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April 11th, 2003, 01:46 PM
April 11, 2003
Market for Priciest Apartments Declines

The Manhattan real estate market, in a reversal of former patterns, is finding strength in more modest apartments and weakness at its most expensive end, according to a market survey of condominium and co-op apartments.

The survey, the Insignia Douglas Elliman Manhattan Market Report, reported that overall apartment prices were stable or fell only slightly last year, despite a recession, fears of terrorism and a volatile stock market. The average price remained more than double that of a decade ago.

The number of sales recorded by the survey last year were up sharply from 2001 and the second highest on record. That was partly because of the aftershocks of the World Trade Center attack, which stalled sales in the last quarter of 2001 and led to a surge in sales in the first half of last year. A period of softening sales and prices followed.

But the most significant growth, according to the survey, occurred in the market for studios and one-bed-rooms. Sales of one-bedroom apartments increased 32 percent, to 3,305 from 2,497, the second-highest yearly sales total on record. Sales of studio apartments increased 11 percent, to 1,275 from 1,149.

In contrast, the sales of apartments with at least four bedrooms fell 13 percent last year, to 118 from 135, and were 35 percent below the 181 sales recorded in 2000.

Jonathan Miller, president of the Miller Samuel appraisal company, who prepared the report for Douglas Elliman, said that within the overall averages, there were some significant changes.

He said the lowest mortgage rates in 40 years had stimulated sales and led to higher prices in more modest studio, one-bedroom and smaller two-bedroom apartments, while having a limited effect on larger and more expensive homes.

"We are seeing a bottom-up real estate recovery, with smaller apartments being the first to respond to lower mortgage rates," he said. Buyers of lower-priced apartments are more likely to finance most of the purchase price, he said, and are more sensitive to interest rates.

"The market is very hot because of interest rates," said Joanne Kennedy, a principal of Coldwell Banker Hunt Kennedy, a Manhattan real estate agency. She said one of her brokers recently worked with a young couple renting a $2,950 one-bedroom apartment. They discovered that they could buy a $445,000 one-bedroom apartment they loved in the West 60's, put 30 percent down and cut monthly housing costs to $2,420, and get a tax deduction on top of that. "The first-time buyer has a great opportunity," she said.

In 2002, the median price for one-bedroom co-ops rose by 7 percent to $343,000, while prices of studios rose by 2 percent to $299,000. Co-ops make up about three-quarters of all sales of studios and nearly two-thirds of all sales of one-bedrooms. The median price for a condominium studio was $280,000 and for a one-bedroom was $429,000, both down slightly from 2001.

Condominiums tend to cost more than co-ops because the maintenance costs are less, the rules are not as strict as those for co-ops and there are fewer purchase restrictions.

The weakness in the market for the most expensive apartments can be seen most starkly on the Upper East Side. The Douglas Elliman survey recorded only 36 sales of co-ops with four or more bedrooms last year, compared with an average of 89 a year during the previous decade. Prices for those apartments fell by $295 per square foot last year, or 21 percent, to an average of $1,092 per square foot, or about $3.3 million for a 3,000-square-foot apartment.

With that softness, the neighborhood lost another distinction. The report showed that prices for Upper West Side cooperatives of all sizes approached the level of those on the Upper East Side in 2002, $617 per square foot, compared with $619 per square foot. Two years earlier, prices on the Upper East Side were 8 percent, or $42 a square foot, higher than those across town.

In TriBeCa and SoHo, where apartments tend to be the largest and prices the highest, average condominium prices rose last year. Half the condominiums sold cost more than $1.5 million, an increase of 11 percent from 2001 prices and 20 percent from 2000. But even so, prices for the largest apartments, with three or more bedrooms, dropped significantly in 2002. The price for a typical three-bedroom fell 17 percent, to $1.87 million.

The new survey confirms the sense of many brokers that the market has gone from being a sellers' market to a balanced one, with neither buyers nor sellers having a strong advantage.

They see the market at a turning point, but no one is sure which way it will turn. Rising mortgage interest rates could drive prices down, Mr. Miller said, but a postwar economic upturn could lead some hesitant buyers to make a commitment.

"There are a lot of people and a lot of money on the sidelines," he said.

Copyright 2003 The New York Times Company

April 14th, 2003, 03:24 PM
They see the market at a turning point, but no one is sure which way it will turn

Thanks for the info, Mr. Barbanel.