Halstead Property

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

Economic Decline Creeps Into Fourth Quarter Realty Reports

By: Tara Lynn Wagner

Although property prices ended higher in 2008 than 2007, year-end real estate reports give a fuller picture of how troubled the economic waters really are. NY1’s Tara Lynn Wagner filed the following report.

The new year means it’s time to look back at the old one, and real estate reports from every major company prove it was a bumpy ride at best in Manhattan.

“It’s not that it's a bad year, it’s just been a slow couple of months at the end of the year,” says Gregory Heym, the chief economist of Halstead Property.

For one thing, inventory is up. A report by Prudential Douglas Elliman lists over 9,000 available apartments in the last quarter of 2008, a 39 percent increase over the same time period in 2007.

“Which is something people should look at because you have to be careful it doesn't get too much,” says Dottie Herman, the chief executive officer of Prudential Douglas Elliman.

While inventory rose, sales dropped. The Corcoran Report estimates a 40 to 50 percent decline in sales between the third and fourth quarters of 2008, in part because prices have yet to significantly adjust to the changing market.

“The sellers are here and the buyers are [over] here, and that's why you're seeing this fall-off in sales volume,” says Pamela Leibman, the CEO and president of the Corcoran Group.

Marketwide, Corcoran says prices were up 10 percent in 2008 versus 2007, with new construction values making up for a 6 percent drop in resale prices, from $1.65 million to $1.49 million.

Meanwhile, a report by Halstead Property shows prices market wide slipped 2 percent from the third to final quarter of 2008, from $1.47 million to $1.45 million.

Heym says there are other indicators that the market has hit troubled waters.

“Time on the market is increasing, as is the difference between asking price and selling price,” he says.

There is also a lag in real estate between contract and closing, meaning most of the sales completed in the final quarter in 2008 actually began months earlier, well before the September crisis. Experts say a true picture of how the market has been affected will not emerge until the next set of numbers comes out in April.

“A big date for us was September 15,” says Leibman. “After the collapse of [investment bank] Lehman [Brothers] was when we saw the market start to stall and I think the effects of that will be seen more in the next quarter than what you are seeing here.”

Herman predicts a further drop in prices of 15 to 25 percent.

“There is no borough that I know of, or the suburbs or the Hamptons, that is going to escape without having any price drop,” she says.

Experts say lower prices, lower sales and lower interest rates means the ball is currently in the buyer’s court.

“You can really get out there and be aggressive and the worst that somebody can say is no,” says Leibman.

Thursday, January 08, 2009