A Downturn Begins
By VIVIAN S. TOY
Published: November 7, 2008
By VIVIAN S. TOY
Published: November 7, 2008
EVEN though the average price for a Manhattan apartment, at $1.5 million, is higher than it was a year ago, some New York neighborhoods have already started to feel the downward tug that has wrenched the housing market elsewhere in the nation.
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DigitalGlobe, via Google Earth
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DigitalGlobe, via Google Earth
Median prices in Harlem and East Harlem were down nearly 20 percent, to $440,000 at the end of this year’s third quarter, from $549,000 at the same time last year, according to data from Miller Samuel Inc., a real estate appraisal and consulting firm.
Similarly, condominiums in Midtown East and Turtle Bay dropped 18.6 percent, to $1.197 million from $1.47 million; and condos in Midtown West and Hell’s Kitchen dropped 8 percent, to $1.01 million from $1.099 million.
“None of that surprises me because those are the fringe areas that are going through change,” said Michael Signet, the executive director of sales at Bond New York, a real estate agency. Whenever there’s a slowdown, he said, those are the first places to get hit.
Another sign that the market has slowed significantly is the marked drop in sales, decreasing 24 percent in Manhattan, to 2,654 in the three months that ended on Sept. 30, from 3,499 in the third quarter of 2007.
The credit crisis and the volatility on Wall Street will probably spur a continuation of these trends and lead to a universal drop in housing prices, Mr. Signet said.
“From everything we’re seeing out on the street, the fourth quarter report will slow prices down across the board in every neighborhood,” Mr. Signet said. “There’s a lot of nervousness out there.”
Jonathan J. Miller, the president of Miller Samuel, agreed that the weakness in the housing market is likely to continue and spread, especially because banks have made it so difficult for buyers to get mortgages.
“Until the financial markets are stabilized and mortgages are more readily available and more affordable to consumers,” he said, “you’re going to see an across-the-board impact on the market and it will affect all demographics.”
As to whether the neighborhoods that have softened first will weaken more quickly, Mr. Miller said: “Emerging neighborhoods by definition are more volatile. They have more potential to decline when the market weakens, and conversely they have more potential upside when the market returns.”
Other neighborhoods that experienced price drops include the Lower East Side and the East Village, where median prices fell 5.5 percent; and Carnegie Hill, where co-op prices decreased 7.2 percent. Median prices in Hamilton Heights and Morningside Heights dropped 30 percent, with sales decreasing to only 19 from 67 in 2007. In Washington Heights, median prices went down 6.3 percent, but the number of sales increased to 24 from 18 in 2007.
The neighborhoods that fared the best through the third quarter included Fifth Avenue and Park Avenue from 59th to 96th Streets, where median prices went up 35 percent. In Lincoln Square, an area between 57th and 72nd Streets from Central Park West to the Hudson River that is home to high-priced apartments in 15 Central Park West and the Time Warner Center, median co-op prices went up 18.6 percent and median condo prices went up 25 percent. Prices also rose in Lenox Hill, where median co-op prices went up 19 percent; and Chelsea, where median co-op and condo prices went up about 6 percent.
Other neighborhoods that experienced increases include Greenwich Village, where median prices for co-ops went up 3.9 percent; Union Square and the Gramercy area, where co-op prices went up 3.3 percent and condo prices went up 2.6 percent; and the Upper East Side, where median co-op prices went up 2.3 percent and condo prices went up 9.1 percent.
Prices were also up in Battery Park City and Inwood, two neighborhoods where sales volume was relatively low. In Battery Park City, the median price rose 6.5 percent and number of sales held steady, going from 31 to 30. In Inwood, prices increased 17.1 percent, but sales dropped to 12 from 26.
Brokers agree that in September after the collapse of several Wall Street brokerage firms and throughout October, many buyers simply opted out of the housing market.
A little more than a year ago, real estate agents worried about how to handle the dozens of people who showed up at open houses. Today, agents are pleased when a sign-in sheet logs six names, because it beats having no one show up at all.
“Things have been at a standstill in the last couple weeks,” said Janice Silver, the manager of Bellmarc Realty’s East Side office. “With the markets crashing, people have been seeing their money go away, and they’re thinking twice about buying a sweater, let alone an apartment.”
In Harlem, the median sales price for co-ops and condos dropped nearly 20 percent, and the number of sales in the third quarter dropped from 160 in 2007 to 100 this year.
“The number of transactions in Harlem is definitely down,” said Jorden Tepper, the director of sales at Century 21 NY Metro. “And in terms of what is selling, we’re specifically seeing more interest in the lower end and not in the higher-end luxury-priced units.”
The size of the average apartment sold in Harlem bears that out. It was 744 square feet in the latest quarter, down from 1,011 square feet in the third quarter of 2007.
Veronica Raehse, the sales manager for the West Side office of Bellmarc, said that while she had seen a softening of the market across the West Side, Harlem had been hit the hardest. She said that after six weeks of very little activity, things had started to pick up in the last week of October. “But it’s all low-end stuff, and at this point, anything over $500,000 is high-end already,” and not moving, she said.
She and other brokers said that they had been advising sellers to price their apartments 10 to 15 percent below the latest comparable sales. “You have to use comps as a starting point and price down from there,” she said. “It’s the only way to get more activity, because if buyers don’t think a deal is being offered, they’re just not going to bother with it.”
Donald Kemper, a vice president of Prudential Douglas Elliman, agreed that the only way to be a successful seller in the current market is to set a competitive price. “You have to establish value right away,” he said. “Because nobody wants to buy now and find that they could get it for less next year.”
Mr. Kemper specializes in Midtown West and Hell’s Kitchen, where median prices on co-ops went down 10.8 percent, to $540,000, and median prices on condos went down 8 percent, to $1.01 million.
He said that the area has changed rapidly in recent years, and that condo prices there had been driven up by the new construction along the 42nd Street corridor on the Far West Side. He said that until this year, many buyers came to the area “with a very definite desire to be in Hell’s Kitchen, because it was more affordable and because Chelsea and other neighborhoods were out of reach for them.”
But because prices are softening around the city, he said, buyers are less focused on Hell’s Kitchen, “maybe because they can find opportunity elsewhere.”
Ms. Silver said that Midtown East and Turtle Bay, an area delineated as from 42nd to 59th Street and from the Avenue of the Americas to the East River, seems to be experiencing a similar trend. While not an emerging neighborhood, it often has volatile prices, especially in the eastern stretches farthest from the subway.
“It’s one of those areas where if you live there, you realize it’s convenient and it’s a fine place to live,” Ms. Silver said, “but it’s not the kind of place where people say they’re dying to live.”
Median prices for condos in the area dropped 18.6 percent, and the number of sales decreased to 126 in the latest quarter, compared with 158 in the third quarter of 2007. But median co-op prices actually rose by 12 percent, to $690,108 from $615,000 in 2007.
Mr. Miller said that those numbers were distorted by a huge drop in activity. The number of co-op sales declined 36 percent, to 117 last quarter, from 184 in the third quarter of 2007. He said that the median price may have skewed up because the apartments that sold were higher-priced ones.
The Financial District is one emerging neighborhood where reality seems to contradict what the third-quarter numbers would suggest. Brokers agree that sales have slowed in recent weeks and that buyers can expect to get some good deals there right now, but the median price for condos actually rose by 5 percent, to $940,000, in this year’s third quarter, compared with last year’s $895,000. Co-op prices dropped 19 percent, but the neighborhood has very few co-ops; the number of sales fell to 6 from 11 in 2007.
Mr. Miller says the numbers are deceptive mainly because there has been so much construction in the area. “New construction will skew prices higher,” he said, adding that in most of the deals that closed recently, buyers probably signed the contracts 12 to 18 months ago. “The closings are delayed, so they’re more reflective of a prior period when the market was stronger.”
For people looking to buy in a new development right now, Yvonne DeNigris, an agent with Sotheby’s International Realty, said: “I think the most substantial flexibility is in the Financial District, because it’s so developed now and there’s not the strongest demand for it.”
SoHo and TriBeCa and the co-op market on the Upper West Side are areas where median prices dropped, but the volume of sales nonetheless remained strong, leading brokers to infer that the lower prices do not reflect what’s happening in these markets.
In SoHo and TriBeCa, which Miller Samuel combines and maps from Houston Street south to Vesey Street and from Broadway to the Hudson River, the median price for co-ops in the third quarter dropped 6.1 percent, to $1.925 million from $2.05 million in 2007; and the median price for condos dropped 28.5 percent, to $1.9 million from $2.65 million. But the number of sales for co-ops and condos rose to 166 from 98.
Cornelia Dobrovolsky, a senior vice president with the Corcoran Group, said that last year’s median price had probably been skewed up by the closings of very high-end condos in 2007.
Several apartments sold last year at 40 Mercer Street for $5 million to $10 million. “And those are very big numbers for SoHo because you don’t have a lot of luxury loft buildings,” she said. “I really have not seen a drop in actual values between this year and last.”
She said, though, that a shift had occurred in recent weeks, and that she had seen some price reductions. “There certainly have been fewer sales since the summer, so that’s got to have some impact for the next quarter’s numbers,” Ms. Dobrovolsky said.
On the Upper West Side, the median price for co-ops dropped 13.3 percent in the third quarter, but the median prices for condos went up 29.5 percent. The volume of sales for all Upper West Side apartments decreased 7.5 percent, to 577 from 624.
But the drop in the median price of co-ops to $650,000 from $750,000 is at least partially attributable to the fact that the average size of sold apartments also decreased, to 907 square feet from 1,142 square feet.
Jeffery Sholeen, a senior vice president of the Corcoran Group, said he found it hard to believe that co-op prices had dropped that much. “It could be that large apartments in co-ops weren’t selling or they weren’t available,” he said. “But there’s still big demand for larger units on the Upper West Side.”
Many of the new developments on the Upper West Side have successfully sold three- and four-bedroom apartments, he said, which might account for the big jump in the median sales price for condos, going to $1.425 million from $1.1 million.
But Mr. Sholeen and other agents said that activity in the fourth quarter would definitely be down from last year because many people had decided to take their properties off the market in the wake of the turmoil in the financial markets.
“A lot of people also said they wanted to wait to do anything until after the election, regardless of the outcome,” Mr. Sholeen said. “There was a lot of anxiety before it happened and people’s attention was focused on that and nothing else.”
But now that it’s over, agents say they’re hopeful that buyers and sellers will refocus their attention on real estate.