NEW YORK — Home prices are set to swell in 2013, as inventory continues to thin and home buyers continue to make a mad dash for condos in Manhattan, real estate experts predict.
The combination of historically low interest rates and a dearth of new development are driving many former renters to consider becoming home buyers, further driving down the availability of one bedrooms and studios, said Paul Purcell, co-founder of Charles Rutenberg Realty.
"People sat back and saw that rents are so high and interest rates are so low. You start to think, 'Could I afford something in the purchase market?'" he said.
Meanwhile, he said, there are few new units being built to replace what's being bought.
Data from Rutenberg indicates that most new developments in Manhattan have yet to be completed, and those that are finished will only have 20 to 30 units each.
The company's research also shows that the units could take up to three years to complete, leaving a lack of affordable homes for purchase, especially in hot areas such as the Upper East Side.
Two developments cited by Rutenberg — one at East 79th Street and Third Avenue and another at East 79th Street and Lexington — are indicative of this trend, as they are priced at some $2,000 to $3,000 per square foot, company information indicates.
"We'll run out of space eventually. You've only got so many square inches, and we're gobbling up all of them," Purcell said. "You simply can't build more on this island."
The number of Manhattan condo contracts rose 5.5 percent in November 2012 compared to the same month in 2011 — with the Upper East Side posting a 16.2 percent increase, StreetEasy reported.
There were also 17.2 percent fewer condos on the market compared to 2011, StreetEasy found.
The median listing price has risen 10.4 percent in Manhattan compared to 2011, StreetEasy noted.
Prices have spiked as a result, and there's little large-scale residential construction anticipated until 2014, he said.
"What you are seeing is that a lot of people are starting to realize the rental market has gotten away from them," he said. "Rentals prices are up from where they were a year ago."
Malin also said this is driving a host of first-time buyers onto the market.
"There's definitely pent-up demand, and we see a lot of transactions and a lot of activity now," he said. "Obviously, when demand increases, prices are going to go along with it."