The Year the Bubble Didn't Burst in Manhattan

Pity the poor Manhattan housing market in 2006; it missed out on so many adjectives.

As markets around it melted—Miami, Phoenix, Boston, pretty much the whole of flyover country—Manhattan’s remained utterly, stubbornly successful.

You’ll have heard another story: that Manhattan’s housing market was red-hot in 2005 and was in 2006, like so many cities nationwide, slowing or cooling or bursting (or whatever-ing). But it’s largely untrue based on the numbers.

Sure, it took longer to sell a home if you tried in the last 12 months, but sales closed fairly evenly compared to last year—and prices were way up in some cases.

At the end of the third quarter of 2005, the average sales price was $1,149,813; up it went the following third quarter, to $1,288,748, according to the appraisal firm Miller Samuel, which releases a quarterly report on the borough’s housing market with one of Manhattan’s biggest brokerages, Prudential Douglas Elliman. This third-quarter 2006 average was also up over the year-end 2005 average of $1,221,265.

The first-quarter 2006 average was a sharp increase over the fourth-quarter average of 2005: $1,187,404 to $1,300,928. The average Manhattan apartment price, in fact, increased year over year in each of the first three quarters of 2006, and it looks likely to do so in the fourth, which ends Dec. 31.

The median price—a better indicator of the market than the average—was $750,000 in the third quarter of 2005, and it rose to more than $845,000 in the third quarter of 2006. The median increased year over year during the first three quarters of 2006, in one case particularly sharply: It set an all-time Manhattan record of $880,000 in the second quarter.

But these are prices, which are only good, really, for sellers—and their lawyers and brokers.

For most buyers, the important thing is what happened to sales in 2006 compared to 2005.

While they didn’t spike like prices, sales either increased slightly or stayed generally steady this year. In the first quarter, Manhattan condo and co-op sales dipped slightly year over year, according to Miller Samuel, and in the second quarter, they dropped more than 11 percent. But in the third, sales were up nearly 6 percent between 2005 and 2006.

In 2005, 7,780 apartments were sold in Manhattan. In the first nine months of 2006, 6,052 were sold, putting this year on pace to surpass 2005, not that that’s any particular thing to brag about loudly: 2005 had the lowest number of apartment sales of any year since 1998. (Generally, no more than 10,000 homes change hands yearly in Manhattan.)

It does take longer, on average, for Manhattan owners to move their apartments. There is nary a real-estate reporter alive who hasn’t heard mild horror stories of price chops and sparse interest at open houses this year. Miller Samuel reports that the average number of days it takes to sell an apartment rose from 133 in the third quarter of 2005 to 150 this past third quarter.

And mortgage rates ticked upward, particularly during the summer. (Still, rates now are generally lower than at the start of the year. The rate on a 30-year, fixed-rate mortgage in January was 6.21 percent, according to Freddie Mac, and 6.12 percent by mid-December.)

Otherwise, the Manhattan housing market over the year that’s about to end has remained fairly strong indeed, though the pessimistic storyline sounds loudly still.

Blame the media, brokers tell The Lab. Others cite an entire category of real-estate blogs devoted to the bubble theory, relying heavily—even gleefully—on the pessimism from 2005 going into 2006.

Ironically, many of these so-called bubble-burst blogs went bust as the wider storyline of a total national housing-market collapse lost steam.

And perhaps that’s just it: The Manhattan housing market is … normal. Boringly, stoically normal.

Any ups and downs that might plague other metropolises simply don’t penetrate Manhattan housing, where $400,000 for a decent studio (four walls, a floor and a ceiling) is considered, without irony, a steal.

The last major dip in the Manhattan housing market, in the late 1980’s, was spurred more by changes in the tax codes than by anything else. Even the recession of the early 1990’s—even the terrorist attacks of 2001—couldn’t truly wallop this market. In 2002, the number of Manhattan apartment sales hit a now-six-year high of more than 9,500.

Steady. Even. Normal. These are adjectives, too, for the Manhattan housing market. They’re just not that cool.