Sales continue to fall in Manhattan

Manhattan home sales dropped 24.1 percent in the third quarter compared to the same quarter last year — the third consecutive year-over-year quarterly decline, according to a report today.

With sales continuing to slow, the inventory of for-sale inventory jumped 34.6 percent year-over-year in the third quarter, according to the Manhattan Market Overview report, prepared by appraisal and consulting company Miller Samuel Inc. for brokerage company Prudential Douglas Elliman Real Estate. Sales slid 13.9 percent in the third quarter compared to the second quarter — there were 2,654 sales in the third quarter. Prices, meanwhile, are continuing to show year-over-year growth.

"The events of the last couple of weeks have really diffused the meaning of the numbers, with the exception of a few of the items," said Jonathan Miller, president and CEO for Miller Samuel Inc.

While sales are down and inventory is up compared to last year, it’s important to remember that last year was a record year for the Manhattan market, he said, and that for-sale inventory is actually about 8 percent below its level two years ago.

A sharp decline in new residential construction in Manhattan, precipitated by the credit crunch and inability of some developers to acquire financing, should curb the addition of more inventory, Miller said.

But it’s undeniable that the troubles among Wall Street firms will impact the housing market.

The forecast is that the financial woes will bring about 50,000 to 65,000 job cuts, he said, with major hits to bonus income for those who are still employed.

"Whether you’ve been laid off or your company is having problems, that’s going to cause people to pause or hold on a purchase," Miller said.

While Manhattan, which has been more resistant to housing speculation than some hard-hit housing markets, is positioned fairly well going into weaker times, Miller said there are a lot of unknowns about the future trends of the market.

"We have a historic financial failure, the scope of which has never been seen before," he said, adding that the "big wildcard" is in how quickly the federal government can act to restore liquidity to the market. The likely impacts of the federal intervention, including the latest legislative effort to buy up hundreds of billions of dollars worth of banks’ bad loans, are unknowable at this stage, he noted.

While the price of Manhattan housing has continued to rise, Miller said it is certainly possible that prices will weaken. There could be a bump up in foreclosures in the Manhattan market, Miller said, from a very low current level. Before that happens, though, Miller said inventory would likely creep up more. The excess inventory is far lower now than it was during the widespread co-op conversion boom of the late 1980s, Miller said — the Manhattan market was hit hard by a recession in the early 1990s that gave way to waves of foreclosures.

The average sales price of Manhattan co-ops and condos rose 8.1 percent year-over-year in the third quarter, while the average price per square foot rose 4.3 percent and the median sales price rose 7.4 percent.

But compared to the second quarter of this year, the average sales price dropped 11.3 percent, the average price per square foot dropped 5.5 percent, and the median sales price dropped 9.4 percent.

The average sales price of Manhattan co-ops and condos was $1.48 million in the third quarter, compared with $1.37 million in third-quarter 2007 and $1.67 million in second-quarter 2008.

The price per square foot rose most (11.6 percent) for Uptown units and least (2.1 percent) for Downtown units in the third quarter compared to the same quarter last year.

A separate third-quarter report, the Manhattan Residential Market Report prepared by real estate brokerage company Brown Harris Stevens, found that the average apartment price in Manhattan rose 12 percent compared to the same quarter last year, to $1.47 million, but dropped 12.9 percent compared to the second-quarter price.

The median price, meanwhile, rose 11.7 percent year-over-year in the third quarter but dropped 6.4 percent compared to second-quarter 2008.

The average price per square foot rose from $1,121 in third-quarter 2007 to $1,184 in third-quarter 2008, a 5.6 percent gain. The average price per room rose from $296,577 in third-quarter 2007 to $323,046 in third-quarter 2008, an 8.9 percent rise.

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