Diane M. Ramirez
Gregory J. Heym
Executive Vice President, Chief Economist
By JOSH BARBANEL
For those New Yorkers who wondered what the Manhattan real estate market might be like without the ever-rising bonuses of Wall Street’s elite, the answer is now emerging: an abrupt decline in transactions, tottering prices and buyers who are still looking but unwilling to sign a contract. Those are some of the conclusions in a series of market reports on the fourth quarter of 2008 released on Monday by brokerage firms, appraisers and other real estate analysts.
Prices on completed sales of co-ops and condominiums, some negotiated months or years ago, were flat or down slightly, but the number of completed sales and newly signed contracts had plummeted, analysts said, as the economy faltered.
Pamela Liebman, president of the Corcoran Group, a real estate brokerage, said that though the Manhattan market had continued to rise in the past year when most of the American housing market was in decline, it “came to a grinding halt on Sept. 15,” when credit markets collapsed and buyers lost confidence.
“Now we see the effects of buyers sitting on the sidelines, and they will remain on the sidelines until they get some confidence back,” Ms. Liebman said. “A lot of brokers are making friends with lawyers and doctors and all those people who were left behind in the heyday of Wall Street, three months ago.”
One market report, by the Corcoran Group, found that the number of closed sales declined by at least 30 percent compared with the fourth quarter a year earlier as the Manhattan market all but stopped after the failure of Lehman Brothers in mid-September.
Other reports, using different data and criteria, found somewhat smaller but still striking declines. A report by the Prudential Douglas Elliman brokerage found that resales of existing Manhattan apartments fell by 24.8 percent, to 1,408 sales, while the sales of condominiums in newly completed buildings rose sharply. Contracts for many of those new condominiums were negotiated in a different market, a year or more ago.
Another report, by Brown Harris Stevens and Halstead Property, put the average apartment sale price at $1.45 million in the fourth quarter, up slightly from the same period in 2007, but down 2 percent from the third quarter last year. The median price was $895,000.
These reports found the average co-op price was $1.1 million, down 8 percent from the third quarter, but up 3 percent compared with the fourth quarter a year earlier. The median price of a co-op was down 8 percent from the third quarter last year and down 4 percent compared with the fourth quarter in 2007. The average condominium price was $1.7 million in the last quarter. The reports found that the number of transactions declined by 9 percent.
But all the analysts agreed that the prices did not yet show the full impact of the recession, which will likely show up in closings in the first quarter this year. Jonathan Miller, an appraiser who prepared the data for Prudential Douglas Elliman, said that the prices of apartments in contract declined 20 percent between August and December last year, with an abrupt drop in late September and early October.
The Corcoran report noted that the number of listings on the market peaked in November, since some discouraged sellers took their apartments off the market in December. But the number of listings going into contract has fallen off each month since July. In December, the report showed 484 listings going into contract, a 57 percent decline from the 1,122 listings that went into contract in December 2007.
“The worst is yet to come; there is a blood bath coming,” said Matthew Haines, a founder of the real estate site Propertyshark.com who prepared the Corcoran report.
Beyond the first quarter this year, assessments varied. A number of brokers said that as sellers cut prices, they will create an opportunity for buyers to get good deals that were unimaginable a few months ago, especially at a time when mortgage rates are falling. Several said they were counting on the Obama administration to bring in a wave of confidence that will change the psychology of the market.
“When the market solidifies itself and everyone feels confident that we are on solid ground, you are going to have hordes of buyers,” said Diane M. Ramirez, the president of Halstead.
But others worry that the market will need more than psychology to support it. Gregory J. Heym, an economist who prepared the reports for Halstead and Brown Harris Stevens, said that unless the economy strengthens, the weakening job market in New York City could further dampen enthusiasm for real estate. He said the city had lost about 18,000 jobs in the 12 months that ended in November, while city economists are now predicting a loss of 170,000 over the next year or two.
“Each time they update the forecast, it gets worse,” Mr. Heym said.
Tuesday, January 06, 2009