By Holly Dutton
After a rash of uber luxury home sales at the close of the fourth quarter of 2012, market analysts expect the middle market to thrive this summer.
First quarter reports from major residential real estate firms show that apartment demand has remained very strong throughout the city, while supply sits at record lows.
Following an onslaught of high-end sales in 4Q, new 1Q numbers show inventory fell more than 30 percent year-over-year in the Manhattan residential market, while the number of closings saw an uptick.
The number of listings dropped 34.4 percent from the previous year to a 12-year low, according to the 1Q market report from Douglas Elliman.
Inventory fell year-over-year from 7,560 to 4,960, while the number of sales increased 6.3 percent from the previous year, from 2,311 to 2,457.
In some neighborhoods, average prices for two bedroom and up homes declined sharply, with an 18 percent drop in average prices year-over-year on the Upper East Side, and a 29 percent decrease in three bedrooms and up on the Upper West Side, according to the 1Q market report from Brown Harris Stevens.
“I think we’ll see these statistics that dropped will come back up,” said Gregory Heym, chief economist with Brown Harris Stevens. “This is sort of the hangover from the fourth quarter, with the market as hot as it is, well see average to medium prices come back up.”
Many of the closings late in the fourth quarter were luxury closings that would normally have occurred in the first quarter but, due to capital gains tax cuts set to expire at the close of 2012, were pushed through early.
“The local economy is strong, foreign interest is strong,” said Heym. “All of that together has really led to demand just remaining strong when supply is dwindling.”
“The challenge is going to be for people to find an apartment at a time when supply just keeps getting lower.”
Time apartments spent on the market fell 14 percent year-over-year in the 1Q, with an average of 111 days on the market. Sellers received 96.8 percent of their asking price in the first quarter, a two percent increase from the first quarter of 2012.
“Those two statistics tell you things are moving quickly,” said Heym. “Those numbers will continue to head in that direction.”
Looking ahead to the second quarter, Heym predicts that due to the lack of inventory, the number of sales will fall while sales prices will rise.
“Conditions making the market so tight today are not going to change in the near future,” he said. “Demand won’t go away and there are no big new developments flooding the market any time soon.”
“You’ll see prices start to rise at a quicker pace because there won’t be enough product to go around and buyers will realize they have to be aggressive from the beginning.”