Halstead Property

Diane M. Ramirez
President
dramirez@halstead.com
(212) 381-3203

Spring Real Estate Market Roars In But Tiptoes Out Early

By Vivian S. Toy

THIS year, the burst of real estate action that marks the spring season came early in New York. Manhattan saw a big sales spike in March, well before the market’s usual busy season in May and June. But now, instead of going into the expected overdrive, some brokers say, sales have started to stall.

That could simply mean that spring arrived and ended early, as buyers gained confidence in the market and began to shop. Or it could mark the beginning of a slide that will lead to another dip in prices and sales activity.

Although many brokers will tell clients that the market has already hit bottom, some economists and real estate experts predict that prices are still falling, and will drop yet another 5 to 15 percent by the end of next year.

“There was a bit of a frenzy in March into April and things have leveled off in May,” said Jonathan J. Miller, president of the appraisal firm Miller Samueland a partner in Condominium Recovery, which invests in real estate. “The market is still high, but the edge has come off and the level of activity isn’t growing anymore.”

He and real estate economists predicted that sales activity would most likely fall back into more seasonal patterns, with fewer transactions going into the summer.

The number of signed contracts for apartments in Manhattan jumped nearly 35 percent from February to March, to a total of 1,000 contracts, far more than had been typical in the previous two years, according to data provided by Streeteasy.com. In April there was an increase, to 1,063 contracts, but the number slipped slightly in May, to 1,016.

“There is a sense that the bottom is near for the housing market, which is why there has been increased activity,” said Celia Chen, a senior director at Moody’s Analytics specializing in housing economics. “The biggest decline is over,” she said. “But we’re still expecting prices to decline by another 5 percent.”

The overall economy will determine to some extent whether that pace can be sustained. “A lot of what happens in June is going to depend on employment trends,” said Sam Chandan, the chief economist at Real Capital Analytics, a Manhattan company that studies worldwide real estate trends. “There’s a fair amount to give consumers pause.” He noted that while the national unemployment rate fell slightly in May, the financial markets in New York City continued to lose jobs. He also said that in Manhattan last month, unemployment increased among people in their late 20s and early 30s — prime first-time-buyer material.

Mortgage rates will very likely remain low, Ms. Chen said, but foreclosures nationally are expected to increase in coming months. Manhattan’s foreclosure rate has remained very low, thanks to rigorous co-op approval standards, but “there still will be softness in prices, because there seems to be a pretty large overhang of new construction still out there,” she said. (The rate in Manhattan in May was 1 in every 12,514 housing units, versus 1 in every 387 nationally, according to RealtyTrac, a company that compiles foreclosure records.)

Mr. Miller estimates that there are as many as 6,500 new condominiums in the so-called shadow inventory: units not yet completed, or built but not yet on the market. “I don’t see how prices can start to rise again until we’ve dealt with that inventory,” he said, adding that he felt prices in the region might slide by as much as 15 percent more.

Dorothy Herman, the president of Prudential Douglas Elliman, said that the number of signed contracts at her agency continued to grow through May. “There’s definitely more consumer confidence and a feeling that the market has stabilized,” she said. “I don’t think people think it’s all over, though. People are leery, because it’s a different world now.” It is still very difficult to get financing, especially for jumbo mortgages, which account for many transactions in the city, she added.

Still, Ms. Herman said, “We got bruised here in New York, but we didn’t get clobbered, and people are starting to feel safer about buying again.”

Housing sales activity rose across the country in March and April, in anticipation of the April 30 deadline for the $8,000 first-time buyers’ tax credit. But economists and brokers say the tax credit was probably a less powerful incentive in Manhattan, where the average sales price for an apartment is $1.4 million. Some New York buyers would have been ineligible for the credit in any case, because of income limits: $125,000 for single people and $225,000 for couples.

Diane M. Ramirez, the president of Halstead Property, said that because so many people put off buying last year for fear that prices would keep falling, there was a great deal of pent-up demand — finally released only late last year and earlier this year. “We definitely saw an early spring market this year,” she said. “And it’s the same thing we saw in 2007, when there was a completely different mindset.”

Three years ago consumers were frantic to buy apartments, Ms. Ramirez said, “because they wanted to beat everybody out of the gate and they wanted to get an apartment because the market was rising so fast.” This year, she said, in a very different market, buyers are worried about the potential for rising interest rates and prices, “but they still want to get ahead of the curve and get that value while it’s still out there.”

At Brown Harris Stevens, which deals primarily in higher-end properties, the number of listings in contract through May was up by 71 percent from last year. “Looking at where we are now,” said Hall F. Willkie, the president of Brown Harris Stevens, “I don’t think most people would have thought it possible last year.”

Seeing another sign that the market is on the mend, Pamela Liebman, the president of the Corcoran Group, said that the average price on signed contracts at Corcoran had climbed to $1.5 million in May, from $1.31 million in February.

“Some brokers are telling me that things have slowed down and some buyers have put the brakes on because of stock-market volatility,” she said. “But I think it’s a small percentage that’s starting to get nervous, and they would have been cautious buyers in any market.”

Thursday, June 10, 2010