2007: Year of the Iron Bubble

The Manhattan housing market in 2007, from tiny studio rentals to ornate Upper East Side townhouses, remained excruciatingly active and ever more expensive, despite a near-constant chorus of pessimism dragged in from 2006 like so much chain link around Jacob Marley’s ankle.

The luxury end exemplified Manhattan’s buoyancy, especially the co-op and condo records set within six months of each other.

In early July, one buyer closed on six apartments in the Plaza Hotel for $51,539,180, according to city records. Elizabeth Stribling, whose eponymous firm markets the Plaza’s condos, declined to reveal recently the identity of the buyer. It is the single biggest closed condo purchase in New York City history.

In December, as first reported by The Observer, writer Georgia Shreve agreed to sell two apartments at 1060 Fifth Avenue to hedge-fund impresario Scott Bommer and wife Donya for $46 million. It is the biggest co-op deal in New York City history.

Halfway in between these records, there were the Bronfman brothers.

Over the summer, banker Charles Murphy bought liquor heir Matthew Bronfman’s 25-room townhouse at 7 East 67th Street for $33 million. It was a record for a townhouse narrower than 26 feet wide. The same season, Edgar Bronfman Jr. sold his townhouse on East 64th Street to oil tycoon Len Blavatnik for around $51 million; Mr. Bronfman had tried to sell it nearly five years ago for $40 million, but …

… In 2002, $40 million was a lot in the highest end of Manhattan real estate; now, it’s a relative pittance. Ms. Stribling told The Observer last month that at least five condos in the Plaza had sold for above that.

The average sales price of Manhattan luxury condos and co-ops was up 9.5 percent from the first quarter to $5.085 million by the end of the third, on Sept. 30, according to research firm Radar Logic. The average price per foot was up over 15 percent over the same time to $2,009, a record. (Radar Logic defines luxury as the top 10 percent of all sales prices in a given quarter.)

Luxury rents, too, jumped. The average monthly rent for one-bedroom apartments in doorman buildings below 100th Street increased 5.4 percent from January to November, to $3,807, according to brokerage the Real Estate Group New York. The average for two-bedroom apartments was up 3.9 percent during the year, to $5,553.

The luxury end’s dribble-down to the market’s lower reaches could be felt in the rise in the median and average prices for Manhattan apartments overall—and in the rise in rent at even non-doorman buildings throughout the borough.

For condos and co-ops together, the average price per square foot was 6.9 percent higher in the third quarter ending Sept. 30 than it was in the first quarter, reaching a record $1,144. And the average sales price, skewed as it was by the bigger buys at the higher end, was up 6.1 percent from the first quarter, to $1,369,486 by the third.

Rents, as the Real Estate Group report noted, increased for even the smallest places. The average monthly rent for a studio in a nonluxury building below 100th Street increased 7.4 percent from January to November, to a rollicking $2,114.

So prices were up in 2007, a lot in some cases. But so what? So this: Despite the price increases (of this year, and just about any since 2001), Manhattan is likely to have its highest sales total since the Koch administration, according to Radar Logic. That’s 10,000 apartments traded, at least.

And the rental vacancy rate should finish 2007 at well under 3 percent, according to investment sales brokerage Marcus & Millichap, making Manhattan the nation’s tightest rental apartment market. One would think with records like the Bronfman townhouses and the Plaza condos and the co-ops at 1060 Fifth—and the jumps in rents ($2,100 for studios!) and sales prices overall—that Manhattan would now have become so prohibitively pricey as to have seen the vacancy rate rise and the sales pace slow as the year fades to black. One would be wrong.

This year proved the oft-cited economic maxim that Manhattan remains an island in more than the literal sense—and perhaps put to rest for good the notion of any sort of housing crash here comparable to the rest of the country.

2007: Year of the Iron Bubble