By ROBIN FINN
Published: October 2, 2013
As Manhattan’s residential sales inventory continued to plunge in the past three months, dropping to its lowest level in 13 years, sales took off in the opposite direction, with buyers determined to make their move before mortgage rates and home prices commence the inevitable tandem escalation experts have predicted.
According to a report being released on Wednesday by the Douglas Elliman brokerage, sales spiked to their highest level since the 2007 heyday that preceded the Lehman Brothers collapse. The volume of sales increased by 30 percent over last year to 3,837, while inventory was down by nearly 22 percent, and the time listings spent on the market shrank by 54 percent. Bidding wars, popular with everyone except buyers, regained their toehold on negotiations, and sellers were able to reap 98 percent of their final asking price.
“I think there was a mad rush to complete deals in this quarter before things change,” said Dottie Herman, the chief executive of Douglas Elliman. “It’s a very healthy market. Sure, you’re seeing bidding wars because there’s no inventory, but properties are still trading at a price that has to make sense.”
One-bedroom apartments, a sector that is sensitive to interest rates, inspired the most frenetic trading in 15 years, a sign of a shift in focus from a somewhat inflated luxury-driven marketplace (where the entry threshold is now $2.95 million) to a more accessible demographic.
Jonathan Miller, author of the Elliman report and president of the appraisal firm Miller Samuel, said sales were up and inventory was low in the second quarter of the year also, but the third quarter, which ended on Monday, “was like a quarter on steroids: sales surged because the fence sitters rushed to buy before the mortgage rates rose.”
“Buyers were concerned that prices would rise and they’d miss their chance,” Mr. Miller continued. “So this added a layer of excessive demand on top of the usual organic demand.”
With the fence sitters now in motion, and with the flurry of transactions completed, Mr. Miller said he expected inventory to stabilize. The supply of new construction, sales of which dropped this year by 55 percent, is also expected to undergo a substantial upswing in 2014 as projects hobbled by the recession come to market.
But Andrew Heiberger, the chief executive of Town Residential, said that demand would persist in outpacing the supply. “Building permits are up 60 percent from last year, which would indicate an increase in supply is forthcoming,” he said, “but the pent-up demand will dwarf the supply of units coming to market.”
Elliman reported a significant year-to-date jump in co-op sales of 37 percent, along with a 19 percent increase in condominium sales. The 62 percent market share held by co-ops was the highest in nine years.
“It was the double-digit quarter,” said James M. Gricar, the president of Halstead Property. “For the three preceding quarters, we knew inventory was down and sales activity was up, but it seems to have come to fruition: we had this highly energized atmosphere with a bunch of super-motivated buyers and a contingent of sellers in the driver’s seat.
“The statistic that is mind-boggling to me is that we sold 16 percent more apartments than at this same time last year despite having 25 percent fewer to sell.”
Mr. Gricar said the short time that properties spent on the market — his brokerage clocked it at 77 days — was another surprise: “Seventy-seven days, it’s an eye blink.”
The brokerage also noted a 75 percent jump in sales above $10 million in the quarter. “It gave quite a boost to our average sale price,” said Diane Ramirez, the chief executive of Halstead, which reported an average sale price of $1.45 million, along with a 19 percent increase in condo sales, up 8 percent from last year.
Pam Liebman, the president of the Corcoran Group, said fairly priced listings at all levels moved quickly. “If it’s good, it’s gone; nothing lingers,” she said. “It’s the most fast-paced market I’ve ever seen.” She also emphasized the quantity of deals struck on properties that traded for $1 million or less. “Everybody thinks Manhattan is so expensive,” she said, “but 37 percent of sales were between $500,000 and $1 million, and 19 percent were below $500,000.”
Ms. Liebman said she did not expect resale inventory to replenish itself anytime soon, particularly on the Upper West Side. “We’ll be dealing with an inventory shortage for some time to come, and that’s going to put an increasing pressure on prices,” she said. In other words, any adjustment will be upward.
“This is a market in recovery,” said Sofia Song, head of research and communications for Streeteasy. “It’s not a recovered market. When we still need federal supports keeping mortgage rates artificially low, we’re not out of the woods yet.”
A version of this article appears in print on October 2, 2013, on page A20 of the New York edition with the headline: Home Sales Rose in Tighter Manhattan Market, Report Says.
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