Manhattan housing market: Signs are positive

NEW YORK (CNNMoney.com) -- Homebuyers have flocked back to Manhattan after sitting on the sidelines for much of last year, according to three reports issued Friday. The demand has helped stabilize prices in the nation's most expensive large market.

"Sales are back in a big way," said Greg Heym, an economist who prepares a market report for two of New York's big brokers.

The total sales made during the first three months of 2010 hit 2,384, nearly double the number sold during the same period last year, according to Prudential Douglas Elliman, one of New York's largest real estate brokers.

That was a 3.6% decline from the last three months of 2009 when 2,473 were sold, but sales that quarter were unusually robust, according to Jonathan Miller, CEO of Miller Samuel, an appraisal firm that produces Elliman's market report.

"There had never been a fourth quarter that ever grabbed a bigger share of all the sales for the year," he said. "Usually, the fourth is the slowest quarter."

The first quarter of 2010 continued that high rate of activity but was not quite able to build on it.

There were several reasons why sales have rebounded:

• Pent-up demand. The financial crisis in late 2008, when Wall Street banks like Lehman Brothers failed, put a stranglehold on sales. Not only did 30,000 well-paid workers lose their jobs, but the ones who retained their positions received lower cash bonuses than in years past. When the remaining banks got through the crisis, workers recovered their confidence.
• The rising stock market. Stocks in the S&P 500 returned a whopping 23% in 2009, restoring investors' reserves and confidence.
• Homebuyer tax credit. The government's tax credit induced people to buy and helped firm up the low end of the Manhattan market. It refunded up to $8,000 in taxes to first-time homebuyers and up to $6,500 to move-up buyers.
• Low mortgage rates. The national weekly average interest rate for a 30-year fixed rate loan never exceeded 5.09% during the quarter. That could have made homes affordable for many buyers.

The three market reports, from Elliman, The Corcoran Group and one used by both Brown Harris Stevens and Halstead, calculate sales and prices differently. They usually agree on general trends but may disagree on specific data.

This time, Prudential reported the median price of a Manhattan apartment sold for $868,000, up 7.2% from a quarter earlier, the third consecutive quarterly increase. It is down 11% from the same period a year ago.

Corcoran pegged the median price at $820,000, up 3% for the quarter and down 11% year-over-year. Halstead and Brown Harris Stevens also had the median at $820,000, up 3% this quarter and down 10% compared with a year ago.

"Prices are going sideways," said Miller, who also found that price-per-square-foot was nearly flat, down 1.2% quarter-over-quarter.

Prices are firming, however, according to Corcoran CEO Pam Liebman. "We had bidding wars on 190 properties this quarter," she said, indicating that low prices bring out buyers.

"Nobody is overpaying, though," she said. "If you're a seller asking too much -- fuggedaboutit. There's no tolerance for that in this market."

Despite that, Miller said sellers still overprice, perhaps more than ever. "Usually, by my estimation, about a third of all listings are overpriced by at least 10%," he said. "Now, there are twice as many as that, two-thirds."

The impact of that overpricing is that even though listing inventory jumped 17% to 8,027 compared with a quarter earlier, there were actually fewer legitimate choices for buyers. Realistically the overpriced units, two-thirds of inventory if Miller is right, are not really on the market because there's no chance they'll be sold.

"The biggest complaint of my agents is, 'I don't have much to sell,'" said Liebman. "Any Sunday, going to an open house, buyers will be accompanied by big groups of people."

If the job market perks up, Wall Street continues to rebound and mortgage rates remain low, those Manhattan open houses could get even more crowded over the next few months.