Gregory J. Heym
Executive Vice President, Chief Economist
Price cuts increase, signaling weakening residential housing market
By Lauren Elkies
July was hot, and buyers were not bothered – at least when it came to buying Manhattan real estate.
Open house attendance was down, beyond the usual summer ebb, and price adjustments were more frequent — both indicators of a weakened housing market.
Richard Rothbloom, a vice president at Brown Harris Stevens, said that his sales open house attendance last month was "hit or miss."
Stefani Pace, an associate broker at Prudential Douglas Elliman, said that appropriately priced units are garnering heavy traffic at sales open houses, but if they are even "just a little overpriced," attendance drops off.
At Barak Realty's Sunday open houses, there was an average of 6.7 visitors in July versus 7.4 in June. Barak Dunayer, the company's president, said that the drop in the number of house-hunters as well as the increase in the number of price cuts reflect the soft market.
Crowded open houses usually mean a property will sell quickly, said Frederick Peters, president of Warburg Realty Partnership, adding that he does not know if the reverse holds true — that a sparsely attended open house translates into a property that sells slowly.
On the rental side, open houses were doing poorly last month.
"Rental open houses are dead," Pace said. (For a different take on open houses for rentals, see story on page 82.)
Lesley Steiner, associate broker at Century 21 NY Metro, echoed Pace's comment.
"There are [fewer] people coming to rental open houses, and in some cases no one shows up," Steiner said.
Apartments have been languishing on the market, but some brokers say that price slashing seems to be effective at increasing buyer and renter interest.
Esther Sapan, a rental salesperson at Adina Equities, said that while the rental market was busier in July, rents were reduced both months to get deals done.
On the sales side, "some apartments are still sitting, but as you do incremental price drops, more buyers come out to look at it," Brown Harris Steven's Rothbloom said.
The discount off the asking price that buyers are getting from sellers has increased. Between the first and second quarters of 2008, the spread between list price and final selling price grew to 3.6 percent from 3.2 percent, according to data prepared by appraiser Miller Samuel for Prudential Douglas Elliman. In the second quarter of 2007, the discount was only 2.2 percent.
Jonathan Miller, president and CEO of Miller Samuel, said the expanding spread does not necessarily mean that price drops were greater. It could be that list prices rose faster than sales prices did. "Either way," Miller said, "it shows a widening gap between buyer and seller."
Ari Harkov, an associate broker with Halstead Property, said, "Properties are still trading, some immediately after coming onto the market and some at full asking or even above, but I think price sensitivity is increasing. This is leading to a larger percentage of properties sitting on the market that may not sell at all or will only sell after several months on the market and several price reductions."
Sha Dinour, president of Triumph Property Group, estimated in mid-July that apartments were sitting on the market 10 to 15 percent longer in July than in June. Second-quarter market reports for Manhattan showed that year-over-year, inventory shot up and sales activity slowed, but home prices still hit record highs. Sales at the high-end 15 Central Park West and the Plaza Hotel, which were negotiated in the first quarter of the year if not before, skewed the numbers.
Looking at just the tail end of the second quarter, only May and June, the last two-month period for which data was available, sales picked up by 12.5 percent to 1,204 sales, according to data from a report by Terra Holdings, parent company of Brown Harris Stevens and Halstead Property. The median sales price receded between the two months by less than 1 percent to $960,000, Terra Holdings determined.
Friday, August 01, 2008