The Manhattan real estate picked up steam last year. The Elliman Report presents data on sale prices in Manhattan over the past decade, slicing the data by neighborhood. Overall, the report was further evidence of the borough’s strength, with last year’s inventory at record lows, along with high sales volume. However, potential buyers can take solace in the modest price gains. Still, there could be sticker shock for house hunters down the road.
We are looking at the pertinent data for co-ops and condos. Consistent with Manhattan real estate in general, it points to a very strong market, with sales advancing at a healthy clip.
Co-ops sales increased for a fourth straight year, to 7,714 units. This is the highest total in the 25 years since it has been tracked. A sharp 24.9% rise from a year ago, the co-op is a popular option amongst Manhattan buyers. It represents 60.6% of the borough’s apartment sales.
Buyers will not have as many options. Inventory fell to a 14 year low, dropping 14.6%, to 2,234 units. This has resulted in a 3.5 month absorption rate, the fastest pace in 14 years. The absorption rate measures the amount of time it takes to sell the inventory at the current pace. Buyers also had less negotiating room, with the listing discount falling to 2.5%, from 5.4% in 2012. This is the difference between the list price at the time of the contract and the sales price.
The median price rose by 2.3%, to $680,000. Interestingly, the mean price fell by 2%, to $1,130,846. However, buyers should not misinterpret this as weakness, especially in light of all the other positive data. Mean prices are impacted by prices at the extremes. In this case, it reflects weakness at the very top of the co-op market.
Interesting, over the past decade, which includes the last years of the bubble, the burst, and subsequent recovery, the median price is up 36%. The number of units has risen 48.5%. Real estate may not always do well, but a long time horizon evens out the extreme upward and downward moves.
It is a similar story with Manhattan’s condo market. Unit volume rose 16% to 5,021. Meanwhile, inventory fell to a 14 year low at 1,930 units, 9.5% below the year ago level. This led to an absorption rate of 4.6 months, also a 14 year low. Consistent with the increased sales and lower inventory, the listing discount fell to 3.8%, which is the lowest it has been since 2007.
The median sales price leaped 12.1% year-over-year, to $1.25 million. This is the highest level since this was recorded in 1989. In this case, the average price also rose, by 7.3% to over $1.9 million, also a record.
Since 2004, the median and average price are up better than 55%, and the unit volume increased more than 45%.
Overall, in 2013, total sales jumped to 12,735 units, up 21.2% from the prior year. This was the second highest total since it has been tracked over a 25-year period and near the all-time high of 13,430 reached in 2007. In order to put this in perspective, it fell 7,430 units in 2008 and 2008, after the housing bubble burst.
Although some sales accelerated due to rising interest rates and buyers’ attempt at locking in low mortgage rates, we feel the economy is expanding at a healthy clip, as evidenced by GDP expanding at over a 3% rate in the fourth quarter. Although the Federal Reserve is tapering its bond purchases, mortgage rates remain at low levels by historical standards, as we’ve pointed out previously.
Home buyers will likely find tighter inventory and greater competition. The number of listings declined 12.3% year-over-year, to 4,164 units, a 14-year low. This is probably not due buyers holding off listing their homes given the stronger market. The absorption rate fell to 3.9 months, also a 14-year low.
However, pricing advanced modestly. The median price rose 2.4%, to $855,000, while the average price per square foot increased 4.6%, to $1,136. The latter is an important metric since it allows for an apples-to-apples comparison. Still, it appears sellers are pricing the home at appropriate levels, leaving buyers with little negotiating room. The average listing discount, which measure the list price at the time of the contract and the sales price, fell to 3% from 5.6%.
The report is the latest confirmation that Manhattan’s housing market has picked up steam. Heading into the spring season, buyers should be more patient and be prepared to act quicker when you find the right home.