Gregory J. Heym
Executive Vice President, Chief Economist
By DAWN WOTAPKA
NEW YORK -- Manhattan's real-estate market has come crashing back to earth.
Sales of units in newly constructed buildings dropped 67% in the first quarter, and closings slid 52% compared with a year earlier. Inventory climbed 29% to 12,336 listings in March, the highest level in more than eight years, according to a report by real-estate brokerage The Corcoran Group and PropertyShark.com.
Reports due out Thursday provide more evidence. Real-estate site StreetEasy.com says that more than a third of listings shaved prices in the first quarter, with the average cut topping 9%. Halstead Property says that apartments sold during the period stayed on the market 18% longer than a year ago.
Manhattan apartments stayed on the market longer in the first quarter.
"I would describe this as a new market -- we essentially hit a reset button. It wasn't like it declined in a slope; it declined in a step," said Jonathan Miller, chief executive of Manhattan real-estate consulting and appraisal firm Miller Samuel Inc.
Because there usually is a multimonth lag between contract and closing, "I think it's safe to say that the bubble had already burst a few months ago," said Sofia Kim, StreetEasy.com's head of research.
New York City had long withstood the prolonged downturn gripping the nation, but that strength crumbled along with Lehman Brothers Holdings Inc. in September. The ensuing financial meltdown erased thousands of high-paying jobs and slashed Wall Street bonuses. Those losses, along with tighter lending requirements and a strengthening dollar, have removed a chunk of the world-wide buying pool and halted price increases.
"The crisis on Wall Street is certainly showing itself in New York City's real-estate numbers," said Pamela Liebman, Corcoran's chief executive. "The market now is very different."
It is a region in transition, with buyers and sellers trying to determine values. "Buyers and sellers are on opposite sides of a river, and they're yet to find a bridge," Ms. Liebman said.
Few expect the region to experience turmoil similar to Miami or Las Vegas, investor-heavy markets battered by the downturn and bloated foreclosures. While Manhattan did experience a condo boom -- and those values are eroding, causing some signed buyers to try to flee contracts -- that the area is an island means there can only be so much expansion.
To be sure, Manhattan prices remain well above the national median price, which was $165,400 in February, according to the National Association of Realtors. According to StreetEasy.com, Manhattan median condo sales fell 4.7% to $895,000 and co-op resales slipped 11.3% to $550,000 in the first quarter from a year earlier.
Falling prices are good news for potential buyers long priced out of the market. The price tag for an alcove studio on the Upper East Side fell 47.5% to $199,000. A co-op on Park Avenue saw $1.1 million shaved off the price in a single day, Ms. Kim said.
As with other markets, lower prices and falling interest rates are generating demand. Industry experts say contract activity, Web site traffic and open-house attendance has picked up, creating hope that New York's fall could be less pronounced than other former bubble areas.
"So far we've held up better," said Gregory Heym, chief economist for Halstead Property and Brown Harris Stevens. "We know we're going into the recession later than the nation. The question is, Will we come out sooner?"
—Kelly Nolan contributed to this article.
Thursday, April 02, 2009