THE MORGENSTERN REPORT
Quick Stat*
4th Quarter 2006 - Average Sale Price of a Manhattan apartment - $1,224,840
up 3.2% from one year ago - 4th Quarter 2005
down 5% from prior qtr. - 3rd Quarter 2006
My Stance
The NYC housing market has turned a corner after a dip in the summer and fall of 2006. The market was spectacular in 2004 and 2005 as prices rose to unprecedented levels. Late in 2005 and early into 2006 sellers began to price their homes assuming the market would continue to grow at that same 20% annual rate of growth, and as a result the market became flooded with overpriced inventory.
As the national housing market slowed through the fall of 2006, the media became enamored with the term ‘bubble’ in describing the Manhattan market. However, it was clear to me that the listings that were priced correctly were still selling. Alternatively, the listings that were priced too ambitiously by sellers looking to cash out if someone ‘hit their number’ were sitting. This standoff, with sellers not willing to budge from their asking prices and buyers unwilling to increase their bids, created an increased demand for rentals, and therefore a fantastic market for landlords as lease prices skyrocketed.
There is nothing like $24 billion to get the market moving again! Since early December, the announcement and subsequent influx of Wall Street bonus money has devoured much of the reasonably priced inventory in prime locations. At the same time, it seems that the housing dip which occurred in the summer and early fall was a wake up call to overzealous sellers and brokers insistent on overpricing their apartments. They began to realize that pricing their apartments accurately was critical to selling a home in a timely manner. The bonus money that flowed into the market this past January combined with more realistic asking prices has heated the marketplace once again.
In fact, a New York Times article published on February 19th quotes Jonathan Miller of Miller Samuel, a leading appraisal firm, who says “The number of contracts signed this January was 19.4 percent higher than in January 2006.”
By the numbers:
According to Miller Samuel, the current average price of a condominium is approximately 39% higher than the average price of a cooperative. I think there will always be a gap due to a few facts: condo buyers don’t endure as stringent of a board approval process; condos generally require lower down payment requirements; and condos allow owners to lease apartments at their own discretion. But the reason the gap has become so large is that the vast majority of buildings being constructed in Manhattan are Condominiums, and the premium that new units command has widened that gap. If new construction were to slow down, I believe that gap could close back towards 30%.
Please feel free to call me with any real estate related questions at 212-371-2525 ext. 234.
Warm Regards,
Robert Morgenstern
*Statistics obtained from Miller Samuel 4th Quarter 2006 Report, available at http://www.millersamuel.com/
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