Manhattan apartment sales surged in the fourth quarter, setting a record for year-end transactions, as the prospect of rising interest rates and prices pushed buyers to make deals before purchases became costlier.
Sales of condominiums and co-ops jumped 27 percent from a year earlier to 3,297, the highest fourth-quarter total in 25 years of record-keeping, according to a report today from appraiser Miller Samuel Inc. and brokerage Douglas Elliman Real Estate. The previous record was set in 2012, when sellers sought to finish deals before an expected jump in capital-gains taxes.
Buyers are rushing into Manhattan’s market after a jump in mortgage rates since May, heightening competition for properties at a time when supply is dwindling. The inventory of homes for sale at the end of December fell 12 percent from a year earlier to 4,164, the lowest since Miller Samuel began tracking that data 14 years ago. Demand is pushing values higher, with the median price for a condo reaching a record.
“There’s a concern that homeownership will be more expensive and therefore the time to act apparently is now,” Jonathan Miller, president of New York-based Miller Samuel, said in an interview. “It’s a combination of rising mortgage rates and concern that prices are going to rise.”
The average rate for a 30-year fixed mortgage jumped from a near-record low of 3.35 percent in May to 4.53 percent this week, according to Freddie Mac. The Federal Reserve said last month that it would begin to scale back its stimulus plan that has kept borrowing costs low, fueling speculation that mortgage rates will rise further.
The median price of Manhattan transactions that closed in the fourth quarter climbed 2.1 percent to $855,000, Miller Samuel and Douglas Elliman said. Buyers agreed to pay the asking price or more in 43 percent of all sales, compared with 12 percent a year ago.
Condo prices rose 14 percent to a record $1.32 million in the quarter. The surge was propelled by a 27 percent increase in the price of apartments in newly constructed developments, to $1.73 million. Properties built and completed since the recession tend to have larger units and are tailored to luxury buyers, which accounts for some of the price jump, Miller said.
“I don’t see demand going away,” said Gregory Heym, chief economist at Terra Holdings LLC, owner of brokerages Brown Harris Stevens and Halstead Property.
He expects that inventory could decline further in 2014 while prices continue to rise. Homeowners are hesitant to list their apartments for fear they will have nothing to buy once they sell, while limited new development activity is focused on high-net-worth buyers, he said.
“There’s no relief coming,” Heym said. “You’re seeing new developments being sold before they’re finished, and there’s no reason to expect people will put their apartments on the market. The frustration is finding something to trade up to.”
Other reports issued today showed a frenzy of sales and record-setting prices for condos. Brown Harris and Halstead reported 2,664 completed deals in the fourth quarter, a 16 percent increase from 2012.
Their report showed condo prices set a record of $2.16 million on average, after rising 15 percent from a year earlier. The average price for units in new buildings climbed even higher to $2.89 million, Halstead and Brown Harris said.
Brokerage Corcoran Group reported an 11 percent surge in completed deals from the previous year to 4,113 sales. The number of contracts signed climbed 10 percent to 3,127. The median price of all properties that changed hands in the quarter rose 1 percent to $855,000, while values in new developments jumped 32 percent to $1.68 million.
“The product that’s been offered this year, while there’s not been a lot of it, it's really been hitting the sweet spot in the market where there’s a high demand for larger apartments,” Pamela Liebman, chief executive officer of Corcoran, said in an interview. “The mood is very positive right now.”
© Copyright 2023 Bloomberg News. All rights reserved.