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Manhattan Housing Market Still Sturdy, For Now

Third-quarter condo sales soar, but lower Wall Street bonuses could threaten the market.

Wall Street may have had a roller-coaster third quarter, but the New York City housing market kept running smoothly.

Two reports released Tuesday show that the Manhattan real estate market continues to perform significantly better than the rest of the nation. That said, market watchers warned that tough times for big Wall Street players could slow down the city's sales boom.

In the third quarter, Manhattan residential real estate sales increased 65.6% from a year ago, according to a report from Prudential Douglas Elliman. The number of condo and co-op units on the market fell 31.7% from the prior year.

Despite the big drop in available homes, prices remained relatively stable. The median sales price for a condo or co-op increased 2.3% to $864,397, the report said.

A report from the Corcoran Group, meanwhile, said sales in the quarter rose 20% from a year ago, while the average sales price increased 5%.

Although the two reports are supposed to track the same sales in the market, discrepancies are often the norm because of sampling issues.

Nonetheless, the data paint the New York City market in a much better light than the rest of the country, where prices are flat to falling, sales are down and inventories have reached historic highs. The S&P Case-Shiller Index

released last week showed home prices fell 3.9% in July from a year ago in the 20 largest U.S. cities.

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The Manhattan market in particular appears to be in a state of supply-and-demand equilibrium right now, says Jonathan Miller, director of research with Radar Logic, which prepares the Prudential report.

"You would suspect that if inventory continues to contract, it would be reasonable to think prices would rise at a faster pace. But that hasn't been the case to date," Miller says.

"We have elevated sales, falling inventory and prices generally holding," he adds.

The Manhattan market's strength has been driven by strong Wall Street bonus dollars pouring into real estate. But given the turmoil in the credit markets, major investment banks are expected to report lower bonuses this year.

That could temper sales at the beginning of next year, while new condos continue to pop up across the city, industry watchers warn. A national recession could also significantly boost inventories and cause prices to drop, Miller says.

Other issues to watch for are a rising U.S. dollar. Recent weakness in the dollar has helped sales of new condos as foreigners flock to the market.

"New York is on sale for those people across the world who are operating on different currencies," says Pamela Liebman, CEO of the Corcoran Group. Buyers from Korea are the biggest segment of the international set, she says.

The hottest segment of condos and co-ops in Manhattan continue to be any apartment with a view of Central Park, Liebman says. Such coveted units are immune to any slowdown in Wall Street bonus money, she says.