Gregory J. Heym
Executive Vice President, Chief Economist
By By Amanda Fung
This year is looking even grimmer than its predecessor for Manhattan’s residential real estate market. Sales plummeted by as much as 51% and inventory soared by 34% during the first quarter, according to a number of industry reports released Thursday. The good news was median sales failed to show the drastic drops that had been widely anticipated. Still, the downward pull on the market overall was clear.
“We expected this,” said Dottie Herman, president and chief executive of Prudential Douglas Elliman, which conducted a survey with real estate appraiser Miller Samuel Inc. “We knew that New York was not going to be immune to what was going on in the world.”
During the first quarter of 2009, overall sales activity in Manhattan plummeted 47.6%. That ranked as the largest drop since the fourth quarter of 1994, which marked the tail end of the brutal housing downturn in the late 1980s, according to Jonathan Miller, Miller Samuels’ CEO.
In the most recent quarter, transaction volume for new developments took the biggest blow. It logged a stunning 67% drop in sales from the first quarter of the previous year according to a survey by The Corcoran Group and Propertyshark.com.
“What we see here is this huge disconnect between buyers and sellers,” said Pamela Liebman, CEO of Corcoran. “Sellers have been unrealistic and unwilling to negotiate prices, therefore we see a big falloff in sale volumes.”
As a result, inventory in Manhattan hit its highest level in the decade since Mr. Miller began tracking that statistic, soaring to 10,445 units, up 34% from the year-ago period. What’s more, he notes that those figures do not include the units that developers do not actively market to sellers, known as their shadow inventory. Mr. Miller estimates that there are 5,000 to 7,000 units that fall into that murky category.
The one bit of good news was that despite the dramatic declines in transaction volume, Mr. Miller’s report recorded an overall increase in median sale prices of 3%. He noted, however, that prices are skewed by sales of units in new developments. In many cases contracts for such units were actually inked in 2007 and just closed in the first quarter of this year—at the initial sale price.
“Activity at new buildings lags the market by over a year,” he added.
Instead Mr. Miller said the market for new and previously owned co-ops is most reflective of the current residential real estate market. The number of sales for co-ops fell 59%, while median prices fell to $587,500, down 22% from the same quarter last year.
According to reports by Halstead Property and Brown Harris Stevens on Thursday, the luxury market suffered the biggest blows. The reports found an 87% drop in closings of Manhattan condos and co-ops costing over $10 million in the first quarter.
“The New York City real estate market is back to basics,” said Corcoran’s Ms. Liebman. “The days of the $20 million deals are gone. There is now a focus on value.”
“It will take the rest of this year for things to shakeout,” noted Prudential’s Ms. Herman. “People who were previously priced out of the market now have opportunities.”
Thursday, April 02, 2009