NEW YORK CITY-Manhattan’s inventory of for-sale housing is continuing to decline along with the amount of time an apartment stays on the market, while prices have increased 8% year over year, Brown Harris Stevens says in its report for the fourth quarter of 2010. Both factors bode well for developers that can afford to build, James Gricar of BHS tellsGlobeSt.com.

“If you’re a developer and you have access to money, then low inventory gives you all the more reason to build,” says Gricar, EVP and director of marketing. “However, the hard part is securing that money.”

As a result, Gricar says, “You’re going to see the big builders continue to develop and acquire product,” while activity among smaller- and medium-sized developers will  “remain low for the foreseeable future.” And a low volume of development activity is indeed what the market has seen over the past several quarters. “Certainly in terms of permits being pulled, it’s almost none compared to what it was compared to pre-2008.”

Manhattan’s average sale price for Q4 ‘10 rose slightly from Q3 to $1,432,787, marking the sixth consecutive quarterly increase. The average price for cooperatives sold during Q4 rose 17% year over year to $1,158,333, due largely to increased activity in the market for two-bedroom and larger homes. The average condominium price rose more slowly year over year to $1,751,219, a gain of just 1%.

The total number of transactions recorded during the quarter was 1,901, down 25% from Q4 2009. Yet Gricar says the higher numbers a year ago were skewed by the paralyzing effect the Lehman Brothers collapse had on the market in late 2008. When homebuyers shook off that paralysis, the floodgates opened.

“All that pent-up desire to close hit in the fourth quarter of ’09,” he says. “That fourth quarter was just insane.”

By comparison, says Gricar, “The fourth quarter of ’10 is a more typical fourth quarter for any given year. If you look at it month to month over the course of the year, you’ll see a steady increase, and without that anomaly of a 25% decline year over year, you’d see a much smoother trajectory of inventory gradually decreasing and prices gradually rising.”

The Q2 sales volume represented something of a bulge in that steady upward trajectory, and Gricar agrees that the numbers were affected to some extent by the first-time-homebuyer tax credit. Beyond the incentivizing effect of the tax credit, which was generally confined to the lower end of the market, the credit gave other buyers a bit of a psychological lift, he says.

The analogy Gricar would draw is to Wall Street bonuses, which brokers traditionally use as a barometer of how strong residential sales will be. “Certainly the bonuses directly affect those who receive them, but they also have an indirect psychological effect on the whole market,” he says. “It sort of frees people up to think it’s okay to buy.” Also spurring sales in Q2 were the interest rates, which were “so much lower than people expected them to be.”

The steady trajectory seen in Manhattan residential sales reflects the economic picture here, and to some extent the current Brooklyn economy, rather than illustrating the recovery in the US as a whole, says Gricar. “Because the economy has been a little better in New York and jobs have been added here at a somewhat faster clip than in the rest of the country, we are a little different in that way.”