Bloomberg News

Manhattan First-Time Apartment Buyers Grab Deals in Slow Market

July 03, 2012

Manhattan

Residential and commercial buildings stand in New York. Photographer: Scott Eells/Bloomberg

Manhattan home sales were dominated by studios and one-bedroom apartments in the second quarter as rising rents and low mortgage rates pushed first-time buyers into an otherwise stagnant market.

Purchases of condominiums and co-ops totaled 2,647 in the three months through June, little changed from a year earlier, according to a report today by New York appraiser Miller Samuel Inc. and brokerage Prudential Douglas Elliman Real Estate. The median price declined 2.5 percent to $829,000.

Studios and one-bedroom apartments accounted for 53 percent of all deals, the second-highest share since the last three months of 2009, when first-time purchasers qualified for a federal tax credit of as much as $8,000, said Jonathan Miller, president of Miller Samuel. The smaller units, favored by entry- level buyers, accounted for 49 percent of all transactions a year earlier.

“The ones that can qualify are clearly buying,” Miller said. “They’re looking at rent versus buy and in more and more cases, the math starts to work.”

The share of two-bedroom apartments, which reflects the so- called trade-up market, declined to 32 percent from 38 percent in the second quarter of 2011. Tight lending standards for jumbo borrowers, combined with home prices still 19 percent below their 2008 peak, are making it harder for homeowners to sell their properties and upgrade to larger ones, Miller said.

StreetEasy Report

“With rates this low and prices off peak, we should be having a housing boom right now, and we are clearly not,” he said.

Among pending sales -- contracts signed but not completed in the second quarter -- one-bedroom deals climbed 29 percent from a year earlier, according to property-listings service StreetEasy.com, which also released a report on the Manhattan market today.

The largest number of pending deals were in the $500,000 to $1 million range, according to StreetEasy.

“Rents are just so high right now that for a lot of people it doesn’t make sense” to continue leasing, said Sofia Song, vice president of research at StreetEasy. “A lot of people are saying, ‘You know what? For this amount of money I can probably buy something.’”

In the first quarter, the median monthly rent for Manhattan apartments jumped 7.1 percent from a year earlier to $3,100, or $37,200 annually, according to Miller Samuel and Prudential. Rents are now within about 5 percent of the $3,265 peak reached at the end of 2006.

Price Cut

The average rate for a 30-year fixed home loan was 3.66 percent, the lowest in records dating to 1971, Freddie Mac said on June 28. The rate was less than 4 percent for the entire second quarter, according to the McLean, Virginia-based mortgage financier.

For Ed Garry, a year made all the difference in selling his one-bedroom apartment in the Upper East Side’s Yorkville section. He put the unit on the market in April 2011 with an asking price of $695,000 and withdrew it seven months later when he got no takers. In January, he tried again, cutting the price to $649,000.

This time, Garry, 42, a Wall Street bank consultant, got five offers for the 930-square-foot (86-square-meter) property on East 80th Street. He sold it in May for $621,000, according to StreetEasy.

‘Eager’ Buyers

“The mood seemed to be a little bit better than it has in the last couple of years,” said Garry’s sales broker, James Ferrando of Prudential Douglas Elliman. “The buyer mentality, they’re eager to get out there and look and purchase.”

Garry, who bought the apartment in 2004 for $500,000, was able to upgrade to a two-bedroom unit in Harlem, where the median price of a condo is almost a third of what it is on the Upper East Side, according to brokerage Corcoran Group. His $890,968 deal was completed last month, New York City property records show.

Low interest rates and tax abatements that encourage Harlem home purchases made buying the bigger apartment “a no- brainer,” he said.

“The combination of the two is what made it feasible in the short term, and, in the long term, I think it’s going to be a big investment,” Garry said.

Other reports issued today on the Manhattan apartment market showed mixed results for sales and values in the second quarter. Corcoran Group said purchases of condos and co-ops totaled 3,650, the second-highest quarterly sales figure in two years. The median price climbed 1 percent to $850,000.

Estimated Closings

StreetEasy said the median price climbed 2.4 percent to $840,000, while completed deals climbed 24 percent to 4,430. The figure is an estimate that includes transfers recorded with the the New York City Department of Finance by June 30, as well transactions that were completed in June and are expected to be recorded later, according to StreetEasy.

Brown Harris Stevens and its sister brokerage, Halstead Property LLC, both reported a median price of $850,000, up 2 percent from the second quarter of 2011.

“People stopped worrying about the end of the world and started focusing on the fundamentals,” said Gregory Heym, chief economist at Terra Holdings LLC, which owns the two firms. “There’s not a lot of supply. It’s not an investors’ market like some parts of Florida. People buy to live here.”

Inventory Declines

The inventory of apartments available to purchase declined 14 percent in the second quarter from a year earlier to 6,981 units, according to Miller Samuel and Prudential. About 376 new listings came to market each week in the period, about 4.8 percent fewer than in the second quarter of 2011, StreetEasy said.

Purchases of luxury apartments, defined as the top 10 percent of all sales by price, totaled 265 deals, unchanged from a year earlier, Miller Samuel and Prudential said. The median price of those transactions fell 10 percent to $4.08 million.

On the Upper East Side, the median price of previously owned co-ops fell 9 percent from a year earlier to $770,000, according to Corcoran. Condo prices in the neighborhood climbed 9 percent to a median $1.18 million. On the Upper West Side, the median price of co-op resales dropped 2 percent to $775,000, while condo resale prices climbed 36 percent to $1.29 million.

Co-op apartments in Upper Manhattan, which includes Harlem and Morningside Heights, sold for a median $342,000 in the quarter, up 10 percent from a year earlier, Corcoran said. Condo prices declined 4 percent to $396,000.

To contact the reporter on this story: Oshrat Carmiel in New York at ocarmiel1@bloomberg.net

To contact the editor responsible for this story: Kara Wetzel at kwetzel@bloomberg.net


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