Though the inventory of units available for sale has declined, the number of sales continues to increase. The third quarter saw 3,499 transactions, up 65.6% from Q3 2006's 2,113 units but down 11.2% from the 3,939 units that traded in Q2 2007. The elevated sales activity has served to reduce inventory levels over the past year by 31.7% to 5,204 units, down from 7,623 units in the prior year and down 0.6% from the prior quarter total of 5,237 units, the locally based firm maintains.

The strong sales have caused the listing discount and days a unit remains on the market to shrink. Fewer units on the market means the ones that are available are snapped up quicker--units were on the block for 123 days in Q3, down from 150 in Q3 2006.

Regionally, price gains were seen in all the city's submarkets. The average price per sf for an apartment unit Downtown was $1,120, up 12.8%--a record price. On the East Side, units were trading at a record $1,271, up 13.4%; apartments on the West Side were commanding a record $1,187 price per sf, up 6.6%, and Uptown prices rose 15.2% to $645 per sf, the second highest level on record.

The largest gains in prices this year were seen on the luxury end of the market, which accounts for the top 10% of all sales prices. High-end units commanded $2,000 per sf mark, a 16.7% increase over their price last year. Prices for three- and four-bedroom apartments, representing the upper 6% of the market, went up 17.9% and 16.4%, respectively, over Q3 2006. "These market segments far outpaced the remainder of the market, which saw modest gains over the past year," states Prudential Douglas Elliman.

"The high level of sales activity, combined with declining inventory levels, listing discounts and marketing times has not resulted in significant price appreciation year to date," the firm's researchers write. "This suggests a market psyche containing reasonable expectations of both buyers and sellers."

This, the company says, is a great departure from the "contentious" conditions between market participants over the past several years, as seen in the patterns of sharply rising prices and declining sales. "Buyers were being priced out the market and sellers had been conditioned to a rapidly appreciating market over the prior five years. In addition, Wall Street mortgage and credit market problems that appeared in mid-July and August have yet to show an impact in market data for the current quarter. Existing mortgage underwriting guidelines have become more strictly enforced with fewer exceptions allowed. A lower number of mortgage options and higher qualifying requirements for buyers are expected to temper the flow of sales activity."

Results aren't yet in for the fourth quarter, but Prudential Douglas Elliman says if Wall Street bonuses exceed last year's record--and they are expected to--those earnings will likely bolster apartment prices in the borough.