Sr. Vice President
Exec. Vice President
By PATRICK O'GILFOIL HEALY
HAS it finally arrived, the end of Manhattan's real estate orgy, the autumn of our discontent? After four years of record-breaking prices and consistent growth, brokers and sellers are examining the latest sales data and wondering whether they indicate a stall, a pause or an insignificant blip.
So it's time to shake the Magic 8 Ball and ask: Is the party over?
Some signs point to yes. New market data show that the number of sales in the third quarter dropped 17.8 percent compared with the same quarter a year ago. Average prices fell some 12 percent, or about $160,000 per apartment, from July to the end of September while median prices dipped only 3 percent, or $25,000. Apartments are spending longer on the market, and inventory is building up. Sellers are cutting prices.
"There is a standstill situation," said Jacky Teplitzky, a broker with Prudential Douglas Elliman. "We all thought September was going to be a strong month, but that did not happen. The phones did not ring. Turnout at the open houses was low, lower than we had expected."
Are these just the summer doldrums, the slow exhale after a barn-burning spring? It's difficult to say. In the last 10 years, third-quarter posted gains over the second quarter five times; the other five, they showed a slump, according to data from Miller Samuel, an appraisal firm.
Still, any dark signs may be false harbingers. If the Manhattan market is pyramid-shaped, with a few $10 million and $20 million properties at its apex, the broad base of cheaper studios and one-bedrooms seems to be as strong as ever. Average sale prices for large apartments - four bedrooms or more - plunged some $2 million over the last three months. Luxury inventory built up and top-shelf apartment sales, whose stratospheric prices can skew averages, dropped off sharply.
Data from Brown Harris Stevens show the number of new listings this September was 60 percent higher than a year ago.
Still, prices for studios and one-bedrooms leapt by 10 percent. Brokers say there has never been a stronger demand for studios.
And over all, home prices in the city are still up 10 to 12 percent over last October.
The Corcoran Group said that this August was its busiest ever, and brokers are expecting robust Wall Street bonuses to buoy the high end of the market. Lisa Maysonet, an Elliman broker, said she sold three-fourths of a loft conversion in Bushwick, Brooklyn, in a single weekend. Many brokers are still moving properties and insist the Manhattan market remains fundamentally strong.
Caught in the middle of these currents are the brokers who tend empty open houses like farmers waiting for rain, the cautious buyers wary of entering a peak market and sellers who cannot fathom why no one wants to buy their once-coveted homes.
Take the case of Randall Trombley, a portfolio manager at Bear Stearns, and his floating one-bedroom at 100 United Nations Plaza, overlooking the spires of Midtown. Mr. Trombley had lived in the 1,242-square-foot condo since April 2001 and wanted a larger apartment with another bedroom, so he listed his home for $1.33 million in August and waited for the offers to roll in.
In the first week, buyers dangled offers of $1.2 million and $1.15 million, but never made formal bids. Others said he should lower the price by 10 percent, or praised the apartment and left without making an offer. Two weeks ago, Mr. Trombley sliced his price by $86,000, and said he may cut it further still.
"I'm beside myself," he said. "I feel like I'm caught in the crossfire here. I have a high-floor apartment priced right around what the average has been, and we're not even getting into a negotiating stance. It's crazy. It's like, what are they waiting for?"
They are waiting for prices to drop, said Pamela Liebman, the chief executive of the Corcoran Group. The last four years were a sellers' bacchanalia, with average prices rising 70 percent, to a peak of $1.317 million in July from $778,575 in 2001. Even as the market has tempered, sellers still expect prices of $2,000 per square foot.
"When you see things that have stalled, it's because of price," Ms. Liebman said. "The million-dollar one-bedroom is not a fact of life. It exists, but it exists in special buildings with something that is beyond the ordinary."
A Douglas Elliman market report released last week showed that prices are starting to recede as units sit longer and longer on the market. The median apartment price citywide dipped to $750,000 from $775,000 over the last three months while the mean price - a simple average - fell to $1.1 million from $1.3 million.
The bigger the apartment, the worse it fared. Two-bedrooms fell by 3 percent, three-bedrooms by 9 percent and apartments larger than that took a 35 percent price hit, according to the Elliman report.
Jonathan J. Miller, whose appraisal firm, Miller Samuel, conducted the study, said the slow rise in mortgage rates, coupled with anxiety about gasoline prices and bubble warnings from the Federal Reserve, had compelled buyers to lock in at the low end of the market but kept richer buyers away from the high end.
The Duke-Semans mansion, a $50 million town house on Fifth Avenue, is still on the market. A $70 million penthouse at the Pierre Hotel remains up for grabs. In the second quarter, 17 homes sold for $10 million or more; last quarter there were four such sales. "Our interpretation was there was a pause or a pullback," Mr. Miller said. "It just seems like all these external factors made everybody take a breath. We're not used to that. If we see another drop for the next couple of quarters, you may see something more negative."
The season's new buzzword is negotiability. The gap between what sellers ask for their apartments and what they will accept is slowly widening, said Ronald Tardanico, the sales manager for Bellmarc Realty's East Side office. In February, an average apartment in the listings represented by Mr. Tardanico's office sold for 1.68 percent higher than the asking price. Last month the average was 2.68 percent below asking price.
Mr. Tardanico said sellers were still overestimating the worth of their apartments, such as a couple asking $100,000 more than the market would bear for a one-bedroom in NoLIta. "Nobody's looking at it, and nobody will look at it," Mr. Tardanico said. "A lot of sellers are inclined to try it at an overly optimistic number, and if they're not getting the money, they come back a bit."
Carmen J. Cook, a vice president at Halstead Property, said she is aiming to ignite interest in a two-bedroom in the West 50's by slashing the price from $975,000 to $899,000 - about 8 percent. Forty blocks north, another Halstead broker, Brian Lewis, is trimming $20,000 off a $559,000 one-bedroom to sell it quickly.
"I'm not a pessimist," Mr. Lewis said. "I just feel that the buyers that are out there from last spring are bruised. They're circling the pool and just putting their toe in."
The longer an apartment sits on the market, the more negotiable it becomes. Apartments now spend 133 days on the market, a month longer than they did three months or a year ago.
Janice Silver, a vice president at Bellmarc, said she persuaded the sellers of a two-bedroom on Madison Avenue in the East 60's to drop their asking price by $150,000 after the apartment lingered for five months with no takers.
For brokers, the long marketing times mean they must pay more for advertising and spend more weekends at open houses and showings. Some firms are coping with the new market with seminars on how to bargain and how to sell during a slump.
"Last spring it was a whirlwind," Ms. Silver said. "No matter what you put on the market, it sold in a second, and you didn't even have to think. You don't see that now."
Except if you're trying to sell a studio or one-bedroom. The Elliman report showed studios rising an average of 13 percent this quarter and one-bedrooms by 10 percent. Combined, these sales represent 55 percent of all apartments sold in Manhattan.
"The demand is there, and the supply isn't going up," said Gregory J. Heym, an economist with Brown Harris Stevens. "It's just been solid growth."
As larger apartments float out of range, average buyers naturally turn to smaller, cheaper apartments. And as that demand grows, square-foot prices for studios have risen while the higher square-foot prices for larger units decline. Brokers said that studios are also being gobbled up as homeowners combine apartments within buildings.
Mr. Heym's numbers showed that, for the first time, studios and one-bedrooms sold for the same price per square foot, $879. The gap between two-bedrooms and studios shrunk by $17 per square foot over the past year.
"These new buildings, they're not building studios," said Richard Hamilton, a Halstead broker who specializes in Chelsea studios. "They're ignoring a market."
What's likely to happen next? With the city forecasting Wall Street profits at $14.4 billion, some say big bonuses will keep the market strong. Others say new inventory will drive down prices, spur buyer interest and rekindle sales numbers.
Others say it's simply all about value, and when the price is right, things will move.
Sunday, October 09, 2005