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Wall Street Journal

Buying Battles Escalate As Listings Dwindle

Manhattan has become a real-estate battle zone for buyers like Jesse Damon fighting over an ever-shrinking supply of apartments, brokers say.

Mr. Damon, an immigration lawyer and his wife, Mari, found that to be true when they tried to acquire a family-size, two-bedroom apartment on the West Side after paying huge sums to rent in the same neighborhood.

Despite a budget of up to $2 million, every place that they wanted also attracted other bidders willing to pay more, almost as soon at the listing came on the market. They had lost several bidding wars.

So when the Damons found a co-op apartment they loved on West 81st Street, they sent the sellers a note introducing themselves and enclosed a family photo, along with their bid.

"It's frustrating," Mr. Damon said. "Everybody is trying to get the same thing, there is a lot of competition."

Brokers have many similar stories to tell about deals won and lost by buyers in the Manhattan market for everything from studios to multimillion-dollar units as the number of listings has shrunk. Listings during the second quarter—the peak selling season in Manhattan—reach their lowest point on record according to Jonathan Miller of appraisal firm Miller Samuel Inc.

A market report by Corcoran Group being released Tuesday found that there were 4,450 contracts for Manhattan apartments signed during the second quarter, the most, by far, in any quarter since the second period of 2007 and 18% above the second quarter in 2012. The same report found that closed sales were up 4%.

Pamela Liebman, president of Corcoran, said that 72% of her firm's brokers who responded to a survey said they had been involved in a bidding war this year, and about half of those said they were part of multiple bidding wars. A year earlier, 50% said they had been involved in bidding wars.

"From the seller's point of view, it is a very exciting market," said Sophie Ravet, a broker at the TriBeCa office of Brown Harris Stevens. She said that all seven exclusive listings she put on the market this year ended in bidding wars within two weeks after they were listed.

She said that prices were increasing downtown, and that some buyers who couldn't afford to pay all cash have "decided to take a breather" and drop out of the market. They were waiting for a market correction or a rise in listings, she said.

Last week, The Wall Street Journal reported that median prices and closed sales in Manhattan during the second quarter were nearly flat compared with a year earlier, based on an analysis of closed records, and a number of latest market reports from brokerage firms being released Tuesday had similar findings.

One report by Brown Harris Stevens and Halstead, for example, reported that sales were off by 1% from the year-earlier period and median prices were unchanged at $850,000. It found that the average price was off 3%.

But another report prepared by Mr. Miller for Douglas Elliman had a more upbeat picture. Unlike the methodology for other reports, Mr. Miller includes nonpublic data on deals reported to be close that weren't yet officially filed.

The Elliman report found that all price indicators for Manhattan were up from the same quarter last year, with median prices up 4.3% to $865,000. It put the average price at $1.425 million, an increase of 1%.

For co-ops, the median price was $665,000, and the average price was $1.09 million. For condos, the median price was $1.25 million and the average price was $1.89 million.

Dottie Herman, president of Douglas Elliman, said that the market was "hot" and that was likely to continue over the next year. She said the tabulations don't include especially strong sales in new developments, like 56 Leonard St. in TriBeCa and 150 Charles St. in the West Village.

As quickly as developers put up listings for their new developments "they are gone," she said. While asking prices on new developments are rising faster than those on older buildings, Ms. Herman said they were still being snapped up. "It is like they are giving them away," she said.

Diane Ramirez, chief executive officer of Halstead Property, said that the market was strong and stable and buyers were cautious. Overall, she said, "Prices are not skyrocketing."

But Nanjoo Joung, an interior designer, found the market frenzied when she bid on a large studio with an alcove on York Avenue on the Upper East Side in need of renovation.

Working with Fern Hammond, a friend and broker at Halstead Property, she experienced a moment of elation when she outbid another buyer and made a deal on the apartment listed at $359,000.

But when the seller didn't send a contract, she and the broker became worried.

They were then told there were two higher offers, for all cash, without a mortgage contingency. So Ms. Joung raised her offer and found private financing to be able to close without a mortgage. She got the apartment.

"They were looking for the highest bid they could get and in this market they can get it," she said.

As for Mr. Damon, on the advice of his broker, Scott Stewart of Corcoran, he prepared a one-page personal statement introducing his family, including his 5-year-old daughter.

"We explained who we were and why we wanted the apartment and what our plans were for the next few years," he said. "It was our life story."

The apartment at 15 West 81st St. had high ceilings and big rooms, and it was the one they liked best.

Mr. Stewart said that when multiple bidders are offering about the same price, a personal note or a photo can help clinch the deal.

But that isn't what happened to the Damons.

They bid more than $2 million, significantly more than the asking price. The seller appreciated the letter, but someone else bid even more.

"The response was, we really like you guys a lot, but there was a significant spread between your bid and someone else's," Mr. Damon said.

Tuesday, July 02, 2013