Manhattan's Price Per Square Foot Has Never Been Higher

The sale of luxury apartments in new developments—many of which had contracts signed more than a year ago—have boosted prices to record numbers for Manhattan’s second quarter sales report. Douglas Elliman released numbers on the Manhattan market, finding that the median sales price increased 13.1 percent from the same quarter last year to $1,108,500. The price per square foot was up 31.3 percent to $1,759, another record. And the average sales price rose 13.1 percent to $2,029,075— that marks the second consecutive quarter in which the average price to buy a Manhattan pad surpasses $2 million.

Jonathan Miller, the man behind the numbers for the Elliman report, separated new development sales from resales to get a better understanding of market trends. New development, which accounted for 18.5 percent of all closings, has seen "a heavy volume of closings since 3Q15 that skew to the high end," he says. But it’s worth noting that most of the contracts for new development units were signed 12 to 18 months prior.

If you’re only looking at the new development market (both condos and co-ops), price per square foot was up 28.1 percent to $2,577 and the average sales price was up 4.9 percent to $4,383,078, both record numbers. The number of sales increased a whopping 188.2 percent. As for demand, Miller says, "the below $5 million, new development market is seeing steady sales activity, but is slow above that threshold unless developers are negotiating."

Resale apartments—which make up 81.5 percent of all closings— show more stable pricing, although it’s "stable at a high price point," Miller points out. The median sales price was pretty much unchanged, at $945,000, while the price per square foot was up 13.8 percent to $1,453.

So while the new development sales contributed to all the record prices, the resale market, Miller says, could be considered "tight at the bottom, soft at the top and neutral in the middle... overall, it’s flat." Resale inventory jumped 25 percent—after three years of chronically low inventory—and the pace of the market remains pretty fast. The absorption rate of 7.2 months is slower than a year ago, but the 40-quarter average is 8.2 months.

Compass also found record prices in the second quarter numbers—with the $1.195 million median closing price the highest on record for the market overall. Median prices on co-ops came in at $790,000, and condos at $1.65 million, the highest second quarter on record. They are finding the most demand in the Downtown market: the median time on the market there, 68 days, came close to that of Manhattan overall, at 63 days, despite a median closing price 41 percent higher than Manhattan’s.

Corcoran found the first signs of prices cooling in their second quarter numbers, despite the fact that new development sales continued a year-long trend of double-digit increases. According to the report, "Prices continued to remain near record levels but showed the first indication of settling with the first decrease in average sale price in three quarters (down 6 percent in the second quarter). Average price per square foot also declined by 3 percent for the first time in two quarters, since the third quarter of 2015." Corcoran also called out Downtown Manhattan for its sky-high sales numbers, as 52 percent of all luxury sales took place there this quarter.

Moving back to resales, Halstead offered a breakdown of where they’re all happening. The highest percentage of resales in Manhattan this past quarter were on the East Side, with 21.8 percent, followed by Midtown at 20.4 percent. The firm found that resale apartments spent an average of 88 days on the market, 6 percent longer than the same time a year ago. For both co-ops and condos, sellers accepted 98.2 percent of their last asking price, which was a mere 1 percent less than in 2015’s second quarter.

Bond focused on the increase of inventory this quarter, with partner Noah Freedman noting "that inventory has showed the biggest increase since hitting bottom in late 2013." He also made a distinction between new development and resale: "This also means that after several quarters of the market conversation being dominated by luxury new development, the only area of the market where inventory was increasing, we can start to talk about the strength and stability of resale inventory." He too thinks that the market is poised to balance out more than it has in recent years, with more price corrections in the luxury market.

Finally, Streeteasy tracked rental prices in both Manhattan and Brooklyn for the month of May. They found some slowdown in Manhattan—rentals spent more days on the market last month (an increase from 21 to 24 days), more rentals were discounted (with an increase from 28.7 percent last year to 30.4 percent), and rent price growth is slowing.

The median rent has increased 2.3 percent since last year from $3,206 to $3,280, less than half the rate of the previous year. And there may be more where that came from, as price growth is expected to continue to slow down in the next 12 months. According to the report, "The median resale price is expected to rise 1.2 percent in Manhattan over the next 12 months (down from 2.8 percent growth over the last 12 months). Prices are expected to decline in Downtown Manhattan."


There’s also some relief this summer in Brooklyn, with rentals staying on a market a little longer (from 19 to 22 days) and one out of three rental units (32.3 percent) getting discounted. Median rent increased 1.2 percent since last May to $2,873, compared to a 4.4 percent increase from May 2014 to May 2015, and that price is also expected to slow over the next year.

Here’s what StreetEasy economist Krishna Rao has to say about apartment hunting in these hot months: "New York renters have grown accustomed to arriving at open houses with their checkbooks in hand, for fear of losing out on a property. Now, in the face of record-high prices, renters are pausing to weigh their options, easing urgency for summer shoppers in both boroughs."