Feverishly working to wrap up two deals during Thanksgiving weekend, developer Joseph Sitt barely had time to sit down for dinner with his family.

But by the following Tuesday, Thor Equities’ chief executive had much to be grateful for. That day he signed contracts to buy two Manhattan development sites, one on Fifth Avenue and West 43rd Street, and the other on Washington Street in the meatpacking district.

“I was very happy because it was quite an effort,” said Mr. Sitt. “We see tremendous upside for retail, residential and hotel [projects] in the city.”

Clearly, others share Mr. Sitt’s sentiments. Sales of development sites in Manhattan below Harlem have skyrocketed during the past two years. The rise comes amid growing optimism about long-term prospects for the city’s economy, its booming tourism industry, its strengthening residential markets and an increasing willingness among lenders to loosen their purse strings.

The number of sites over 10,000 square feet sold in Manhattan quintupled from a post-crash low point in 2009 to 51 last year, according to Massey Knakal Realty Services. Meanwhile, sales in the city—excluding Staten Island—more than doubled, to 142, over the same period, while the average price per square foot surged 38%, to $173.22.

Yet beneath that broad rise, the market remains very spotty. In Manhattan, for example, the total number of sales is still far below the 75 to 80 in a typical year, while the average price slipped 17%, to $311.22 a square foot, over the past two years.

Massey Knakal Chairman Robert Knakal said that average was likely depressed by a number of sales of smaller and less desirable locations. In contrast, in prime neighborhoods such as Chelsea and the meatpacking district, prices are almost back to their boom levels. For example, a site on West 24th Street between Ninth and 10th avenues recently sold for nearly $360 per square foot. At the peak of the market in 2007, an identically sized site five blocks away fetched $380 a square foot.

“We are seeing some really high prices being paid,” said Mr. Knakal.

Whether that can continue will hinge on further improvements in the city’s economy. In recent months, job growth has been lackluster and is no longer running ahead of the national average. Meanwhile, New York’s traditional engine—the financial services industry—continues to shed employees. In the second half of last year, that combination, along with fears of a European meltdown, hit the recovery in the commercial leasing market hard. Leasing volumes sank 31% in the last two quarters compared with the previous two.

The recent crop of buyers that has emerged recently, however, is generally more experienced and less leveraged, and looks to be far better equipped to weather such problems.

“Now you have to have a track record and put in 40% to 50% in equity to qualify for a loan,” said Peter Hauspurg, chairman of Eastern Consolidated.

Ironically, one of the factors helping to boost sales is an increasing number of distressed properties, victims of the last boom and bust, coming onto the market—many of them at bargain prices. That increased flow of troubled sites comes as banks are eager to shed some of their failed deals.

High Line bargain

Barclays Capital, for example, sold a lot at 360 10th Ave. to Sherwood Equities last year for $43.5 million after the borrower failed to pay back the loan. Sherwood, which paid cash, completed the deal in just eight days, paying about $145 a buildable square foot for the site between West 30th and West 31st streets, across from the High Line.

The price was at least 19% below what the former owner paid when he was assembling the site between 2005 and 2007, public records show.

“We got a price that you can get in a distressed situation,” said Sherwood owner Jeffrey Katz, who confessed that at this point he isn’t sure what he’ll build on the lot but is in no rush to decide. “We bought it because it was a great opportunity and the location was very unique.”

Other developers, including Mr. Sitt, are wasting no time at all. He has already hired architect Morris Adjmi to design a seven-story property with a twisted steel façade for the Washington Street site. The developer plans to have retail shops in the base of the building and either an upscale office or hotel on the upper floors.

“We’ll design with the utmost flexibility,” Mr. Sitt said, noting that he believes either option will be a success because creative companies crave office space in the meatpacking district, while retailers are keen on the area’s flood of tourists.

Sky-high pedestrian traffic is also a key selling point of the space he is preparing to build on the Fifth Avenue lot he bought for $132 million, or $440 a buildable square foot, a price he considers a bargain. “When was the last time there was a development site for sale on Fifth Avenue?” he asks.

The risk is that bargains tend to draw crowds, and that could yet slow things down a bit as prices inevitably rise in the face of increased demand.

“There is a lot of equity out there chasing deals,” said Douglas Steiner, a developer whose family owns the Steiner Studios in the Brooklyn Navy Yard, and who late last year snapped up a site in downtown Brooklyn on Flatbush Avenue for $30 million. He plans to construct a 52-story rental building on the lot. But while he is still interested in buying more sites, he notes that there is more competition now that banks are more willing to lend again.

By Theresa Agovino

The Federal Reserve announced on Wednesday that it will not increase its benchmark interest rate until at least late 2014, saying that record-low rates are still needed to help boots the still sluggish economy.

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After a two-day meeting of the Federal Open Market Committee, the central bank said the economy is growing moderately, despite slowing global growth.

The Fed described inflation as “subdued” — a more encouraging description than offered last month. A better outlook for prices will allow the Fed more room to keep rates low.

Treasury yields fell on the news, while stocks quickly recovered their morning losses. Lower yields could further help reduce mortgage rates, which are tied to Treasuries, as well as boost stock prices as investors shift out of lower-yield government bonds.

Economists believe the extended time frame for low rates could lead to further Fed action to try to stimulate the economy, but today the Fed held off on any further bond-buying programs to fuel growth.

Other than pledging to keep its key rate at a record low well beyond the earlier mid-2013 target, the central bank’s statement today closely tracked its previous comments about economic conditions, using the same language to describe Europe’s debt problems and their impact on the global economy.

U.S. companies are hiring, the stock market is rising, the housing market is improving, factories are busy and more people are buying cars, but the threat of a recession in Europe will likely continue to drag on the global economy, the United States included.

The Fed said it would continue a program to further drive down long-term rates by selling shorter-term securities and buying longer-term bonds, but officials have resisted further bond buying for fear it would raise the risk of high inflation later.

In two rounds of bond buying, the Fed purchased $2 trillion in government bonds and mortgage-backed securities to try to cut long-term rates and ease borrowing costs so as to encourage consumers and businesses to borrow and spend more. Lower yields on bonds also encourage investors to shift money into stocks.

While Fed officials have chosen not to continue bond purchases at this time, they did not rule out the possibility of another bond buying program in the future, saying they were prepared to adjust their “holdings as appropriate to promote a stronger economic recovery in the context of price stability.”

To contact the reporter on this story: Emily Knapp at staff.writers@wallstcheatsheet.com

By MEG HANDLEY

For those looking for a bright spot amid the barrage of depressing data recently, news that housing prices were up for the third month in a row might have buoyed morale a bit.

The latest data from the Standard & Poor’s/Case-Shiller homeprice index showed that home prices in the nation’s largest metropolitan areas ticked up 1.1 percent, on average, in June, following a 1 percent increase in May. Chicago and Minneapolis saw the largest month-over-month increases, both recording 3.2 percent increases in home values, on average. Even metro areas hit hard by the foreclosure crisis saw incremental gains: Atlanta posted a 1.5 percent increase, while Phoenix saw a 0.3 percent gain.

So has the housing market finally found its footing?

Maybe not. While prices have been on the rise for a few months, experts don’t expect the upward trend to continue. Most predict home values will fall in the coming months, not bottoming out until the first half of next year. “I would expect that prices fall a little bit more,” says Celia Chen, senior director at Moody’s Analytics. “Any improvement in stability is temporary.”

U.S. News talked to experts about why the housing outlook might not be so rosy after all:

Seasonal bump. One reason home prices have seen a temporary bump has to do with the time of year. Even in this weak market, more homes tend to be bought and sold in spring and summer, which boosts demand and gives real estate values a lift. “A seasonal kick accounts for the recent strength in the indexes,” wrote Patrick Newport, economist at IHS Insight, in a recent report. “The kick will wear off in the fall when demand weakens and sellers have to give way on price, and prices will start dropping again.”

Even with the seasonal uptick, prices are down 4.1 percent compared with June 2010, and down 33 percent from their 2006 peak, meaning the housing market still has a lot of ground to make up. And it faces stiff headwinds. More foreclosures and excess supply coupled with weak demand could drive prices down another 10 percent, Newport predicts. The outlook is even worse if the economy slips into another recession—a 40 percent probability, he says. “The unemployment rate will climb, driving foreclosures up, leading to an even larger drop in home prices.”

Underwater mortgages, distressed properties. The housing market meltdown has left millions of Americans owing more on their mortgages than their homes are worth, and until sagging prices stop draining home equity, that debt overhang will continue to bottleneck the housing market. The number of Americans facing serious delinquency on their mortgages is rising as well, another troubling fact that could translate intoeven more foreclosures flooding the market.

On top of fresh foreclosures expected to hit the market, properties held up for legal reasons are likely to stream onto the market in the coming months as well. Finally, abandoned or vacant homes—the product of overbuilding—only add to the glut of supply and will pull down home prices for the foreseeable future.

Index methodology. Although Case-Shiller numbers have become one of the most popular metrics used to measure house prices, critics argue that the indices shouldn’t be used to gauge the health of housing market from a consumer point of view, primarily because they lag signed contract data by about six months.

“It’s equivalent to waking up in the morning at the end of August and deciding what clothes you’re going to wear based on the average temperature in February,” says Jonathan Miller, president of New York City-based Miller Samuel Real Estate Appraisers. “If that’s what you want to know, then it’s helpful, but that’s not how the index is being applied.”

Since the end of June—as far as the data goes back—the country has endured a slew of natural disasters, a debt downgrade that shook consumer confidence, and reports that America could be slipping into another recession, none of which have been factored into the most recent Case Shiller numbers.

What does this forecast mean for consumers? According to experts, sellers shouldn’t hold out for better times in the coming months. If your goal is to make a profit off the sale of your home, now is probably not the time to sell, says Daisy Kong, spokeswoman for Trulia, a real estate information website. But if you have to move, the key is price your home aggressively to attract what little demand there is in the market. “Make sure [your home is] priced to sell based on [comparable homes] from the local neighborhood. Maybe price it even a little lower,” Kong says. “Don’t focus so much on trying to make a profit as much as just trying to recoup costs.”