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Red-Hot Housing Markets Showing Signs of Cooling Off

Wall Street Journal
By DANIELLE REED
October 3, 2005

NEW YORK -- Maybe there's been no `pop' of a bubble bursting, but signs that housing markets are leveling off continue to accumulate.

On a national level, the most recent data have been mixed. New home sales reported last week fell 9.9% to a seasonally adjusted rate of 1.24 million units in August, according to the Commerce Department. The pace of existing home sales though rose 2% in August to 7.29 million units, a near-record pace, according to the National Association of Realtors.

But in a few metropolitan areas, reports are starting to show more consistent signs that demand and supply may be closer to reaching an equilibrium, as the volume of sales drops and in some cases prices seem to be following.

In San Francisco, the number of homes sold in August dropped 9.9% to 662 from 735 sold in the same month a year ago, though median prices still climbed a healthy 11.5% to $745,000, according to DataQuick Information Systems. In San Diego, the number of homes sold dropped 3.6% to 5,379 from 5,580 a year earlier, and the median price rose just 2.1% to $493,000.

In New York City, a report released Monday by appraisal and data firm Mitchell, Maxwell & Jackson Inc. showed that Manhattan apartment prices declined in the third quarter of 2005 for the first time in two years. According to the report, which was based on sales records of condo and co-op apartments south of 96th Street, the average apartment sale price dropped 3.9% to $1.090 million from $1.134 million in the second quarter. The decline followed a drop in overall demand, the report said, as the number of sales dropped 32% to 1,031 from 1,528.

Despite the quarter-over-quarter decline, however, the average apartment sale price was up 21% over the third quarter of 2004, according to report.

Meanwhile, a report from Halstead Property released Monday also showed a price decline for both co-op and condo apartments in Manhattan in the July-September period compared with the prior three months. For co-op apartments, the average price was $1.04 million, down 11% from $1.17 million, though up 10% from $951,000 in the third quarter of 2004. For condominiums, the average price was $1.28 million, down 10% from $1.42 million in the second quarter, though still up 13% from $1.13 million in the year-earlier period.

New York City Housing Market More Balanced The price and volume data suggests that "supply and demand have reached parity," said Jeffrey Jackson, co-founder and chief economist of Mitchell, Maxwell & Jackson, in a press release. "That's good news for buyers, as slowing sales volume and leveling prices have swung the pendulum out of sellers' hands."

Other analysts of Manhattan home prices say they have seen similar trends. "We are seeing some moderation in the housing market, both in terms of volume and prices," said Jonathan Miller, president of appraisal firm Miller Samuel Inc. The firm prepares the Prudential Douglas Elliman Manhattan market report, which tracks residential real estate activity each quarter. That report will be released on Tuesday, as will reports from two other large real estate firms, the Corcoran Group and Brown Harris Stevens.

Miller cautioned that the size of a sales database can cause variations among data reports for the Manhattan market. While trends may be similar across the different reports, the degree to which, for example, sales volume or prices have changed can vary from one data set to another. Manhattan is one of the few real estate markets in the country with no multiple listing service, and in which around 80% of the sales are co-ops and therefore not public information.
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