The real estate market in Manhattan has developed a dichotomy of sorts.
Home prices continue to flirt with record highs, even with a supposed softening in the high end of the market.
However, there are also fewer deals going around, with the number of signed contracts and closed sales dropping by double-digit percentages.
By most accounts, this should be a textbook case of supply and demand.
According to Douglas Elliman’s third quarter market report, the listing inventory in the borough increased by 10.8 percent and days on the market rose by 8.2 percent to 79 days.
This, coupled with the growth in listing discounts from 2.2 percent to 2.9 percent, may be symptomatic of high supply and low demand, the concoction necessary to drag down prices.
The Elliman report was not an outlier. Its findings were corroborated by market data from other sources.
Corcoran’s third quarter report had almost identical numbers. Closed sales dropped by 17 percent year-on-year to 3,418. The number of contracts signed dropped 18 percent to 2,589.
The decline was more modest according to figures from the Real Estate Board of New York. In its third quarter residential sales report, the group pegged the decrease to six percent year-on-year.
However, Manhattan seems immune to natural forces.
According to the Elliman report, the median sales price in the borough increased by 7.6 percent to $1,073,750 during the quarter.
The price per square foot also rose 13 percent to $1,692. This increase was driven by robust figures from the luxury and new development markets.
During the period, the price per s/f in the upper 10 percent of all co-op and condo sales rose by 23.9 percent to a record of $3,040 psf. The average sales price for this segment also jumped by 30.8 percent to a record high of $8,840,704.
Meanwhile, the new development market also posted record numbers in median sales price, price per square foot and average sales price.
During the period, the median sales price in the borough almost doubled, increasing by 95.8 percent to $4,011,044. Meanwhile, the average sales price was more modest, jumping by 58.6 percent to $5,355,827. The price per square foot also rose by 32.6 percent to $2,799.
Stan Ponte, a real estate broker with Sotheby’s International Realty, attributed Manhattan’s gravity-defying act to the attitude of buyers.
“Unlike other markets where dips in transactions are directly related to drops in average sales price, Manhattan property owners are much more likely to ‘wait it out’ until they feel the market is strong and they can achieve their desired price,” he said.
Michael Slattery, REBNY’s vice president for research, said that there may come a time when sales volume drags down prices. However, he doesn’t see that situation playing out right now.
“There’s a sense that the volume of sales is important because it shows the level of buyer activity and interest. But, you know, what people are willing to pay is a judgment of where they think the market is and what the value of that property is.
“At some point, they’re going to come to the line where fewer transactions may result in lower pricing. But that doesn’t happen simultaneously,” he said.
Brian Kilmas, the vice president and chief economist for research at REBNY, attributed the price increase to competition among buyers.
“There’s a bidding war,” he said, adding that he has yet to see sales volume depress prices.
Ponte predicted that certain metrics, such as the price per square for apartments, will continue to go up.
“Manhattan is an island with only so much land and that built-in scarcity of dirt will always drive values higher,” he said.
“At the risk of sounding too optimistic, I truly believe that the sky is the limit and that prices will continue to increase over time.”
Slattery was less effusive. He said that the figures indicating market activity don’t truly reflect the state of the market, pointing out that the bulk of the closings were from deals that go as far back as a year ago.
“I think we’re seeing a lot of closings, but those have been based on contracts that were signed, you know, it could be as much as a year ago. I think you can’t judge that market by the activity and closings to date,” he said.
Slattery points to broker sentiment as a more accurate barometer for the market. And he said that, judging from the chatter, the prognosis isn’t sunny.
“I think what we’ve been hearing from brokers is that the market is slowing down. I think they’re probably the best source for the market at this point,” he said.
His comments align with REBNY’s Real Estate Broker Confidence Index. According to the trade group’s second quarter report, the broker confidence index settled at a score of 7.04. This represents 0.19 drop from the previous quarter, continuing a steady slide in broker confidence since the fourth quarter of 2014.
Nonetheless, Slattery still has rosy predictions for the Manhattan market.
“We’re optimistic about Manhattan because you don’t see a lot of new product coming on the market based upon looking at the offering plans that have been filed and approved,” he said.
“Certainly the high-end sales are driving up Manhattan prices both as an average and also at a per square foot basis. That’s an important factor in those Manhattan numbers. But I think if you peel out those numbers, I think the Manhattan numbers are still showing improvement.”