Real estate prices in other parts of the country may still be 20% below peak values, but it’s a different story in Manhattan. The demand for luxury apartments has helped property prices almost fully recover from the recent crisis.
During the first quarter of this year, the median sales price for a co-op or condo in Manhattan increased by 18.5% compared to the same time last year, reaching $972,000. The article in CNN Money points out that this price is more than four times the median US home price which is currently at $205,000. Elsewhere in the country, $972,000 would normally buy a large three or four bedroom home complete with garage and backyard, but in Manhattan it buys a one-bedroom apartment with less than 1000 ft.² of space.
In spite of this, home prices in Manhattan are still expected to continue to increase, as prices are still below the $1.025 million peak seen during the second quarter of 2008. Real estate experts expect prices to reach these levels during the second quarter of this year. Major brokers in Manhattan have seen sales volumes increase by 25% or even more during the first quarter of this year, and inventory levels are still low. This means many homes are ending up in bidding wars. Apparently some 38% of sales achieved the full listing price or were in excess of the asking price, and not surprisingly this has caused prices to rise substantially. Much of the demand is for high-end luxury homes.
At the moment there is very little construction taking place in Manhattan and as a consequence there are too few homes to meet buyer demand. Just 367 brand-new apartments were sold during the first quarter of this year. Many of these were in high-end luxury buildings, built to cater for international buyers.
Demand is also being boosted by families seeking apartments of three bedrooms or more. In the past people tended to live in Manhattan until they started a family or until they downsized or retired, but nowadays things are quite different and more people are choosing to raise their children in the city. Nearly a third of the closings during the first quarter were for homes with three bedrooms or more. The housing shortage has led some buyers to look outside Manhattan to the boroughs of Long Island and New Jersey. The median price of a property in Brooklyn rose by 11.2% during the fourth quarter to reach $570,110.