The Manhattan real estate market, which soared while some surrounding metro areas suffered slumping sales and sinking prices, may be at the beginning of the end in its robust run-up.

While the city’s condominium and co-operative prices continued a record streak in the first quarter, market experts say that prices don’t tell the whole story.

The Manhattan real estate market, which soared while some surrounding metro areas suffered slumping sales and sinking prices, may be at the beginning of the end in its robust run-up.

While the city’s condominium and co-operative prices continued a record streak in the first quarter, market experts say that prices don’t tell the whole story.

Total sales dropped 34.3 percent in the first quarter compared to the same quarter last year, while the inventory of for-sale properties rose 4.6 percent and days on market jumped 11.7 percent, according to a Manhattan Market Overview report released today by Miller Samuel.

The data in the report, prepared for real estate brokerage company Prudential Douglas Elliman, suggests the "beginning of a trend" for the Manhattan market, said Jonathan Miller, president and CEO for Miller Samuel Inc.

"We are going into a different period. There is a lower level of sales activity, which would be more likely to temper appreciation in the future," he said.

"You can’t measure the health of a market based on price — you’ve really got to measure it on the level of activity. Typically when you see transactions cool it takes some time for prices to cool. I think I’m more worried about ’09 than I am about ’08."

The median sales price of Manhattan co-ops and condos jumped 13.2 percent year-over-year in the first quarter, to $945,276, and rose 11.2 percent compared to fourth-quarter 2007, according to Miller Samuel Inc.’s first-quarter market report.

The average sales price was up 33.5 percent year-over-year in the first quarter, while the average price per square foot was up 20.5 percent.

A separate Manhattan market report released today by brokerage company Brown Harris Stevens noted a 46.6 percent year-over-year rise in the average sale price of Manhattan condos and co-ops in the first quarter, and a 25 percent increase in the average price per square foot.

Another gauge of prices Standard & Poor’s/Case-Shiller home-price index, found that home prices for the entire New York City metro area dropped 5.8 percent in January 2008 compared to January 2007 and dropped 0.9 percent compared to December 2007. That index is based on repeat sales of the same homes over time.

Price appreciation data in the Miller Samuel report may be skewed a bit by a rise in sales of luxury apartment units, and two high-rise residential projects alone may account for about 2.5 percent of the rise in median price, Miller said.

Another skew factor in the overall price increases is that some buyers may have dropped out of the market with the decline in affordability. With tightening lending standards these days, buyers may find that they have less buying power, Miller said.

Noah Rosenblatt, an agent for Manhattan brokerage company Halstead Property LLC and creator of the UrbanDigs.com real estate blog, said buyers are definitely more cautious and careful these days.

"They’re more savvy as far as the quality of the product they are looking to put their money toward," he said.

And as with so many things in New York City, many buyers’ decisions revolve around Wall Street.

"There are a lot of buyers who are rooted in Wall Street … they really took a wait-and-see attitude," he said. And with the turmoil in the mortgage and credit markets and its ongoing fallout in New York City’s financial sector, there is quite a bit of uncertainty, he said.

Some of his buyer clients have said they want to put their purchases on hold, he said. "Everybody wants to see if they will have a job in another three, four, five months. I see confidence under pressure. We haven’t seen the full effect of the layoffs yet.

"We know it’s coming; we know more rounds of layoffs are going to be announced. We don’t know how bad it’s going to be," said Rosenblatt, a former NASDAQ equities trader.

But his view of the market recovery and correction is not dire. "I think what’s going to happen — this is all part of a healthy correction," he said. "Manhattan always lags in corrections and leads in recovery."

Inventory will likely rise, and it could rise to the point where there is fierce seller competition — "something we do not have right now," he said.

While buyers are cautious, Rosenblatt said there are still first-time buyers who are ready to make purchases and have set aside enough money for the down payment.

There will be "a big dislocation in future price reports and future inventory trends and sales volume trends," he said, which has a lot to do with contracts signed months earlier for pre-construction properties that are finally closing.

2008 will be the year that for-sale inventory rises in New York, and it remains to be seen whether there will emerge a "domino effect" of declining price appreciation and buyer confidence.

"There is a question of how sales volume rises over the course of the year," he said.

Sales of Manhattan co-ops and condos dropped from 3,474 in first-quarter 2007 to 2,282 in first-quarter 2008, according to the Miller Samuel report. The Brown Harris Stevens report is based on 2,857 Manhattan apartment sales in the first quarter.

Charles "Sandy" Mattingly, a real estate agent for Coldwell Banker Previews International and author of the ManhattanLoftGuy.com blog, said that 2007 was "an extraordinary year," and the market would still be strong even if the market in 2008 ends up more like 2006.

Sales in the loft market have been roughly flat — the Miller Samuel report noted 182 loft sales in first-quarter 2008 compared with 182 sales in the same quarter last year, while the median sales price of loft units declined 1.8 percent, to $1.6 million and listing inventory rose 5.1 percent, to 494 units.

Buyer psychology is definitely a market factor, Mattingly said, and is driven in part by "people’s personal view of their income and wealth going forward. People who are confident about income and wealth will continue to be buyers."

There is also the Wall Street factor, he said. "If Wall Street has additional layoffs and more broad-based layoffs, that’s got to have an impact."

Robert Thomas, another Coldwell Banker Previews International agent, said "the fear of recession is on consumers’ minds," as well as the weak dollar and the possibility of falling real estate prices.

Even so, he said first-time buyers are still active in the market, and there has been interest from international buyers who are taking advantage of the weak U.S. dollar to purchase Manhattan real estate as investment properties or vacation homes.

Miller, too, said that the weakened U.S. dollar has brought more foreign interest to the city’s real estate market. He estimates that up to one-third of all unit sales in new residential developments are to foreign buyers, a pace that he says has nearly doubled in the past two years.

Thomas, who specializes in luxury properties, said he believes prices in Manhattan will generally hold but may not experience further dramatic increases as they have in the recent past.

"There are still more buyers than sellers in Manhattan. However, I have noticed inventory staying on the market for longer periods of time," he said, adding that there has been a rise in price downgrades on for-sale properties.

"If the economy and the Manhattan real estate market were to turn downward, the luxury market would be the last to be hit and the first to come back," he said.

In Miller Samuel’s report, the luxury market — which is defined as the upper 10 percent of all co-op and condo sales prices — saw a 45.7 percent gain in median sales price from first-quarter 2007 to first-quarter 2008, with listing inventory dropping 14.3 percent, days on market rising 4.7 percent and sales falling 34.3 percent.

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