After slow fall, inventory starts to grow

It’s a simple real estate equation: Sales go down, inventory piles up and prices start dropping.

That’s what’s been going on in Manhattan’s residential real estate
market, and more of the same is on the way as deals made in the wake of
the credit crisis come to a close.

“August and September were bad. If I had a weak August and September,
collections will be weak in December and January,” said Neil Binder,
principal and co-founder of Bellmarc Realty. “Most firms will have to
go into reserves to keep the show on the road” those two months.

“The month of October was fine, nothing special, nothing terrible. It
was just OK. This particular month looks similar,” Binder said in late
November.

Add to that the post-Thanksgiving market slowdown, the traditionally
weak fourth quarter and uncertainty about bonus payouts. Some news
reports have said bonuses are expected to be flat to down 15 percent
compared to last year. Bonus payouts are predicted to vary by different
sectors within banks more than most years, because some divisions like
stock trading and investment banking did well, while areas the with
most exposure to the mortgage fallout did poorly.

“If there is a significant bonus payout, you see a pickup in activity
in the last few weeks of December. I would suggest you won’t see as
much of that this December, because the expectation is that bonuses
will be lower than last year,” said appraiser Jonathan Miller,
executive vice president and director of research for Radar Logic.

Although New York’s market is faring better than markets in the rest of
the country, October data, the most recent available at press time,
showed a less than rosy picture.

The number of co-op, condo and cond-op unit sales in Manhattan dropped
11.5 percent to 1,048 from 1,184 between September and October,
according to research by Gregory Heym, chief economist at Terra
Holdings, parent company of Brown Harris Stevens and Halstead. There
was a slightly more dramatic drop — 13.7 percent — year over year,
when there were 1,215 sales.

Manhattan condo, co-op and townhouse inventory was up in October from
September. The number of available homes rose 4.2 percent to 5,721 in
October from 5,490 a month earlier, Miller said. Barak Dunayer,
president and founder of Barak Realty, shrugged off the increase,
saying, “What’s the big news? A tiny 4 percent increase in inventory?”

Each building class saw an uptick. There were 2,522 co-ops, 2,900
condos and 299 townhouses on the market in October, up from 2,472
co-ops, 2,732 condos and 286 townhouses a month earlier.

Though telling, the numbers are not completely atypical.

“I would suggest it’s not unusual to see inventory rise somewhat in
October, but this would suggest a weaker level of demand,” Miller said.
Last year, however, listings did not actually rise between September
and October. Indeed, they shrunk 9.5 percent to 7,350 from 8,118.

In addition to a rise in inventory, the median home price fell 3
percent in the borough between September and October 2007 to $800,000
from $825,000, Heym of Terra Holdings found.

On the rental side, market assessments were varied.

“The prices of the rentals are down. For $3,500 rentals, we can’t get
$3,000,” Binder said. “I think that there are just a lot of people that
are uncertain that are not moving.”

October’s vacancy increased to 1.13 percent from 1 percent in
September, 0.85 percent in August and 0.81 percent in July, Citi
Habitats numbers show (see Rental market shows some signs of weakness
and In a rental town, vacancy numbers stir debate).

Anecdotally, some real estate pros said the sales business was going
strong last month, although buyers still need some handholding in
following the credit crisis.

“I’m not the cock-eyed optimist but I’m basing it on what I see now,”
said Paul Purcell, co-founder of real estate consulting firm Braddock +
Purcell.

Leonard Steinberg, an executive vice president at Prudential Douglas
Elliman, said that he expects business to “be slow through December”
and “pick up in January, not at the same level of previous years
though.” He added that “buyers and sellers are cautious right now. This
is a bit of a ‘wait and see’ market. That always changes sooner of
later.”

Sounding off from the trenches

To keep our finger on the pulse of the Manhattan residential real
estate market, The Real Deal sent out a survey last month to key
players in the industry, asking them to weigh in on the current
climate. Some excerpts:

Shai Shustik CEO and founder, Manhattan Residential
There has definitely been a slowdown for the average cookie-cutter
unit. People are looking for deals and taking longer to execute. Units
that are priced as if we were in 2005 are not moving and just flooding
the market with unsold statistics.

Frederick Peters president, Warburg Realty Partnership
There are few bidding wars, and when they do occur it is only on very
well-priced properties. Even then, things are not going much over the
asking price and there may be two or three bidders, not six or eight.
Almost nothing is sold anymore in a week or two.

Kathy Braddock co-founder, Braddock + Purcell, and Charles Rutenberg Realty
The most positive trend in the market right now is that the mortgage
problem and the media have not deterred our market. The most negative
is that it is still hard for first-time buyers to acquire the liquid
assets that they need.

Diane Levine brokerage manager of the Downtown office, Sotheby’s International Realty
Certain sellers are still attempting to push beyond the value of their
property. Correctly priced properties are moving. And, those attending
open houses tend to be “real” buyers.

Gordon Golub senior managing director, Citi Habitats
Studios as well as larger units (1,600- to 2,200-square-foot
two-bedrooms and three-bedrooms) are being absorbed very rapidly, while
one-bedrooms are taking longer to go to contract.

Barak Dunayer president and founder, Barak Realty
Overall, the attendance at open houses has been steady. The only
noticeable difference is that buyers stay away from undesirable
properties. I still remember the times that people bought any hole in
the wall.

David Schlamm president, City Connections Realty
The rental market actually slowed down a lot earlier than in previous
years. This year we felt it slow down in the beginning of October,
where traditionally it really slows down closer to Thanksgiving.

Brian Huang sales manager, City Connections Realty
The overall market has strength in prime locations, but we are seeing
some negotiability in “up-and-coming” areas. We’ve also had more
interest in larger apartments than last year.

Jonathan Miller director of research, Radar Logic
There is modest appreciation based on median sale price, a relatively
tight listing discount and the normal number of days on market so
buyers and sellers seem to be in sync.

Because of all the turmoil on Wall Street and the discussion of lower
bonuses, we’re expecting to see an expansion of marketing times and
some cooling off of the elevated activity. But, we’re still seeing a
lot of activity.

Compiled by Lauren Elkies