2nd Quarter 2006: “The Boom is Done”

After double digit increases following the 2nd Quarter of 2005, there were headlines forecasting an immediate real estate collapse. And while that hasn’t happened, the relatively small increases or decreases –depending on which market report you’re looking at–show a more stable, if not cooling, market.

Today, three major brokerages released their market reports. Similar to last quarter, the results differ here and there. In both the Corcoran Group and Brown Harris Stevens reports, the average sales price for all Manhattan apartments (both condos and co-ops) dropped 5 percent. However, the Prudential Douglas Elliman report–prepared by Miller Samuel–showed an increase of 6.6 percent. And in that report, the average apartment has hit a new record price: $1.386 million.

But one significant area of concern could be the increased inventory of condos.

Traditionally, the large percentage of co-op apartments has worked as a safeguard in the Manhattan market, which has not been as investor-driven as other markets that boomed over the past few years. So will the increased inventory–which the Corcoran report shows jumping from 6,134 units to 9,619 units over the past year–cause buyers to pause?

“Anyone who has been playing the waiting game in the Manhattan–over the past five years–has come out on the losing end,” said Pam Liebman, CEO of the Corcoran Group. “Buyers are very savvy. Buyers do take longer to make their decisions, because they have more time to see. But I don’t see a huge downturn.”

Indeed, a year ago there seemed to be much more of a rush to jump into a market that was witnessing ever increasing rates of appreciation.

Also, the drop in average sales price could be the result of less expensive units closing this quarter, according to Ms. Liebman. Indeed, some of the high priced units that have been reported as sold–at the Plaza or 15 Central Park West–will not be closing for at least another quarter.

For Jonathan Miller, president of appraisal firm Miller Samuel, his report shows appreciation is most categories, and should certainly not cause alarm. However, he did notice a few contradictions in the Manhattan market.

“Prices are rising and setting records in this quarter, yet the volume has dropped and inventory has risen,” said Mr. Miller. “Buyers are not negotiating, so they are waiting longer. That makes inventory pile up.”

“We’re at a much slower pace,” said Mr. Miller. “Appreciation has eased significantly. We’re looking at rising rates and rising inventory.”

And Dottie Herman, CEO of Prudential Douglas Elliman, remains confident that there will be plenty of buyers to absorb the inventory. “You’re not going to steal anything, but you have to price things properly today,” said Ms. Herman. “There are no fire sales going on.”

But, again, this isn’t a year ago.

“There is no more boom,” said Ms. Herman. “The boom is done.”

- Michael Calderone

Average Sales Price (2nd Quarter 2006/ 1st Quarter 2006)
$1,386,193/ $1,300,928 (PDE)
$1,212,453/ 1,258,420 (BHS)
$1,247,000/ $1,311,000 (CG)

Average Sales Price (2nd Quarter 2006/ 2nd Quarter 2005)
$1,386,193/ $1,317,528 (PDE)
$1,212,453/ $1,276,964 (BHS)
$1,247,000/ $1,284,000 (CG)