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Manhattan Apartments Have Never Been So Expensive

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The second quarter market reports are out, and boy, are they a doozy. According to the Elliman Report, new price records were set for the average sale price, median co-op sale price, the average price per square foot for new developments, and the average price for luxury apartments. The average sale price is now a whopping $1.87 million, 11.4 percent higher than a year ago. One might assume that luxury new developments are leading the way for these price hikes, but appraiser and graph guru Jonathan Miller explains that while that might have been the case last year, it's not this time around. "This time, we have a record average and median set for the co-op market," says Miller, "and that's not a new development-influenced market. The condo market average sale price set a record, but if you remove new development from the mix, average, median, and price per square foot for resale condos all set records as well." In other words, apartments truly are just really expensive.

The Elliman report puts the median sale price for all apartments at $980,000, which ties the second highest on record. Corcoran put the median slightly lower, at $960,000, and Compass put it at $930,000. When asked if we could see a new median record soon, Miller says, "Yes, for sure." The current median record, $1.025 million, was set in the pre-Lehman market peak during the second quarter of 2008.

The co-op market, which is, like Miller said, not swayed by new developments at all, saw some serious price gains. The median price jumped nearly 10 percent from last year to $795,000. Corcoran and Compass put it a bit lower, at $750,000 and $740,000, respectively, but those numbers still break the previous record. The condo market also set new records across the board, with the median price hitting $1.39 million.

Compared to the first quarter, closings on new development condos sharply dropped, according to Compass and Elliman. While we spend a lot of time writing about new condo buildings, they are a small slice of the market; they made up just 8 percent of all sales in the second quarter, according to the Elliman report. But they stayed on trend and the average price per square foot set a new record, peaking at $2,011.

What do we have to thank for all these new price records? The biggest factor is a lack of inventory. "Inventory growth is stalling," says Miller. After bottoming out at the end of 2013, inventory expanded last year, but during the second quarter, it only increased to 5,730, a 1.3 percent compared to last year. What's more is that apartments on the lower end of the price spectrum decreased. Compass found that listings below $1 million decreased, while those priced at $3 million or above saw steady gains. Units in the six-digit club made up only 36 percent of sales.

The number of sales is down 20 percent compared to last year, and stalling inventory is partially to blame, but Miller points out that sales volume is still above average. Last year, the number of sales spiked drastically thanks to pent-up demand that accumulated as the economy improved after the financial collapse. Things have now evened out.

Tight inventory plus fewer cheap apartments is the perfect recipe for bidding wars, and that's exactly what is happening. Miller found that more than half of all sales closed at or above the asking price. "This is the highest ratio since the financial crisis began," he says. Price pressure will most definitely continue, so don't be surprised if 2015 turns out to be even more expensive than last year.
· 2Q 2015 Manhattan Sales [Elliman]
· Manhattan Q2 2015 [Corcoran]
· Market Reports [Compass]
· 2014 Has Been the Most Expensive Year Ever for Manhattan [Curbed]
· All Market Reports coverage [Curbed]