Gregory J. Heym
Executive Vice President, Chief Economist
BY JULIE SATOW
New York City's status as a rosy exception to the nation's slowing housing market may be starting to come to an end.
The national housing market is sliding further into a decline, with home prices plummeting across the country this year, according to Standard & Poor's S&P/Case-Shiller Home Price Indices, released yesterday. A composite index of 10 cities posted a year-over-year decline of 6.7% — the worst drop in the index's 20-year history.
New York, one of the 10 cities in the index, saw home prices drop 0.4% in October and 4.1% over the past 12 months. These New York numbers include a large swath of northern New Jersey, Fairfield County in Connecticut, and Putnam and Nassau counties in New York.
"When you look at the amount of inventory out there, the fact that lending standards are tightening, and the flow of mortgage credit has slowed — particularly for jumbo mortgages — we still have farther to fall," the chief economist at Mission Residential, Richard Moody, said.
As for the Manhattan market, the S&P/Case-Shiller figures are fairly limited. The indices, which also include a 20-city composite index that has dropped 6.1% in the past year, track repeated sales of single-family homes rather than the condominiums and cooperatives that dominate the market here.
Some real estate analysts say that despite the country's overall slowdown, Manhattan apartment prices will maintain an upward trajectory in the fourth quarter. "Our fourth quarter report is coming out next week and we expect price growth will continue," the chief economist at Halstead Property, Gregory Heym, said. "Several new condo developments are starting to close, such as the Plaza and 15 Central Park West, which will help push up prices."
In addition to apartment closings at new developments, where prices are often high, there are many larger units that are also closing, Mr. Heym said. Despite the market turmoil, Wall Street bonuses at many firms are expected to be solid, and with a weak dollar, foreign buyers continue to flock to Manhattan.
Mr. Heym predicts that prices will rise by a similar pace as the third quarter — when Halstead reported the average Manhattan apartment jumped 26% over last year to an average of $1.32 million. He does predict a slowdown in the number of sales, which is typical for the fourth quarter.
While the S&P/Case-Shiller index may not emphasize Manhattan proper, "we track a large area where the homeowners' livelihood ties back to the New York City economy," the chairman of the index committee at Standard & Poor's, David Blitzer, said. "The home prices in New York have been weak, and don't show signs of a quick turnaround," he added.
New York home prices began dropping in June 2006, and have fallen roughly 5% over the past 15 months, bringing the Case-Shiller indices back to the level they were at in September 2005. In the past 5.5 years, the New York market has increased 115%. "So anyone who bought a house before September 2005 is probably still ahead of the game," Mr. Blitzer said.
As for Manhattan's coop and condo market, "I don't think Manhattan apartments are immune to the downturn," Mr. Blitzer said. "My sense is that we will see softness here over the next several months."
For all his bullishness, Mr. Heym warned, "if over the next couple of quarters you don't have all of these luxury closings, prices could start to go down."
"The general trend is modest appreciation, and whatever happens around the country, New York is in a much better position," the director of research at Radar Logic, Jonathan Miller, said.
Radar Logic publishes housing indices that compete with S&P/Case-Shiller, and its RPX index includes data on new construction, foreclosures, and condominiums in addition to single-family homes. It expects to publish its October report next week. For September, RPX reported housing prices in New York increased by 3.3%, a slowdown from the 4.7% price increase in August.
"For New York City, the wild card will be what happens with Wall Street," Mr. Miller said. "The impact on real estate will be more associated with jobs and bonuses than anything else."
Thursday, December 27, 2007