Luxury sales were way up, but the rest of the market lagged.

At first blush, the fourth-quarter Manhattan market reports would seem to be evidence of a holiday miracle: co-op boards were overwhelmed by contracts, inventory plummeted, prices skyrocketed and a tremendous amount of money changed hands.

Manhattan ended 2012 with a grand finale: more fourth quarter sales than it has seen in 25 years, according to Douglas Elliman, and the lowest level of inventory in more than a decade. Alas, as is increasingly the case in the Manhattan real estate market and the city at large, the wealth was not spread out evenly in the end-of-the-year closings. The trophy market, while shining brightly, is something of a false beacon when it comes to the Manhattan real estate. It illuminates the seemingly unshakeable good fortunes of the world's wealthiest, but does not reveal the decidedly uncertain recovery and unstable footing of the financially struggling masses.

These were not one-bedrooms facing air-shafts or second-floor studios changing hands at such a hurried speed during the last three months of the year, but sprawling co-ops in white-glove buildings. The fourth quarter saw 37 closings above $10 million, the majority of them on the Upper East Side, according to Streeteasy. There was also a 142 percent increase in the number of contracts for properties above $10 million. And buyers certainly had their pick: in 2012, 644 properties priced above $10 million came on the market, the highest number in the last five years.

Viewed purely as an increase in sales volume and prices, the numbers might seem more encouraging than they really are: high-end sales pulled the average Manhattan sales price up 7 percent (to $1.48 million) over the fourth quarter of 2011, according to the Halstead market report, and the media price up 6 percent (to $836,000). Both time on the market and price cuts decreased. It was, as the Streeteasy report notes, the best year for real estate since 2008 (even if the median price in 2008 remains 9 percent above the 2012 median price).

It's too bad that the frantic pace of fourth quarter closings was not a sign of economic optimism, but rather pessimism: a last ditch attempt on the part of the haves to have more before the tax codes changed on January 1. And while no one would buy or sell a luxury condo for a favorable tax rate alone, the change means that many sales that might otherwise have closed in the first quarter of 2013 now belong to the previous year's tally. Fear of the fiscal cliff caused a flurry of activity, which is unlikely to be repeated in the New Year, despite the fact that we did not fall over said cliff. In 2013, the capital gains tax will go from 15 percent to 23.8 percent, reducing any sense of urgency to sell trophy properties. Low mortgage rates, which helped to fuel sales in 2012, are also likely to rise this year.

“With the upcoming changes in tax laws, record low interest rates and the inventory of available apartments at 30% below where it was a year ago, the incredible activity in the fourth quarter was not surprising,” Hall. F. Willkie, president of Brown Harris Stevens Residential Sales, said in a statement about the market reports, noting that the brokerage's report does not include the few substantial sales that closed in the very last days of the year, which would likely bring the total even higher.

However, other market analysts cautioned that the activity at the very top and bottom of Manhattan's real estate market does not mean that the market is healthy or well within recovery mode. Besides the luxury market, the only other strong category are entry-level apartments, largely purchased by people who were pushed into the sales market by record-high rental prices. Mid-range apartments remain oddly untouched. "At best, the recovery is nascent, fragile and fragmented," the Streeteasy report warns. "In a healthy market... buyers from all segments... would be clamoring to take advantage of the record-low mortgage rates."

kvelsey@observer.com

As expensive as ever (http2007, flickr)

After watching the world's wealthiest snap up one trophy property after the next—a $52.5 million co-op at 740 Park here, a $90 million penthouse at One57 there—it can be easy to lose sight of the fact that not all segments of the Manhattan real estate market has been drowning in a deluge of cash.

Thank goodness for the sobering arrival of second quarter market reports. A slew of reports released today show that while the uber-rich were out hunting for ever-more exquisite homes during these last few months, the merely well-off (buying in Manhattan is not, after all, for the masses) engaged in more sedate apartment shopping.

Manhattan apartment prices stayed more or less flat during the first two quarters of 2012, averaging $1.45 million in the second quarter, according to the Brown Harris Stevens market report, which is slightly less the first quarter average of $1.48 million. (Although it's still better than the second quarter of 2011, which had an average of $1.43 million).

Overall, co-ops and condos prices stayed fairly consistent compared to last quarter and last year, with co-op prices at $1.19 million (down one percent from last year), according to Brown Harris Stevens, and condo prices at $1.81 million, up 8 percent from last year (albeit less than last quarter's average of $1.88 million).

But even if prices have remained fairly steady, people are definitely buying more apartments than they were last year. The volume of closings jumped 23.6 percent from last year and 67 percent from last quarter, Streeteasy reported. Considering that spring is the busiest season, the 67 percent jump is not as impressive as it seems at first blush, but the increase from last year is noteworthy indeed.

And not only are more apartments selling, but they're selling closer to ask (which may mean that, at this point, sellers are more realistic about what their homes will fetch). In the second quarter, there were 4.2 percent fewer listings with price cuts than last quarter, according to Streeteasy, and 19.8 percent fewer than last year.

The segment of the market that is, not surprisingly, doing the best are high-end luxury apartments. The luxury market, categorized by Jonathan Miller in his report for Prudential Douglas Elliman as the upper 10 percent of all co-op and condo sales, was up 3 percent from last quarter, averaging $5.72 million. And as Brown Harris Stevens notes, while sales on the Upper East Side were down overall, sales of apartments with three or more bedrooms doubled compared to last year, and their average prices were 26 percent higher.

kvelsey@observer.com

Real Estate Market Looks to be Muddling Along (Flodigrip's World, flickr)

It's crystal ball time again, in which we use the past, the present and market reports to look into the future of real estate market.

Let's start with the good news. New York is becoming "'a place to be' for the oligarchs of the world," according to Stribling's Luxury Residential Report. Stribling reflects that while sales like Dmitry Rybolovlev's $88 million penthouse purchase at 15 CPW are an anomaly, such sales do "signal the return of the 'money means nothing if this is what I want' attitude," that was "so prevalent during the economic bubble."

In Stribling's category (properties going for $5 million and up) luxury sales really made their dramatic recovery in 2010, the brokerage says, but co-op dollar volume was up 23.2 percent in 2011. Less encouraging, condo dollar volume dropped 15.6 percent and townhouse dollar volume basically stayed the same.

But Stribling concludes on a bright note: "While it is rather boring to report on such a relatively stable market, it is also quite a relief after the turmoil between 2008 and 2009."

But then there are the sobering numbers from the Jan. 2012 report of S&P/Case-Shiller to contend with. Their home sales price indices showed an annual decline of 2.9 percent in New York (and a 3.9 percent and 3.8 percent drop in home prices for the 10- and 20-City Composites they studied).

Fortunately there's hope for the future, according to the new Urban Land Institute survey. The ULI determined that data from across the U.S. shows "reason for optimism throughout much of the real estate industry." Based on economic indicators  like rising gross domestic product, job creation and falling unemployment, they projects "broad improvements for the nation’s economy, real estate capital markets, real estate fundamentals and the housing industry through 2014." We like the sound of that!

Commercial real estate activity will be the real star of the sector, the ULI predicts, with total transaction volume rising from $250 billion in 2012 to $312 billion in 2014. The housing industry is even expected to begin a slow turnaround, although apartments may be cooling off a little, with the national vacancy rate expected to jump from 5 to 5.1 percent. (Imagine if New York had a 5 percent vacancy rate?)

Celebrations should be muted though, given that the times we're currently living in are not the best. According to the latest report from the Furman Center for Real Estate & Urban Policy at NYU, there were fewer foreclosures across all of New York than a year ago (good), although Manhattan had more foreclosures than it did a year ago (bad), but still far fewer foreclosures than any of the other borough (good).

Less promising were sales—volume was at its lowest citywide level since the 2nd quarter of 2009—and building permits, down 60 percent from the last quarter (but it was December, after all). Housing prices across all boroughs remained basically flat, except for Staten Island, where they were up. The next Brooklyn? We doubt it.

And so, there you have it. The uncertainty and ambivalence continues.

kvelsey@observer.com

"The first quarter of the Manhattan housing market showed a modest uptick in sales but declines in all the price indicators," Jonathan Miller wrote in his closely watched report for Prudential Douglas Elliman. "However, the declines were generally attributable to the expiration of the tax credit last spring and the significant shift in the sales mix toward co-ops over condos ."

In other words, blame (or credit) the Obama administration. We've been here before.

Mr. Miller's numbers, which show the median apartment price down almost 10 percent from last year and 7.4 percent from the quarter before, underscore the idea that there are fewer homes to buy, as inventory shrunk 5.3 percent, to 7,605 units from 8,027 a year ago. 

This could help drive prices up as the year continues, but Mr. Miller has also been expressing concerns about shadow inventory for some time. If the economy improves, and people begin to sell homes they have been holding on to, they could flood the market with property at a time the economy is ready to start pushing prices up. The number of days on the market also rose four days, to 127, which speaks to a possible lack of options for perspective buyers.

The median Manhattan home price reached $782,071, down from $868,000 last year and $845,000 in the fourth quarter of 2010, while the price per square foot was off 1.3 percent from last year and 3.2 percent from the fourth quarter, at $1,025 per square foot.

Part of the reason prices fell was a greater number of co-op sales, which rose 28.4 percent from the same time last year—even as prices fell, down 1.3 percent per square foot. At the same time, condo sales fell 24.3 percent from last year as prices rose a considerable 5.4 percent. This trend can be tied in part to the absorbtion of all the new condos built during the boom. As the glut runs out, the prices run up.

The shadow may indeed be lifting, as StreetEasy's report, also out yesterday, saw a 41 percent rise in inventory within its listings, to 383 new listings compared to only 271 additions last quarter. StreetEasy also saw fewer price cuts for condos, down a slight 1 percent, but still another possible sign of confidence in the market and a shortage of supply. Most striking, the site recorded median home prices down just over half a percent while average prices rose 3.5 percent.

mchaban@observer.com

Leasing activity hit a four-year high in 2010, according to Cushman & Wakefield's fourth-quarter Manhattan office report. Activity rose 61.4 percent in 2010 compared to the year before.

The bulk of the activity was in renewals, Joe Harbert, Cushman & Wakefield's regional COO, said, though major tenants, such as Meredith Corporation and Societe Generale, also hopped around the city in search of deals. Of course, there are still some surprisingly big holes left to fill.

But hold off on the celebrations, because there was only a modest improvement in vacancies and asking rents. The recovery still looks fragile.

"For much of the year, the strong leasing was almost completely offest by new space coming onto the market," said the report, released Tuesday. Vacancy rates, fell by 0.4 percent, to 10.5 percent in the fourth quarter from 10.9 percent in the one preceding it. But average asking rents were up less than 1 percent in that same period, to $54.34 a square foot.

Eyes ahead, though, because there are also troubling signs that the pace of activity could slacken this year.

In a briefing to journalists, Mr. Harbert said if unemployment doesn't start catching up, "we could see a little flattening."

Moreover, much of the rush for space--especially earlier in the year--came when rents were cheap and concessions generous. Landlords are just starting to scale back on things like free rent and fancy renos, and are nudging asking rents up in prime buildings, brokers at the briefing said. Building owners will need to do some fancy footwork next year to keep pushing rents upward without scaring off tenants.

The report predicts that asking rents will remain stable and vacancies will decrease. "With little construction in the pipeline," it says, "vacancy rates are projected to decline in 2011."

New York's aging office infrastructure never looked so good.

lkusisto@observer.com

Naturally, we called soothsayer Jonathan Miller for the answer.

"My takeaway is, relative to where we came from, it's positive. Relative to where we're going, it's neutral. There's a lot going on, but we're not done yet. It's the macro stuff we're concerned about."

By and large, apartment prices are up relative to this time last year (by 0.7 percent) but down from the third quarter (by 3.4 percent), according to Miller's own numbers for Elliman. Basically, 2009 was so crazy, so backward, that the shockwaves created by the credit crunch saw almost no sales in the first two quarters of 2009 with bunches and bunches of them in the last two. Fourth quarter 2009 set a record in terms of volume, in fact. Now we've returned to an (uneasy) normal.

Helping to fuel all this activity, of course, was the much-vaunted first-time homebuyer tax credit.  And that's where things got interesting in the discussion with Miller.

There has been a lot of talk about a housing double-dip--including in these here pages--about how everything is about to go right off a cliff again. Given the stagnation in apartment sales, we had to ask: Is this where we're headed, right back down, even here in high-flying Manhattan?

"We're not in a double-dip," Miller explained. "Not even close."

See the problem is, in Miller's view, the tax credit was a sleight of hand, a waste of money even. "It created an artificial high, and now we're suffering through an artificial low," he said "And it wasn't even really a high, it was more of a neutral."

What happened was, the tax credit caused a lot of people who maybe would have bought homes somewhere down the line, when prices fell to a suitable level, to go out and do so a little bit sooner. But, ultimately, it had no impact on the fundamentals within the housing market. The feds were stealing from Peter to pay Paul, as it were. We're only now unwound from the tax credits, and so the slide continues where it left off. Regarding demand, the economy just isn't there yet for a real recovery.

That's a recovery Miller does not expect at least until the end of 2012 or beginning of 2013, either. "Best case, we move sideways, but I'm more inclined to think we're seeing a price or sales erosion in 2011," Miller said.

"We've been living on a roller coaster ride, so at least we've gotten off that," he added.

What now, then, The Observer asked. A merry-go-round?

"Hah, no. I'm feeling more like we're on the tea cup ride," Miller said. "We're going round and round and not getting anywhere. And turning green in the process."

mchaban [at] observer.com | @mc_nyo