers listed the renovated two-bedroom apartment near the High Line in March for $2.5 million, the lowest they were willing to accept. A month later, the unit, which includes a 650-square-foot (60-square-meter) yard and temperature-controlled wine storage for 240 bottles, went into contract with a buyer who agreed to pay $3.2 million.

Another seller in the neighborhood, Victor Vecchiariello, listed his West 23rd Street condo for $999,000, and attracted several bids at an open house held on a snowy day in March. On the advice of his broker, Scott Harris of Brown Harris Stevens, Vecchiariello held a second open house and ended up selling the 754-square-foot apartment for $1.28 million.

One or two of the bidders “might have said, ‘I’m going to step away,’” said Vecchiariello, a partner in Ernst & Young LLP’s tax division. “But most of them came back. They upped their offers a bit.”

Supply Shortages

Four other brokerages released reports Wednesday on the Manhattan market showing accelerating price gains in the face of limited inventory.

Brown Harris Stevens and its sister brokerage Halstead Property reported that resale apartments reached a record average price of $1.57 million in the quarter, and a record median price of $920,700.

Corcoran Group said Manhattan’s median price and price per square foot reached the highest level in six years amid “supply shortages” of apartments for sale, particularly at less than $2 million.

Compass said that lower priced listings -- those under $500,000 -- are “quickly evaporating.” Those units made up 11 percent of the total market in the quarter, the lowest share ever. Apartments listed for $3 million or more accounted for 30 percent of the market, Compass said.

“These value listings are not being replenished,” the brokerage said in its report.

Neighborhood Pricing

In Upper Manhattan neighborhoods including Harlem, which traditionally have the borough’s least-expensive listings, the median sale price jumped 8 percent from a year earlier to a record $583,000, according to Compass.

On the Upper East Side, the median price of a resale co-op was $875,000, up 3 percent from last year’s second quarter, Corcoran said in its report. Previously owned condos in the area sold for a median of $1.52 million, a 13 percent increase. Units in new developments sold for a median of $7.33 million, an 84 percent jump.

Downtown -- south of 34th Street through Tribeca -- co-ops resold for a median of $795,000 in the quarter, up 9 percent from a year earlier, Corcoran said. Resale condo prices also climbed 9 percent, to a median of $2.02 million.

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