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Prices Fall in Manhattan As Housing Market Cools

NEW YORK -- Housing market watchers can exhale. Prices in some of the nation's hottest markets are at least leveling off, and in some cases even coming down.

In New York, a report prepared by appraisal company Miller Samuel Inc. on behalf of real estate firm Prudential Douglas Elliman released Tuesday showed that average Manhattan apartment prices fell nearly 13% in the third quarter 2005 to $1.15 million from $1.32 million in the second quarter.

Housing stock is also staying on the market longer, the report showed, with the number of days it takes to sell an apartment increasing a month to 133 days from 102 days.

The report was confirmed by other research, including reports from two other real estate firms, Brown Harris Stevens and Halstead Property. These showed that average apartment prices in Manhattan were down 11% in the third quarter for co-ops to $1.04 million from $1.17 million in the second quarter, and down 10% for condominiums to $1.28 million from $1.42 million in the previous quarter.

Data released earlier in the week by real estate appraisal firm Mitchell, Maxwell & Jackson Inc. showed that average Manhattan apartment prices for co-ops and condos south of 96th Street fell 3.9% to $1.09 million, the first time in two years the firm had seen a drop in prices. The decline followed a drop in overall demand, according to Mitchell, Maxwell & Jackson managing director Michael Martin, as the number of sales dropped 33% to 1,031 from 1,528.

The Prudential Douglas Elliman report also showed a decline in sales, albeit more modest. In the third quarter, the number of sales dropped 8.4% to 1,997 from the prior quarter's total of 2,181, "as mixed economic news weakened demand," the firm said in a press release.

Not Just New York

The apparent slowing in the New York housing market followed signs of cooling off in markets across the country. The most recent national data have been mixed, while reports from specific West Coast markets have been pointing to a possible slowing of demand.

New home sales reported last week fell 9.9% to a seasonally adjusted rate of 1.24 million units in August, according to the Commerce Department. But the pace of existing home sales rose 2% in August to 7.29 million units, a near-record pace, according to the National Association of Realtors.

In San Francisco, the number of homes sold in August dropped 9.9% to 662 from 735 sold in the same month a year ago, though median prices still climbed a healthy 11.5% to $745,000, according to DataQuick Information Systems. In San Diego, the number of homes sold dropped 3.6% to 5,379 from 5,580 a year earlier, and the median price rose just 2.1% to $493,000.

With home prices appreciating routinely at a double digit pace for a couple of years in certain metropolitan markets, analysts have long predicted a slowdown would eventually take hold. In New York, prices "are going to reach a level that just can't be sustained," said Mr. Martin, the managing director at Mitchell, Maxwell & Jackson.

Particularly with short and long-term interest rates heading higher, affordability may start to make buyers more resistant to high prices in the coming months, he said, at least in the under-$2 million market where buyers are more sensitive to changes in interest rates.

But so far, Mr. Martin said he doesn't see signs of a bubble bursting. More likely, he said, there will be "a soft landing," in which prices ease up a bit and then level off for a time.

posted by Henry @ 1:24 AM