Halstead Property

Gregory J. Heym
Executive Vice President, Chief Economist
(212) 546-1069

Sales Of Million Dollar Homes Soar In New York And Around The Nation

By DAVID B. CARUSO
Associated Press Writer

September 27, 2005, 1:07 PM EDT

NEW

YORK -- Everything about Frank Fazio's new two-bedroom apartment on

Manhattan's Upper West Side is decidedly average, including its price:

a hair under $1 million.

With five rooms and about 1,050

square feet of space, the place is a nice size, by New York standards,

but it is no mansion. There are no chandeliers, no soaring cathedral

ceilings and no doorman downstairs to help with groceries.

"There

is nothing that would make you say, 'Wow this place must have cost a

million bucks," said Fazio, 42, a banker who relocated from Chicago.

Yet pay a million he did, something more New Yorkers _ and more Americans _ are doing these days.

For

the first time, there are more than 1 million owner-occupied homes in

the United States worth $1 million or more, according to a Census

Bureau survey published late last month.

Once a symbol of

unusual wealth, million-dollar dwellings now seem like a dime a dozen

in some places. San Francisco alone has more than 20,000 of them. There

are another 46,000, or so, in Orange County, Calif.

But the

king of outrageous housing prices continues to be Manhattan, where even

someone with a million dollars in their pocket can't buy luxury.

The

average price for an apartment in all but Harlem and the borough's

northern tip climbed above $1.2 million in the second quarter of 2005,

said Gregory Heym, chief economist for Terra Holdings, an owner of real estate brokerages in the city.

"For a million dollars, you couldn't get a two-bedroom on the East Side," Heym said.

Real

estate has become so hot that the boom has spread to neighborhoods

formerly written off by many investors as hopelessly impoverished.

In

Bedford Stuyvesant, the section of Brooklyn that was the setting for

Spike Lee's 1989 film, "Do the Right Thing," some owners were asking

more than $950,000 this week for their brownstones.

The

prospect that a neighborhood that experienced rioting in the 1960s and

a crack epidemic in the late 1980s would fetch such high prices now is

both an urban success story, and potentially dismaying, said Richard

Weeks, an agent at Coldwell Banker Mid Plaza Real Estate.

If a working-class family can't afford a home in Bed Stuyvesant, he asked, just where can they buy?

"As

an African American, I worry about it," said Weeks, whose listings

include a limestone town house in a fast-gentrifying section of the

neighborhood, priced at $975,000. "It is definitely going to become

harder for the people who aren't well off to purchase there."

Nationwide, the surge in high-end prices has happened quickly.

The

Census Bureau's 2004 American Community Survey found 1,034,386 homes

worth at least $1 million in 2004, compared to 595,441 in 2002 and only

394,878 in 2000.

Even in land-rich cities like Phoenix, the demand for housing in mature neighborhoods has outstripped supply.

In

a few exclusive communities, $1 million won't buy you more than "an

acre of dirt," said Kristy Ryan, a broker at Re/Max Fine Properties in

Scottsdale.

In other parts of town, $1 million is still enough

to build a 4,000-square-foot villa with a pool and a three-car garage,

but Ryan noted that the same house might have sold for $700,000 just

five years ago.

"Some people are disappointed when they get

here," she said of the northerners who continue to arrive in droves.

"They don't realize how much it has appreciated in the last few years."

The surge in the number of homes breaking the $1 million mark

is a natural product of an increase in sales prices across the board,

said John M. Clapp, a professor of finance and real estate at the

University of Connecticut.

Demand for housing is still

outstripping supply in many U.S. markets, he said. Low interest rates

have made it easier for people to afford more house, as have some new

financing methods, like interest-only adjustable mortgages, which

initially allow buyers to lower their monthly payments.

The

losers in this hot market, Clapp said, are people buying a home for the

first time. At current interest rates, the monthly payment on an

$800,000 mortgage is about $4,700 a month. The financial hit is

especially bad in places like New York, where the city's many

condominiums and co-ops require monthly maintenance fees that often

exceed $1,000 a month.

"I think they are stretched to the limit at this point," Clapp said. "In some markets, renting makes more sense."

If

prices stop rising, other potential losers could be speculative

investors who were counting on a quick resale of a home at a profit to

pay back debt. Economists have split over whether the rise in housing

prices constitutes a bubble that could burst at any time.

Federal

Reserve Chairman Alan Greenspan has warned that housing prices in some

markets have been driven to "unsustainable levels," but also said

Monday that homeowners on average have enough equity to absorb the hit

if values drop.

"In the long run, things have to come back into equilibrium," Clapp said.

Tuesday, September 27, 2005