Gregory J. Heym
Executive Vice President, Chief Economist
When Figures Trail the Facts
By JOSH BARBANEL
ONE might be excused for thinking that all Manhattan condominium buyers are in a state of panic at the moment, thrashing around for any reason to back out of contracts already signed for apartments in the new glass towers dotting the skyline.
After all, co-op sales have dried up, and preliminary figures show that average co-op prices are off 28 percent so far this year from the record prices in the first quarter of 2008.
Yet last month, despite the faltering economy and a difficult mortgage market, lawyers for 328 buyers of new and existing condos filed deeds with the Department of Finance, the final step in property purchases. And average condo prices are up sharply from those of last summer and fall.
Many buyers stood by commitments, made in better economic times, to buy new apartments in expensive condominiums that are just now being completed. Still, the number of buyers closing on condominiums is falling each month and few buyers are now signing contracts for the latest round of new buildings, endangering many weaker developers. The number of deed filings is off 20 percent from the number of filings in January, off 40 percent from December, and 60 percent from February 2008, when sales were still strong.
The prices on the new apartments that have actually closed so far in 2009 were so high (including a $30 million glass-walled two-story box built atop a converted industrial building on Hudson Street in SoHo, and a $15 million triplex in a condo conversion at 101st Street and Fifth Avenue) that they drove both the average and median condominium prices to near-record levels, far above the prices in the last half of 2008.
A review of preliminary figures for the first quarter, through last week, put the average condo closing price at $1.82 million, with a median price of $1.195 million. The average price was about 14 percent above that of the second half of 2008, and only 4 percent below the peak average price in the first quarter of 2008, when many apartments were closing at very expensive new developments like 15 Central Park West.
But the higher average prices, might, perversely, represent some bad news.
Dolly Lenz, a top-selling broker at Prudential Douglas Elliman, said major banks had recently cut back on lending in new condominiums, especially those with many unsold units, reducing closings. Wealthy buyers paying cash for more expensive apartments were not affected.
The banks, she said, are now requiring that 70 percent of new apartments be sold or in contract before they will issue mortgages, a policy based on new federal guidelines. This requirement is jeopardizing many newer projects.
The co-op market is faring far worse so far this quarter, as many brokers and analysts had predicted. Prices are down sharply, and deed filings have fallen by more than 60 percent this year compared with the same period in 2008, with the steepest decline in sales among the most expensive units.
Gregory J. Heym, the chief economist at Halstead and Brown Harris Stevens, said that the decline in co-op prices occurred several months ago, but is appearing only now in property records because co-op closings are often delayed until the buyer is approved by the co-op board. As a result, the average co-op sale price recorded by the Department of Finance fell below $1 million for the first time since the fourth quarter of 2006; it is now just under $930,000, preliminary figures show. The median fell to $598,250, its first time below $600,000 since the same quarter in 2006.
Average co-op prices were off 18 percent from the second half of 2008, and 28 percent from the record high prices in the first quarter of 2008, according to the preliminary figures.
Kirk Henckels, the director of Stribling Private Brokerage, said that for the last few weeks, the high-end market had been “picking up momentum,” with more deals every week. But last week, he said, with more worries about the banks, insurance companies and the auto industry, there appeared to be yet another pause.
“That has caused another little intake of air,” he said. “Let’s hope it doesn’t last.”
Sunday, March 15, 2009