Gregory J. Heym
Executive Vice President, Chief Economist
BY PETER KIEFER
New York City's residential real estate market is showing signs of cooling after months of resisting the national real estate plunge.
One of the three quarterly reports scheduled for release today from the city's leading brokerages shows a 34% drop in sales in the first quarter of 2008 compared to the same period last year. Overall, the reports show a strong increase in major price indicators for the first quarter of this year compared to the same quarter last year, but analysts said a handful of high-end luxury sales skewed the market and blurred the outlook for the remainder of 2008. The closing of dozens of sales at two new luxury buildings in particular, 15 Central Park West and the Plaza, pushed average prices up sharply compared to last year, analysts said.
In the reports, issued by Prudential Douglas Elliman, the Corcoran Group, and Halstead Property, the average sales price of condominiums and cooperative apartments increased between 11.2% and 47%, and the median sales price — a more accurate indicator of overall market health, according to experts — increased between 9% and 13.2%.
Real estate analysts were quick to point out that average sales prices were inflated by an uncharacteristically high number of sales of apartments for $10 million or more.
"As luxury makes up a bigger proportion of these sales, many of these indicators will just shoot up," the chief economist for Halstead Property, Gregory Heym, said. "It's not us saying that every apartment is worth 47% more. The increases don't tell somebody what his apartment is worth but rather what is selling in the market now."
An appraiser who produced the market report for Prudential Douglas Elliman, Jonathan Miller, said sales volume showed a decline of 34% from the same period last year, which he said was the largest year-over-year drop since he began tracking the statistics in 1989.
However, the Corcoran Group's report said overall sales increased by 5%, while the Halstead Property report said they decreased by 1%. The authors of the three reports could not explain the discrepancy.
Mr. Miller also wrote that listing inventory increased 4.6% and the average time an apartment is on the market increased by two weeks compared to the same period last year. He said it was perplexing that his numbers were so much higher but said anecdotal evidence showed that sales are off. Overall, he said he was "moderately" concerned about the health of New York's residential real estate market.
"The sales levels right now are in sync with the last five years and are relatively similar, so we are back to previous levels. It is not a dire level of concern, but it is one of the first times we are seeing the impact of the credit markets on the level of demand," he said.
Some have voiced concern that demand for Manhattan residential real estate could be restrained by the reduction of available credit, less favorable mortgage terms, the national economy teetering on the edge of a recession, and the specter of additional layoffs in the financial services sector.
Mr. Heym said the big risk is if the fallout from Wall Street is worse than expected.
"A lot of those people haven't disappeared from the payrolls. They may have been told, but until they are not getting paid and either not selling their apartment or not buying their next one, then you won't see it," he said.
The chief executive officer of the Corcoran Group, Pamela Liebman, said that after a record-setting year like 2007, it is difficult to make any accurate assessments about the remainder of 2008.
"I think the second-quarter numbers will more accurately reflect the 2008 market, which is a much more challenging one than we have had in the last few years," she said. "Spring is typically the busiest part of the year, and it seems it is active but it lacks the frenzy of 2007 and 2006. It is much more normal."
Wednesday, April 02, 2008