Halstead Property

Richard Grossman
Executive Director of Sales, Downtown
rgrossman@halstead.com
(212) 381-4274

Gregory J. Heym
Executive Vice President, Chief Economist
(212) 546-1069

When Will The Real Estate Bubble Burst

By Justin Rocket Silverman, amNewYork Staff Writer

News of a bursting bubble and increasing foreclosure rates is daily fare in reports of the American real estate market - unless it's New York City's market that's being discussed. Then the picture seems oddly stable; some would even say sunny for the foreseeable future.

The average sale price for a home in the city climbed to $782,000 in the third quarter of 2007, an increase of 20 percent from the same period in 2006, according to figures released yesterday by the Real Estate Board of New York.

"New York City is still considered a cool place to be, and everybody wants a part of it," said Richard Grossman, executive director of downtown sales for Halstead Property. "I have friends from all over country trying to move here."

"Unless banks stops lending we [the local real estate market] is not going to fall," he said.

Grossman pointed out a number of factors contributing to the city's seeming immunity from the national real estate crisis.

Foremost, he said, is that the city does not have a high proportion of the subprime loans blamed for many recent foreclosures. Co-op apartment buildings tend not to accept them, and in general New Yorkers make more money than the typical subprime borrower.

A weak dollar is also keeping the local market strong by attracting foreign investors in city real estate, Grossman said. Then, there is the age-old factor of supply and demand.

"Even with all the construction going on, you just can't build housing fast enough in this city," he said.

Yesterday's report found prices were highest in Manhattan, where the average home sold for $1.33 million, or around $1,176 per square foot. The average cost of a home went up in every borough except Staten Island, which saw a 2.8 percent drop.

The board's findings is based on data collected by the city and includes all condominimums, co-ops and one- to three-family homes sold in July, August and September. Despite the glowing data, some cautioned against being too optimistic about the market's apparent strength.

Gregory Heym, chief economist with Halstead, pointed out that there is the forecast of a downturn on Wall Street.

"Obviously, we don't know what is going to happen with the Wall Street bonuses," he said. "That is very important not just to real estate but to the whole economy of the city. If Wall Street starts to lay off large groups of workers, the market could turn."

The Associated Press contributed to this story.

Thursday, November 08, 2007