Gregory J. Heym
Executive Vice President, Chief Economist
Manhattan apartment sales plunged the most in 18 years last quarter as buyers faced the prospect of a recession and job cuts at Wall Street securities firms.
First-quarter sales fell 34 percent from a year earlier and inventory rose 4.6 percent to 6,194 units, New York-based real estate appraiser Miller Samuel Inc. and broker Prudential Douglas Elliman Real Estate said in a report today. The median price of a Manhattan co-operative apartment or condominium increased 13.2 percent to a record $945,000.
"If it continues along this pattern, we're in a period of transition to a weaker market,'' Miller Samuel President Jonathan Miller said in an interview. "You typically see a slowdown in sales activity precede a slowdown in pricing.''
Financial companies have cut at least 34,000 jobs in the past nine months as losses and writedowns related to mortgage- backed securities climbed to at least $230 billion. Wall Street drives Manhattan real estate, with the median apartment price roughly tracking bonuses paid by investment banks since 1997, Miller said.
Until now, Manhattan has avoided the national housing slump. Last year, the U.S. saw the first drop in existing home prices since the Great Depression, while Manhattan apartment prices rose 3.6 percent, according to Miller Samuel.
Gains continued in the first quarter, according to today's broker reports. The Corcoran Group said the median for condos and co-ops rose 9 percent to $917,000. Terra Holdings LLC, which owns brokers Brown Harris Stevens and Halstead Property LLC, said the median climbed 13 percent to $855,000. The numbers vary in part because each broker includes some of its own sales that have yet to show up in the city's public records database.
About 30 percent of all first-quarter closings were for apartments in new developments that went into contract before turmoil hit the credit market, said Gregory Heym, chief economist for Terra Holdings.
"They are pre-credit crisis, pre-Wall Street worries, pre- new mortgage standards,'' he said in an interview. "You see a delay in impact in these numbers.''
Areas where buyers are worried about future price appreciation will be the first to slip, particularly neighborhoods that saw quicker-than-average price growth in recent years, said Pam Liebman, Corcoran's chief executive officer. She declined to be specific. Harlem in Manhattan and sections of Brooklyn including Dumbo, short for Down Under the Manhattan Bridge Overpass, are possible locations.
Brokers are waiting for any fallout from job losses on Wall Street or from JPMorgan Chase & Co.'s takeover of Bear Stearns Cos.
"What we are seeing now is buyers who are emboldened to be more aggressive in their offers,'' Liebman said. "They don't hesitate to bid lower and sellers now will have to decide whether or not they want to lower their prices.''
Apartments are already taking longer to sell. The average time spent on the market rose 12 percent to 146 days, according to Miller Samuel.
In Brooklyn, New York's most populous borough, the median price fell 2 percent to $549,000 last quarter, according to Corcoran and real estate appraiser Mitchell, Maxwell & Jackson Inc. Both Manhattan-based companies are closely held.
The average price per square foot of a Manhattan co-op rose 16 percent to $1,128 for the quarter, Miller said. For condos, the price per square foot gained 21 percent to $1,416. Co-ops make up more than two-thirds of Manhattan apartments. Residents of them buy shares in a corporation that owns the building, rather than having a deed to the property itself.
On the East Side, the greatest price appreciation was in apartments with at least four bedrooms, with the average rising 53 percent to $13.6 million, according to Brown Harris Stevens. On the West Side, three-bedroom apartments gained 90 percent to an average of just under $5 million.
The luxury market also saw big increases, largely due to multimillion dollar condominium sales at the recently converted Plaza, and at architect Robert A.M. Stern's 15 Central Park West.
The median price of a luxury apartment rose 46 percent to almost $5 million, Miller Samuel said. Corcoran's estimate was an increase of 18 percent to $4.4 million. Both companies consider apartments of more than $2.8 million as luxury.
"There is no question 2007 was the record year for real estate in New York City,'' Liebman said. "I don't think any of us will be surprised if 2008 doesn't hold up in comparison.''
Wednesday, April 02, 2008