For an full version of this report in PDF format, please click here

Average Sale Price Declines - Sharp Drop in Sales Volume Index
Caution Squeezes Urgency Out Of The Market - Where is the Love?

NEW YORK, NY October 3rd, 2006

Mitchell, Maxwell & Jackson Inc., (MMJ) reported in its 3rd Quarter Market Measure Report that the average apartment sale price declined by 2.2% to $1,144,000 from $1,169,000 the previous quarter and was 5% higher than the same time one year ago. The MMJ sales volume index declined by 17% from 1,345 to 1,122 and was 5% higher than last year.

"The third-quarter Manhattan sales data is in and it appears that an increasing number of buyers are no longer obsessed with real estate." said Jeffrey Jackson, Co-Founder & Chief Economist of MMJ.

The report showed that the average sale price of lofts was the only gainer, up 7% from 2Q06. The lower end of the market (studios, 1-bedrooms, 2-bedrooms) all experienced slight declines in average sale price down 1-5%. The greatest price weakness was seen at the upper end (the $2.5 million+ segment), which is also where a large portion of new supply has come on line. This sub-market saw a 40% decline in sales volume over 2Q06. Consequently, average sale prices were off 6% for 3-bedrooms and down 14% in the 4+ bedroom market in 3Q06 versus 2Q06.

The weakness in sales was not surprising given the 58% run up in real estate prices over the last five years, the 24,000 new units that have entered the market during the past two years, and the 17 consecutive Fed interest rate hikes.

Absorption slowed during the past 12-24 months just as developers brought a record 24,000 new apartments to market. According to the Corcoran Group, approximately 9,990 units were listed for sale in September, compared to 9,279 in August and 8,280 units a year ago (a 21% increase). At these levels, it would take 10-11 months to sell all of the listings available versus 7 months one year ago. On the supply side, new condo development is down 39% since the beginning of 2006. The State Attorney General's Office reported new filings for Manhattan condominium units peaked in 1Q06 at 4,941 had decreased to 4,301 in 2Q06 and were down to 3,035 units in the third quarter.

With interest rates returning to earth and the run-up in real estate pricing, the rental market is once again looking attractive to those who anticipate a drop in sale prices. Increased demand for rentals has pushed average monthly rents up 15% this year according to The Corcoran Group.

"It appears that buyers and sellers are increasingly arriving at a stalemate - buyers feel no urgency to act or trade up while sellers are not motivated to dramatically cut prices. Given the overall steady economic and income scenario at present, it's likely the cautionary trend could continue. The fourth quarter is typically a slow period for sales and this year appears to be no different. The real test will be the when bonuses are announced and spring is in the air. Will New Yorkers rekindle their love affair with real estate, or will they move on?" said Jackson.