To view, click or mouse over the above tabs. Updated every Thursday for the previous week.
 

< Return to News & Press listing
10.03.2006
 3rd Quarter Market Summary
Caution Squeezes Urgency out of the Market


By Jeffrey Jackson

NEW YORK -- Mitchell, Maxwell & Jackson's third-quarter Manhattan sales data is in and it appears that an increasing number of buyers are no longer obsessed with real estate. Sales volume in 3Q06 declined 17% from 2Q06, while the average sales price of a Manhattan apartment declined 2.2% in the 3q06 to $1.144 million from $1.169 million in the second quarter.

Loft's were the bright spot, showing the only price gain (up 7%) in the quarter from 2Q06. The lower end of the market (studios, 1-bedrooms, 2-bedrooms) held on, but did experience slight declines. The greatest price weakness in the quarter was seen at the upper end (the $2.5 million+ segment), which is also where a large portion of the new supply has been coming on line. We estimate this sub-market saw a 40% decline in sales volume over 2Q06. Prices were approximately off 6% for 3-bedrooms and down 14% in the 4+ bedroom market in 3Q06 versus 2Q06. However, we point out that second-quarter sales were atypically strong.

In addition, 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 (see our 3Q05 Market Measure - The Froth Is Off The Market).

As stated, 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 are currently listed for sale, which compares to 9,279 units a month ago (or up 7.7%) and 8,280 units a year ago (a 21% increase). At these levels, we estimate it will take 10-11 months to sell all of the listings available versus 7 months one year ago.

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 rates up 15% this year according to The Corcoran Group.

On the supply side, new condo development is down 38.6% since the beginning of 2006. The Attorney General reported new filings for Manhattan condominium units peaked in 1Q06 at 4,941, decreased to 4,301 in 2Q06 and down to 3,035 units in the third quarter.

It appears that buyers and sellers are increasingly arriving at a stalemate, buyers feel no urgency to act or trade up. Sellers, at this point, are not motivated to cut prices dramatically. Given the overall steady economic and income scenario at present, it is likely the cautionary trend could continue. The fourth quarter is typically a slow period for sales and we anticipate this year will 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?