Year of the Frustrated Buyer Awaits Manhattan Real Estate Market
MANHATTAN — Without a lot of apartments for sale right now, signs are pointing to a sellers’ market in Manhattan, some real estate experts said.
Buyers can forget about low-ball offers. There was a 26.8 percent rise in the numbers of homes sold after price increases in the first quarter of 2013 compared to last year. There were 41.3 percent fewer price cuts for the quarter, according to a Manhattan real estate report released Tuesday by StreetEasy.com.
Sofia Song, the report’s author, dubbed it the “Year of the Frustrated Buyer.”
House hunters hoping to take advantage of the historically low mortgage rates or feeling afraid they'll be priced out are flooding the market, she said. They’re egged on by stories about crowded open houses and bidding wars “reminiscent of frothier times.”
“Once you hear that the open houses are so crowded, you can’t help but wonder and start looking,” said Song, noting that the 7-year-old StreetEasy website hit a record high of more than 30 million visitors last month.
So, despite the fact that inventory remained near historic lows — falling nearly 35 percent from last year — the number of sales increased 6.3 percent, according to the first quarter Manhattan sales report from Prudential Douglas Elliman. That report listed the average sales price for Manhattan homes as $1.35 million, up 1 percent from the year before.
“Inventory has been falling for a couple of years but in the last six months it’s gotten chronic,” said Jonathan Miller, the real estate expert who wrote the Elliman report.
Would-be sellers are stuck because they can’t qualify for credit or because there aren’t enough new apartments for them to choose from, Miller explained. He said that new developments opening their doors this year will likely bring little relief since they focus more on the high-end market, rather than “the other 90 percent,” he said.
Song questioned whether the market was trending toward a bubble.
“In a healthy market, property owners would be unfettered to list their homes in the marketplace, which does not seem to be the case in today’s market,” she said.
With stagnant wages and reports of smaller Wall Street bonuses, what’s driving the “frenzy” is not the traditional first-time buyers or growing families needing to trade up, she said. Rather, many are investors and foreign buyers who can make all-cash purchases.
Overall, there was a flurry of activity for properties under $3 million, StreetEasy found.
So-called entry-level apartments — which in Manhattan terms is under $1 million — and the “mid-level” homes, ranging from $1 million to $3 million, saw a 19 percent increase in new contracts compared to the last quarter. Closings for these properties increased, too, 5.6 percent and 12.3 percent respectively.
Closings for apartments costing more than $3 million, however, declined 6.6 percent, Streeteasy found.
Many of the luxury sales that might have happened in the first quarter of 2013 took place in the last quarter of 2012 as people rushed to take advantage of lower capital gains tax rates, the report from Brown Harris Stevens found.
“With many buyers, especially those on the high-end, rushing to close at the end of 2012, we experienced a significant decline in high-end closings,” noted Hall F. Willkie, president of Brown Harris Stevens residential sales, whose report found that the average Manhattan apartment sale price of $1.25 million was down 16 percent from the first quarter of 2012.
The Upper East Side saw the greatest percentage upsurge in new contracts since last year with an increase of 25 percent, Streeteasy found.
Upper Manhattan, however, was the only area to have fewer contracts signed this quarter compared to a year ago, with a nearly 2 percent dip.