Gregory J. Heym
Executive Vice President, Chief Economist
As Home Sales Fall
By MICHAEL CORKERY
Long insulated from the gale-force winds buffeting most U.S. housing markets, the New York City market is showing signs of softening just as Wall Street layoffs could put a further damper on demand.
Manhattan has been one of the hottest housing markets in the country, with prices of many homes more than doubling since 2003. But real-estate agents agree that tightening lending standards and eroding consumer confidence -- which have crippled housing markets across the country -- are starting to slow the New York City juggernaut.
"I don't know anyone in the industry who can say that their business was the same as it was last year," says Doug Heddings, a senior vice president at Prudential Douglas Elliman, who runs a sales team in Manhattan.
Just how much of a slowdown, though, is a matter of debate. Sales volume of condos and cooperatives in Manhattan dropped 34%, to 2,282 units, in the first quarter from a year ago, an unusually sharp decline, according to Miller Samuel Inc., an appraisal-and-research firm that tracks New York real estate. But a separate report issued Wednesday by Halstead Property LLC, a Manhattan-based real-estate firm, showed a 1% decline in sales in Manhattan when compared with a year ago.
Unlike many cities, New York doesn't have a multiple-listing service for homes, which can complicate efforts to calculate sales information. Analysts often use data from individual companies in the industry, which can at times show discrepancies.
Not all the news is bad. Miller Samuel and Halstead agree prices are rising. The median price for Manhattan homes rose 13%, to $945,276, in the first quarter, according to Miller Samuel. Halstead said the price increase was partly driven by sales at the ultrahigh end of the market, including two homes that sold for more than $40 million each.
But slowing sales volume, not lower prices, can be an early sign of a weakening market. Meanwhile, many brokers agree that the number of homes for sale is rising and buyers are becoming more tepid. "We are not looking at a robust real-estate economy going forward," says Jonathan Miller, president of Miller Samuel Real Estate Appraisers.
Mr. Heddings, of Prudential Douglas Elliman, says buyers have been backing away from sales across the city, from the Upper West and East Sides to Lower Manhattan. "People are nervous," he says. "More and more people are backing away at the 11th hour, just before signing a contract."
Signs of waning sales come as New York's economy prepares for a wave of job losses on Wall Street. But real-estate agents say it could be six months to a year before the housing market feels the brunt of Wall Street job cuts.
In Harlem, agent Klara Madlin says banks are requiring buyers to put more money down. "Instead of loaning 90% they will give 80% because they think prices are likely to go down," says Ms. Madlin, president of Harlem Homes Realty Inc. So far, she says, there have been price discounts of 1% to 2%, mostly by developers who agree to pay the closing costs to quickly move a new condo, but there have been no drastic price cuts.
While it is common for inventory to rise before the spring and summer selling season, Mr. Miller says the current supply "seems on the high side."
Another cause for concern is the number of condominiums being built amid the slowing market. This year, developers are expected to complete 10,200 condos, more than double the 4,100 that were built in 2006, according to REIS Inc., a real-estate research firm.
Agents aren't anticipating the sharp drops in prices that hammered New York real estate during the Wall Street collapse in the late 1980s and early 1990s, when about 100,000 people lost their jobs, according to Moody's Economy.com. The research firm estimates about 33,000 people will lose their jobs amid the current financial stress.
Several factors may save the city's real-estate market from distress. For one, there has been far less speculative building than before the last crash. Secondly, Manhattan has largely skirted the subprime-mortgage debacle that sank markets in Florida and California. That is partly because many co-op boards require sizable personal assets and an average down payment of 35%, says Mr. Miller.
Also helping New York sales are wealthy buyers from Europe, Asia and the Middle East who are taking advantage of the weak dollar to snap up multimillion-dollar condos and townhomes as second and even third homes.
While two-bedroom apartments and studios have been selling briskly, "one-bedrooms seem to be on pause," says Alison Rogers, an agent at DG Neary Realty in Manhattan's Chelsea neighborhood. "They are popping into contract and popping back out again."
Wednesday, April 02, 2008