By Dan Orlando
In 2014, the thirst for inventory in Manhattan was quenched by a revitalized resale market and the results helped the borough maintain its 2.5-year streak of increased closing prices per square foot.
Residential brokerage Urban Compass reports that the finale of 2014 saw Manhattan’s sales hit the highest Q4 total dollar closed sales volume ever, coming in at about $5.4 billion.
Douglas Elliman found that the average sale price of condos and co-ops rose by more than 13 percent as compared to the final chapter of 2013, with deals finishing at 9 percent more per square foot.
The rise was greatest in homes that had spent time on the market before, with an 8.1 percent jump coming from resale and only a 3.5 percent increase coming from new development.
The improving figures overcame the studio niche, which bled out an 11.5 percent dip from the close of 2013.
The healthy numbers are also thanks in large part to the surge in mid-level activity. Whereas 2013 was dominated by luxury and upper-tier sales, 2014 saw a more active market for mid-shelf properties across Manhattan.
“It’s amazing what can happen in a year,” said Noah Freedman, partner at Bond New York Real Estate. “This time last year there was a severe inventory shortage creating a volatile environment in which bidding wars, all-cash offers and packed open houses were the norm. Sellers struggled with how to price their homes, and buyers were frustrated and fatigued.
“After more than a year of increased inventory being limited to the luxury and ultra-luxury market, resale inventory is moving again and has finally opened up the market.”
Bond points to a reported 41.9 percent increase in pending sales as compared to the close of ’13 with an increase of 11.2 percent of active listings to accompany it.
The bump in pending deals came mainly from neighborhoods like Chelsea, the West Village, Murray Hill, the Financial District and Nolita.
Despite Bond’s confidence, Urban Compass’ report warns that a drop could be coming to the median closing prices in of Q1 2015. The numbers could climb by more than one percent, but they could also dip by nearly 4 percent as well. “What we noticed was there’s sort of this pattern of behavior in terms of pricing where we see high growth one year followed by a slight decline the following quarter of the next year,” Sofia Song, head of research and external affairs for Urban Compass said.
“We do expect for the rest of 2015 to see gains in price, especially because you have several new developments that will be closing, such as 150 Charles and 10 Madison,” she continued.
Stressing that Q1 “tends to be slower,” Song described her outlook on 2015 to be overall “bullish.”
“This report in many ways reflects the ongoing evolution of the Manhattan market into two interconnected but distinctive markets; new development and resale,” said Hall F. Willkie, president of Brown Harris Stevens Residential Sales via release.
The Brown Harris Stevens findings echoed the positive sentiments of the other reports, and joined the chorus crediting the revitalized resale sector with helping to stoke the fires.
“It’s important to remember that the majority of apartment sales in Manhattan continue to be resale. Improvement in the local and national economies combined with ongoing low inventory and foreign investment, has resulted in a jump in average new development prices while resale prices inch up at a more steady pace. Our current absorption rate In Manhattan is just 3.9 months, with some neighborhoods as low as 2.7 months; historically a rate of 6-9 months indicates a balanced market.”
Town’s findings suggest that should 2015 fulfill the projections of an overall climb, perhaps more responsibility will be shifted back into new development and first-time sales.
Citing a 25 percent rise in building permits across the entire city in Q4 of 2014 as compared to a year prior, Town labeled the city as an “active environment for real estate investment.”
A common theme among the varying reports was that while a comeback in more affordable and mid-class options certainly helped the overall market in Manhattan by boosting median sale prices, the demand for high-end properties will continue to float the overall revenues for the borough.
“The glamorous end of the newly built, high-priced new condominium market enjoyed record prices, even as many of the units in these luxurious new towers languished on the market,” said Frederick Peters, president of Warburg Realty in his Q4 review before giving credit to the less awe-inspiring transactions.
“The market for small units, both co-ops and older condominiums, remained extremely strong as low interest rates continued to create a better value proposition for owning than for renting. And for the larger co-ops, even in the prime locations, pricing and condition asserted themselves as the primary drivers of sales.
“There is a limit to how many $30 or $50 or $75 million properties can be absorbed, and I suspect we may be approaching that limit. So on the new condominium front I suspect 2015 may be the year of the quiet incentive.”
The overall positive outlook in sales for 2015 suggest the peaking of a cycle that has been rebounding since the last recession in ’08, and time will tell how close Manhattan’s market already is to the summit.