Manhattan Apartment Prices Hit Record Highs

The first quarter numbers are in for the Manhattan
real estate market,
and old records have yet again been broken. While the numbers seem
surprisingly positive, the overall picture is more complex.

Average home prices were up roughly one third, or 33.5%, over last
year's numbers. All told, the average price of a Manhattan apartment
has risen to an astounding $1.7 million.

There are several warning signs for the New York apartment market,
however. There is a growing disparity between Manhattan prices and
the rest of the city's real estate market. More importantly, while
prices have remained high, sales have slowed significantly.

Furthermore, Manhattan's record average price comes largely from several
new luxury condominium buildings that went on the market last month.
In all, 71 apartments were sold on the island for more than $10 million
during the first quarter – a number that far outpaces the average figure
for Manhattan.

However, what is most troubling about the numbers is the timing of
it all. While the first quarter was a surprising success in terms
of average sales prices, inventory was starting to increase significantly
before the Bear Stearns episode, which presumably put a significant
chill on immediate demand for luxury New
York City apartments.

Indeed, the very presence of record average prices in the 1Q may end
up causing some alarm when the 2Q numbers are released.

A significant problem in analyzing the potential impact on the New
York apartment market of the evaporation of Bear Stearns lies is in
the differing empirical data sets from Manhattan's major real estate
brokers. According to Prudential Douglas Elliman, the number of sales
declined 34% during the first quarter. Two other real estate firms
recorded a drop of low single digit percentage points.

If the Prudential Douglas Elliman’s number are correct, then that
could spell trouble for the market: a sharply declining rate of sales
is then combined with a major disaster like the closing of one of the
city's largest private employers. Whereas if the less dire assessments
prove true, then it seems likely that the downturn will not lead to
a full scale retreat of prices.

In all, the 1Q numbers are more positive than many predicted. However,
unmistakable signs of a slowing market can be seen in all three of
the major reports released so far. How the Manhattan
apartment market
reacts to Bear Stearns will be the next major determinate of the near-term
future of the market.

Nicholas Adams Judge is a freelance writer specializing in business, politics
and economics. He holds a B.A. in political science and will begin his PhD studies
in political economy and public opinion next fall. He has studied economics and
political science at a number of different institutions, both here and in the
U.K., including Amherst College, Warwick University, Oxford University and the
University of Massachusetts-Amherst. New York City Apartments