Manhattan Apartment Sales Drop for Fourth Quarter in Recession

By Peter S. Green

Jan. 6 (Bloomberg) -- Manhattan apartment sales fell for the fourth straight quarter and prices for the most expensive apartments dropped for the first time since the recession began as the national housing slump hit the metropolitan area.

Fourth-quarter transactions dropped 9.4 percent to 2,282 units from a year earlier, New York property appraiser Miller Samuel Inc. and broker Prudential Douglas Elliman Real Estate said in a report today. While the overall median sales price rose 5.9 percent, luxury prices dropped 3.9 percent and the median for all resale apartments slid 3.6 percent.

The U.S. recession that began in December 2007 and the global credit crisis have claimed at least three financial firms and may cost the city as many as 175,000 jobs. Finance jobs drive the Manhattan market. Employment at Wall Street investment banks accounted for almost 15 percent of the city’s total privately paid wages in the first quarter of 2006, according to the U.S. Bureau of Labor Statistics.

“The end of the year marked the beginning of Manhattan’s entry into a new kind of market,” said Jonathan Miller, Miller Samuel’s chief executive. “For all of 2008 we were seeing a fairly sharp decline in the number of transactions every quarter. Now we are starting to see prices decline.”

The fourth quarter Manhattan property results are the first to reflect the deepest yearly drop for U.S. stocks since the great depression. In 2008, the Standard & Poor’s 500 Index lost 38.5 percent, led by slumping shares of Citigroup Inc., Bank of America Corp. and Goldman Sachs Group Inc.

National Slump

The city also began to resemble the national real estate scene. The U.S. median home price fell 13 percent in November from a year ago, the biggest drop on record, the National Association of Realtors said.

In Manhattan, the inventory of apartments listed for sale rose almost 40 percent from a year ago to 9,081 units. Apartments sat on the market for an average 159 days before selling in the fourth quarter, up 21 percent from a year earlier, Miller Samuel and Prudential said.

In separate reports today, brokerage Brown Harris Stevens Inc. said the overall median sale price in Manhattan rose 8.1 percent to $895,000 in the fourth quarter from a year earlier and Corcoran Group said it rose 3 percent to $937,000.

The median in the Miller Samuel-Prudential survey rose to $900,000 in the fourth quarter. The median price of resale apartments declined to $732,500 from $760,000. The median for new developments rose 5 percent to $1.26 million.

More ‘Weakness’

Almost no new contracts were signed on condominiums in the quarter, said Miller.

“Based on the contract activity we observed, we are expecting to see continued weakness in terms of declining prices and sales activity in the first quarter next year,” Miller said.

New Yorkers paid less for smaller apartments. The median price of a studio fell 8.5 percent to $420,000, according to Miller Samuel. One bedroom prices were $715,000, down 4.5 percent.

Prices rose 9.1 percent for two-bedroom apartments to a median of $1.62 million. Three bedroom apartments slid 6.4 percent to $4.05 million, Miller Samuel said.

Buyer’s Market

Manhattan has gone from being a seller’s market to a buyer’s market, said Gregory Heym, chief economist for New York brokerage Brown Harris Stevens.

“In the last few years, people knew they were getting a big bonus and went out shopping early,” said Heym. “That’s not the case now.”

Buyers are being now more cautious and hunting for bargains, said Dottie Herman, chief executive officer of Prudential Douglas Elliman.

“The whole process is taking a lot longer,” Herman said in an interview. “Six months ago in New York City people would lose their down payment if couldn’t get a mortgage.” Now buyers are refusing to sign such restrictive contracts, she said.

Sales of luxury condominiums in two buildings, 15 Central Park West, where Goldman Sachs Chairman Lloyd Blankfein and former Citigroup chief Sandy Weill bought homes last year, and the Plaza skewed condo sales prices for the quarter, according to all three reports.

Luxury Drops

In the luxury market, defined as the top 10 percent of sales by price, the median fell to $4.13 million in the fourth quarter from $4.3 million in the fourth quarter of 2007. Inventory rose 26 percent to 1,730 apartments. Luxury units stayed on the market 169 days, 52 more days than the same period a year earlier.

Apartments near Wall Street in the Financial District are likely to be the worst hit by the drop in sales and prices, said Pam Liebman, chief executive officer of Corcoran in Manhattan. Many new condominiums there were built to attract wealthy Wall Street bankers and foreign investors.

“Foreign investors are having a real tough time getting mortgage money, and a lot of those young affluent buyers aren’t so affluent any more,” Liebman said.

To contact the reporter on this story: Peter S. Green in New York at psgreen@bloomberg.net