Manhattan Housing: Get Some

You know how this ends. Prudential Douglas Elliman and Miller Samuel have published a mammoth analysis of the Manhattan housing market from 1999 through 2008. The findings are predictable: prices shot up. The average price per square foot for an apartment in 1999 was $400; a decade later it was over three times as much.

The current recession is supposed to have ended such price leaps. It has—for a time. Apartment prices will, sooner rather than later, start to climb and steadily. We are not in a new paradigm, just a paradigm shift.

Manhattan housing is a finite thing. There’s only so much land and sites for development—pretty simple stuff. So the greater inventory because of the recession is an immediate thing: That inventory of unsold apartments, most of it condos, will in the next few years be sold. These apartments may sell at lower-than-desired prices, as far as developers and brokers are concerned, but they will move.

It’s the nature of Manhattan; even in shaky economic times, like the recession of 2000 and 2001, the island recorded roughly between 8,000 and 9,000 apartment sales. At its decade peak, in 2007, Manhattan recorded 13,430 sales, according to the Douglas Elliman-Miller Samuel report. (It should be noted, too, that most of these apartment sales, in 2007 and other years, occurred in what could relatively be called Manhattan’s bread-and-butter range; in fact, last year, 94 percents of apartment traded for under $4 million.)

At the end of 2008, there were 9,081 apartments for sale. There’s about two and a half times that in condos coming on the market by the end of 2010. Yes, a lot of apartments for sale; but not so many that, history tells us, they won’t sell.

Instead, they will—just at lower prices, at least for a time, due to the now familiar suspects: tougher lending requirements, shallower Wall Street bonus pools, and a general sense among the savvy—aren’t we all?—that now is the time only for suckers to buy.

And they will also sell as developers virtually pack up shop in Manhattan, unable to construct new buildings because of scarcer loans, high labor costs, the dismal economy and the generally lower rate of return. Condos no longer reliably trade for $1,000-plus a foot.

So, Manhattan's apartments will gradually sell, and the development of new ones will cease. And at the other end of this swing will be the finite apartment supply. Cue a fresh price climb. Seize the day, buyers, they’re not making any more of them.