Another sign the luxury condo market is cooling

 The median price reached $1.1 million, up 17% from the same time a year earlier, but that figure is inflated

The median price reached $1.1 million, up 17% from the same time a year earlier, but that figure is inflated

The overall market for Manhattan homes remained strong during the first quarter of this year despite the luxury segment cooling off, according to a number of reports released Friday.

However, the $1.1 million median price reported by Douglas Elliman Real Estate—up 17% from the same time a year earlier and the second-highest on record—was artificially inflated by a slew of new development contracts closing during the first three months of the year. Those deals, which also pushed the average price to new heights, were likely inked more than 12 months earlier.

"I think of the market as three broad areas all performing in different ways," said Jonathan Miller, whose appraisal firm, Miller Samuel, prepared the report for Douglas Elliman. "And the further down in price you go, the more intense the demand is."

The luxury portion of the market, which Miller considers the top 10% of all sales based on price, has slowed by many accounts. Despite a number of new projects coming online in the past year, the number of sales increased by a mere 8%, while the number of units on the market fell as developers of new buildings opted to keep homes off the market.

The trend was even starker for apartments in newly constructed buildings, many of which also fall into the luxury category. Even though developers built an estimated 5,500 units in 2015, there were fewer units being marketed in the first quarter of 2016 compared to a year ago. That decline in active listings, which fell by 44%, was largely due to sellers keeping new units off of the market in response to the sluggish pace of contract signings in recent quarters, according to Miller.

The median price for new developments jumped by more than 60% compared to a year earlier, but this was more of a reflection of the market at the time the contracts were signed during headier days in late 2014 and early 2015. Now it's a different story. 

"I think on the higher end, buyers are balking a bit on the pricing and looking for deals," said Pamela Liebman, chief executive of the Corcoran Group, which also released a report Friday. "Prices have been going up for so many quarters in a row it is not unusual for them to take a breath."

But the opposite was true in the resale market, which makes up more than three-quarters of all transactions in New York City. There, buyers quickly snapped up lower priced units. In fact, the largest share of sales during the first quarter were for homes priced between $500,000 and $1 million, according to Corcoran.

And inventory increased by double digits as more owners opted to cash in on what the Douglas Elliman report showed was steady price growth: The median price for resales reached $950,000 at the end of the first quarter, a 7.3% increase compared to a year before.  

Going forward, real estate experts believe the lower-end and resale markets will remain strong. But developers at the high end of the market need to be willing to price their apartments appropriately in order to move units. 

"The real sellers have made adjustments to what was unrealistic pricing," said Andrew Heiberger, chief executive at brokerage firm Town Residential, who said that more developers will likely begin following suit for homes that have sat on the market.