Manhattan may be an island, but it is not unto itself when it comes to the issues now plaguing the United States real estate market.
Spring sales were back to their highest level since the spring of 2007, but supplies of homes for sale are very low. Active listings were down 31 percent from a year ago, according to a new report from Douglas Elliman, a New York-based real estate firm. They are at the lowest level in 13 years.
Despite the fact that Manhattan co-ops require big down payments and scrupulous analysis of potential buyers’ financials, too many New Yorkers still owe more on their mortgages than their homes are currently worth or don’t have enough equity in their homes to afford a move. Bottom line, home prices fell here too.
“They have may have re-financed, and they may have taken out a second mortgage,” said Jonathan Miller, CEO of Miller Samuel, a real estate appraisal and consultancy. “When they bought the home they may have figured out a way to put a small amount down, smaller than what the co-op actually knew about. It is the same problem here that it is everywhere else.”
Nationwide, more than 40 percent of homeowners with a mortgage are in a negative or near-negative equity position (less than 20 percent equity in the home), according to Zillow. Housing may be local, but this particular credit issue is national.
Short supply pushed prices higher for Manhattan condominiums, but not for co-ops. Condominiums, which have a median price of $1.25 million, about twice that of co-ops, are being helped by foreign, all-cash buyers. International buyers tend to shy away from tough Manhattan co-op boards.
“Scarcity is an important issue, and when apartments are properly priced they are selling quickly. While there is great demand and small supply, buyers are reluctant to pay a price that is not justifiable,” said Hall. F. Willkie, president of Brown Harris Stevens Residential Sales in a release. “Job growth remains strong in the city as does interest from both domestic and international buyers; this bodes well for a healthy market.”
Sales began to pick up dramatically this year, as fears of the fiscal cliff abated and optimism returned to real estate. While limited inventory would appear to make this a seller’s market, agents say savvy buyers are the norm in Manhattan, and that has kept price increases in check. While home prices in the rest of the nation were up just over 12 percent in May from a year ago, according to a new report from CoreLogic, Manhattan prices in general are not rising that fast.
Prices for co-ops, which account for 75 percent of the Manhattan market, were flat in the second quarter of this year, while the median price for a condo was up 14 percent from a year ago, according to the Douglas Elliman report. Larger co-ops saw bigger price gains, but for condos the gains were in studio apartments. Sellers are getting 98 percent of asking price, according to another report from Halstead Property.
(Read More: Rising Mortgage Rates Cause ‘Rush to ARMs’)
There is not much concern of any price bubble in Manhattan right now, especially as interest rates rise. Demand is still strong, and supply is low, but that does not translate into huge price spikes.
“I think the next quarter, we’re going to see a continuation of what we saw in the second quarter, which is pretty elevated sales levels despite rising interest rates, and also some upper pressure on prices is a continuation of that,” said Miller. “After that point I think we’re going to see some easing of sales levels.”
—Follow Diana Olick on Twitter @Diana_Olick.