One way to understand what’s currently happening in the Manhattan residential real estate market is to visualize, as Miller Samuel CEO Jonathan Miller put it, that “we’re in the second hump of the annual two-hump camel.”
The normal seasonal pattern for New York City has recently resurfaced, after virtually disappearing with the fallout from the Lehman Brothers collapse and ensuing housing downturn. Traditionally, the strongest time of the year is spring. Sales taper off during summer, jump in the fall as Manhattanites return from their summer vacations, and then slow down in time for the busy holiday season.
Last spring was very active, especially as the housing market appeared to emerge from the crisis and the federal first-time homebuyers’ tax credit spurred sales, Miller said. Then contract activity slowed in July and August.
“I saw contracts cool off over the summer,” Miller said.
That’s normal for the time of year, he noted. “We’re getting back into the seasonal thing,” he said.
Still, the sales market in general seems to be slowing down. Seasonality is crucial to understanding that trend, but it doesn’t tell the whole story.
Activity in September was “lower than expected,” Miller said. And while contract signings climbed last month, as they normally do, “there’s a bit of an edge that has come off the market after a fairly robust early part of the year,” he said. Part of it is the expiration of the tax credit, he added, and part of it is just a weakening economy.
“The fall has been much softer than I had anticipated,” said Max Moondoc, a sales associate at Barak Realty. “I figured that with interest rates at historically low levels, more buyers would be bringing their dry powder to the market.”
Instead, he’s found that “there are quite a few tire-kickers not quite ready for the opportunities in front of them,” he said.
Given the turmoil in the broader economy, it’s not surprising that buyers are still a bit nervous. The controversy continues to rage over “robo-signers” used by banks to speed up foreclosures, and late last month, the Obama administration warned that the resulting uncertainty over the legal status of foreclosed homes could further depress home prices nationwide and delay the recovery of the housing market.
Since foreclosures are unusual in Manhattan, the crisis hasn’t yet had a direct impact on the city. Still, “it just adds a layer of uncertainty to an already uncertain housing market,” Miller said.
As a result, buyers are exhibiting ambivalence about purchasing a home, although conditions are undeniably stronger than they were a year ago. Prudential Douglas Elliman’s third-quarter market report put the average Manhattan sales price at $1.487 million, marking a 12.4 percent increase over the third quarter of 2009. The median sales price hit $914,000, up 7.5 percent year-over-year. The number of sales Elliman recorded marketwide, 2,661, increased 19.3 percent.
“Buyers seem more ready than a year ago and are feeling more confident, but are still somewhat hesitant,” said Ann Guttman, a senior managing director at Bond New York. “When they move on a property, they do it with vigor, but it takes a while for them to get to a decision.”
At The Real Deal’s sixth annual forum, “The Road to Recovery,” at Lincoln Center last month, Halstead Property President Diane Ramirez said while real estate is recovering, “I am seeing no urgency in the market right now.”
As a result, Takk Yamaguchi of DJK Residential said there is a “lack of credible buyers for certain properties.
“Growing pains due to the economy should continue to be a test within our profession,” he said.
Studios in particular are running into trouble now that the tax credit has expired. “The studio sale market in Manhattan has really struggled,” Yamaguchi said.
In response, Manhattan brokers are hoping that Wall Street bonuses will spur more sales. “Manhattan brokers are lighting candles in hope of a strong Wall Street bonus season,” said Nikki Field, a senior vice president at Sotheby’s International Realty.
The Real Deal sent out its monthly questionnaire to brokers about the market. Here is a sampling of responses:
Victoria Shtainer, senior vice president at Prudential Douglas Elliman: “Refinancing is taking away inventory from the market. I see sellers taking their properties off the market, refinancing, and staying put.”
Luigi Rosabianca, principal attorney, Rosabianca & Associates: “New York City real estate is apolitical. Generally, [the midterm elections] have no bearing upon the market, and vice versa. Most practitioners — brokers, attorneys and bankers — will have difficulty naming their local congressman and representatives.”
Frank Sanchez, managing partner, AC Lawrence & Co: “Overall, brokers still feel the market conditions are not as strong as we would like, but much better than last year.”
Margie Hussel, director of landlord services, Citi Habitats: “The rental market slows down this time of year and if you haven’t adjusted your rental prices already or plan to do so in the next couple of weeks, the properties will probably stay on the market until next year or you’ll have to settle for considerably less. This happens every year without fail.”