New York City real estate hasn't hit as many bumps as the broader national housing market, with prices in the city continuing to soar despite increasing supply. In the second quarter, the median sales price of co-ops and condos in Manhattan rose 13.5% from a year ago to $880,000, despite overall sales falling 14.8%, according to the Prudential Douglas Elliman Manhattan market overview released Thursday. During the same time frame, listing inventories rose 54% to 7,640 homes. "It's not a buyers market, not a sellers market, it's very evenly balanced," says Prudential Douglas Elliman CEO Dottie Herman. "So, I'm looking to see by the end of the year whether it tilts at all." The price gains were helped by another year of record Wall Street bonus money, says Jonathan Miller of Miller Samuel, the appraisal firm that tracks the data used in the Elliman report. Firms like Goldman Sachs ( GS), Morgan Stanley ( MS), and Merrill Lynch ( MER) all reaped in hefty profits last year. "The Wall Street bonus money exaggerated price growth, because at the same time you had rising inventory," Miller says. The second quarter had the highest inventory level since 1999, when Miller began tracking sales. The decline in sales activity was the worst in three years, he says. The growing inventory is due to a tug-of-war between many sellers and buyers who are having trouble converging on prices. "I'm struck by how many buyers are waiting on the sideline," Miller says. "There are buyers, they're just not pulling the trigger." But if apartments are priced right, they're moving, he notes. "People were worried once supply crept up that prices would have to come down. But it just shows that demand is very strong," says Greg Heym, chief economist with Brown Harris Stevens, which released its own report on New York City sales showing that the average price per square foot of a New York City apartment rose to $999 in the quarter from $962 a year earlier.
The strong demand is helped by a booming city economy. As evidence of this strength, Heym points to the recent New York City Comptroller report that showed that the number of employed city residents reached a record level in the first quarter. Brokers and economists also note that New York's real estate market doesn't suffer as much from investors and speculators who bid up prices to unhealthy levels in markets like Florida and California, where sales are slowing significantly for homebuilders like Toll Brothers ( TOL). "
New York is not going to grow rapidly like we did the past few years," Heym says. "But we're not going to drop rapidly either." A separate report from the Corcoran Group said the median sales price for co-ops and condos in the borough of Brooklyn rose 6% to $510,000 in the first half of this year from the same period in 2005.