Manhattan real estate starts to soften
Sales are down according to the latest reports, but thanks to strong demand for luxury apartments the average Manhattan apartment now costs $1.67 million.
NEW YORK (CNNMoney.com) -- Even the lofty Manhattan real estate market is beginning to soften, according to reports released Wednesday by four of the city's top real estate agencies.
Data from this year's second quarter indicate two divergent trends; on a year-over-year basis, the volume of sales is down, while at the same time the average home price is rising.
"The constant bombardment of negative news every day is weighing on people's psyche," said Pamela Liebman, CEO and President of the Corcoran Group. Buyers "are looking for either real quality or real value and anything in between is suffering - the ordinary is not enough," she added. That explains the sales slowdown.
But it's the booming luxury real estate market that's helping to boost average Manhattan prices. "We are looking at almost two separate markets right now - the luxury market and the rest of the market," said Liebman.
The average price of a Manhattan apartment ranged from $1.66 million to $1.68 million in the second quarter of 2008, according to separate reports released Wednesday by Brown Harris Stevens, the Corcoran Group, Halstead Property and Prudential Douglas Elliman. That represents an increase of anywhere between 25% and 36% over average apartment prices for the second quarter of 2007.
When two of the most elite addresses in Manhattan with units on the market are excluded - 15 Central Park West and The Plaza - the average price comes down to about $1.49 million.
However, prices were down slightly - between 1% and 3% - from the record they set in the first quarter, when the average reported price was as high as $1.72 million.
In the second quarter the median price of a home in Manhattan - representing the midpoint of the market - rose to between $975,000 and $1,025,000, according to the reports. That is an increase of between 13% and 23% over the second quarter in 2007.
Sales figures vary from agency to agency, but all report that volume is down significantly. Second quarter sales were down 38% from the same quarter a year ago according to the Corcoran report, which was put together in collaboration with PropertyShark.com. Sales were down 21.8% on a year-over-year basis, according to Prudential Douglas Elliman, and down 18% according to Brown Harris Stevens. Halstead saw a dip of 14%.
While sales in the second quarter of 2008 were below where they were in the second quarter of 2007, "last year was the mountaintop and we are still just below the mountaintop," said Hall Willkie, President of Brown Harris Stevens. "We are still above where we were 2 years ago," he said.
Jonathan Miller, President and CEO of Miller Samuel Real Estate Appraisers, which assembled Manhattan data on behalf of Prudential Douglas Elliman, agrees that the Manhattan market is still near the top. "Last year was very unusual in that we had a very elevated level of activity," he said. According to his calculations, sales are still above the quarterly averages for the last 5 years.
The middle range of the real estate market has been the hardest hit by the slowdown, while the luxury market has remained virtually unscathed.
"If you are buying at $20 million, you are not worrying about a mortgage," said Dottie Herman, the President and CEO of Prudential Douglas Elliman.
Still, as Wall Street continues to be rocked by the credit crisis, industry concerns are growing about the strength of the luxury segment, which Prudential defines as the top 10% of all Manhattan sale prices.
"While we know Wall Street layoffs are coming, many laid off workers have yet to disappear from payrolls," Gregory J. Heym, Chief Economist at Brown Harris Stevens, said in a written statement. "There has been an anticipation of a decline in real estate prices."
According to the Prudential report prepared by Miller, the average price for an luxury apartment was $6.4 million, up 38.4% from an average for $4.6 million in the second quarter of 2007. The Corcoran report said that the median sale price for a luxury apartment increased to $4.884 million, up 35% from the same quarter last year.
Inventory is actually down 31.5% in the luxury market compared to a year ago, despite the fact that overall Manhattan home inventory increased by 31.2%, according to Miller.
A flood of new luxury condominium buildings are goosing the high-end trend, according to Liebman. These buildings offer full concierge services, with swimming pools, spas and even areas for children. "It is like living in a 5 star hotel and people love it." 
