Gregory J. Heym
Executive Vice President, Chief Economist
BY LINDA BARR O'FLANAGAN
Reports of the death of the Manhattan real estate market have been greatly exaggerated.
That's the word from the very top of an industry that feeds on the pulse of a city that never sleeps.
"We've been on a good ride for the past couple of years and we should appreciate what we've had and figure out how we're going to deal with a shifting market," said Pamela Liebman, CEO of The Corcoran Group.
"Brokers should take a deep breath and understand that they work in Manhattan and we're not going anywhere. While we may be in for a rough patch, the long-term fundamentals are excellent."
As the city's financial powerhouses have unraveled this past week, Liebman, like other senior executives at brokerages around the city, has been huddling with analysts and economists in an effort to deflect a sucker punch to the housing market.
And like generals preparing their troops for battle, they've been rallying the rank and file to brace for a reality check.
"Brokers have to get everyone they're working with do a reality check," said Liebman. "They have to know it's going to take longer to get deals done and they're going to have to work alot harder, but they have the right people to work with. If a seller has wildly overpriced an apartment, they might need to re-evaluate whether they want the listing. They also have to be prepared to do some hand holding, become part financial adviser, part therapist, part broker. Emotions are in very strong play here and the broker needs to keep a level head."
Calming nerves has been a key element of the coaching from those who've lived to tell the tale from previous batterings New York City has kicked and screamed its way to the top of the global housing market.
"People keepwanting to compare this with theslump of the early 90s, but New York was a very different place back then," said Liebman.
"We had mostly co-ops back then and people couldn't rent their apartments. Now we have more condos and people who don't want to sell can rent until the situation changes.
"We still had squeegee men, a high crime rate and a poor reputation abroad. Today, New York is a place where everyone wants to live and many people who may not have been able to afford to live here before will seize the opportunity to buy here now."
Liebman has made a point of visiting all of the Corcoran offices to advise her brokers on the next move. She said, "A lot of us have been through bad markets before and this one hasn't even had a chance to shake out. There's a lot of fear out there, but I don't want us feeding into that — there's always a buyer and seller and its our job to get them together."
It's a fairly simple analysis that's shared by many of the city's vets.
Barbara Corcoran, the founder of the Corcoran Group who's now a TV pundit and author, said, "All bad news is contagious and if there are financial woes in the finance world, then its a big fire that spreads to all business. Right now, the financial meltdown is kicking real estate in its gut.
"On a positive note, there's something great about reaching the bottom of the market because you have afoundation to build up on and that's the beginning of a recovery. New York City always gets back up again. The best example was on the heels of 9/11 when everyone thought New York was down for the count, but the television coverage provided a multi-million dollar PR campaign for the city and everyone fell in love with New York. Sales doubled in one year and prices went up by almost 30%. Never write off New York City!"
Alan Rosenbaum, CEO at mortgage brokerage Guardhill Financial, agreed. "People are going to realize that we are near the bottom. Volume in the market will rebound because sellers will finally realize that the value of their home has declined and they will price more realistically for sale. When the market nears the bottom, buyers jump in to take advantage of the reduced prices. They shouldn't wait for the bottom because it's impossible to time it."
Greg Heym, executive vice president and chief economist at Halstead Property, warned against speculating about what's to come.
"Some people say its the end of the world. It just leads to more speculation. Right now, it's too early to be sure of anything."
Heym noted that the dreaded phrase "sub prime crisis" first trickled into the collective consciousness over one year ago, but pointed out, "We haven't seen the dramatic effect people have expected.
"What we do know is that we were in a very strong position before this crisis started a year ago: a stong market, good economy, low supply. We have a lot of things going for us and that has helped us weather this uncertainty better than anywhere else in the US." Indeed, despite predictions to the contrary, prices have risen in the city as a whole.
The most recent report from the Real Estate Board of New York showed average sale prices increased 12% in the second quarter of this year to $824,000 compared to the same time last year.
The July report from ResidentialNYC.com, REBNY's listing web site, found that Manhattan apartment prices shot up to an average $1,548,000 while citywide the figure stood at $1,007,000, a 21% hike on the same time last year.
Those figures may well take a hit as the market shakes out, according to Liebman, who said, "The market already had little tolerance for overpricing — now it will have zero tolerance."
She said events in the financial sector will likely to create a "surge" towards a buyers market, although she cautioned, "Buyers need to know, there's not going to be a feeding frenzy.
Wednesday, September 24, 2008