MANHATTAN — With mortgage rates at record lows and rents at record highs it may seem the perfect time for house hunters to buy — but there's one problem.
There's not a whole lot to choose from.
Listing inventory fell 13.5 percent from last year, according to the second quarter Manhattan sales report released Tuesday by Prudential Douglas Elliman.
Low inventory will be one of the biggest challenges facing the housing market over the next year, according to the report's author, Jonathan Miller, an expert real estate appraiser.
“Falling inventory starts to be problematic because it can choke off recovery,” Miller said.
Part of the problem, Miller believes, is that sellers — who tend to become buyers — don’t have enough equity to trade up, even when their mortgages aren’t under water. There has been more activity on the entry-level end of studios and one-bedrooms or on the deluxe high-end, but not the middle, representing the “trade ups,” he said.
“Why would you sell if you can’t buy?” he said.
Overall, housing prices remained fairly flat — and have remained so for more than two years, Miller noted.
Median sales prices hit $829,000, which was actually down 2.5 percent from the previous year's second quarter. The average sales price was $1.4 million, down 3.2 percent, the report found.
The dip could be attributed to the popularity of entry-level apartments making up such a large share of sales. This marked the third consecutive quarter of studio and one-bedroom apartments comprising 50 percent of Manhattan sales, the Elliman report said.
The inventory situation “over time” could end up pushing prices higher, Miller said.
Inventory was down nearly 6 percent, according to the numbers crunched for StreetEasy.com’s second quarter Manhattan report.
It represents the fifth consecutive quarter that inventory is down, noted the report's author, Sofia Song.
At the same time, apartments have been moving a little more quickly, down 2.7 percent to 151 days from last year’s 155.
“It’s boosting up seller confidence,” Song said.
There have been 20 percent fewer price cuts on apartments to move inventory, StreetEasy found.
StreetEasy found that median prices have been inching up for condos since a year ago: nearly 14 percent to $1.19 million for re-sales and 2.1 percent to $999,000 for new developments. Co-ops, on the other hand, fell 2.6 percent to $634,000.
Prices are only 12 percent below 2008 levels, Song said, noting, “the gap is closing.”
For those who have down payments to buy, many are coming off the sidelines, Song said. (But Miller noted that with the great mortgage rates, lenders are more risk averse.)
“Especially with inventory shrinking and properties getting snatched up and fewer price cuts, there is a sense of urgency” Song said, “for people entering the market, who may fear they’ll be priced out.”