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Inventory Nosedives, Sales Jump Despite Low Supply As Q2 Ends

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As we march on into the third quarter, it's time to analyze some trends?the good, the bad, and the ugly?from the one we just wrapped up. In a continuing saga from the first quarter of the year, the number of Manhattan apartments for sale continued to fall... and fall... so far, in fact, to the lowest second-quarter figure on record, and the second-lowest figure for any quarter at that, at least in the 13 years that real estate guru Jonathan Miller has been keeping track. Speaking of JMillz, here's his executive summary of this Q2's Elliman Report, a.k.a. what happened, why it happened, and what we can expect down the line. "Sales were expected to be low in the first half of the year, given the huge year-end volume seen [in late 2012] as people rushed to beat the fiscal cliff. 4Q12 was the most sales for a fourth quarters ever seen and that was expected to poach from 2013. It probably did, but we had a rise in sales anyway despite low inventory," he says. "Two causes: the threat of rising mortgage rates and the release of pent-up demand from the past few years." Low inventory coupled with high demand is leading to lots and lotsa sales (the most active spring since 2007!) and, bummer, pushing prices higher?the median sales price for Manhattan (Miller's metric of choice) increased 4.3 percent year-over-year to $865.000.

Much of the new development activity?think 432 Park, One57, 56 Leonard, and the rest of 'em?is aimed at the top 10 percent of the luxury market, and so, Miller says, "the remaining 90 percent don't have a lot of hope for new supply in the near term, because developers can't build much other than high-end due to cost of land and construction." He concludes: "It will continue to be frustrating with limited choices and upward price pressure." Well darn. It is without a doubt a seller's market out there for the near future, but there is one bright spot for buyers: rising mortgage rates will help take some of the edge of rising prices.

Q2 figures from Brown Harris Stevens, meanwhile showed average prices dropping slightly for apartments in Manhattan despite reduced inventory, mostly due to buyers being unwilling to shell out for an apartment that's priced too high just because there's low supply. Sales are still robust, however, because of some telltale signs. For one, the average time an apartment spent on the market until a contract was signed was 102 days, 18 percent less time than a year ago, and the average price per square foot for new developments rose 16 percent over the past year to $1,327.

But StreetEasy has its own Q2 report, and here's the upshot: sales are booming in Manhattan. Or so says the report: "Fueled by low interest rates, increased consumer confidence and the persistent fear of being priced out of the market, Manhattan buyers signed 4,185 new contracts?the highest number of contracts StreetEasy has ever recorded." The numbers here give a silver lining to all the inventory woes, noting that while it's still down 11.4 percent year-over-year, it's gone up 8.4 percent since Q1. Yup, that's looking on the bright side.

Meanwhile, over at Corcoran, in Q2 Manhattan market-wide sales jumped a dramatic 48 percent over the previous quarter, largely because first-quarter closed sales were atypically low as buyers rushed to close before 2012 ended for tax reasons. The data here, however, reveal even more bad news for inventory levels, which hit their ninth consecutive quarter of year-over-year decline. Come on, developers, can't you build more, and not just at the very highest end? Corcoran says to expect more "pressured inventory levels, rising mortgage rates, escalating prices, multiple offers and bidding wars" through the end of 2013. Well, yay.
· The Elliman Report: 2Q - 2013 Manhattan sales [Douglas Elliman]
· Second Quarter 2013 Manhattan Residential Real Estate Report (PDF) [Brown Harris Stevens]
· The Corcoran Report: 2nd Quarter 2013 (PDF) [Corcoran]
· Market Report - Manhattan Q2 2013 (PDF) [StreetEasy]
· All Market Reports coverage [Curbed]