The Real Deal New York

Apartment Market Takes a Breather

October 15, 2007
By Stuart W. Elliott

The residential real estate market in Manhattan normally takes a breather in the summer compared to the spring, and this seems to be especially true this year.

After an overheated market in the first and parts of the second quarter, characterized by tight inventory and dramatically rising prices, the market started to slow down in May, and things have remained relatively flat through July.

“There was a one or two month window where there was a 10 to 20 percent jump,” said Jonathan Miller, president of the appraisal firm Miller Samuel Inc. and author of the Douglas Elliman Manhattan Market Overview. “Now we’re seeing a 10 to 15 percent annualized return.”

“Brokers are taking time off, and buyers and sellers are too,” Kenneth Scheff, director of sales for the Downtown and Tribeca offices of Stribling & Associates, said in late July. “My agents are going on some really lovely summer vacations, and taking an extra week off.”

Scheff said it is “hard to know where the market is going.”

He said he is still seeing properties get into bidding wars and overall “it’s a very strong July,” given the fact that “July is never May.”

The market is especially strong at the high end and lower end, which Scheff characterizes as above $3 million and (surprisingly enough) below $1 million, respectively.

At the same time, pricing compared to the month before has been flat for several months. “It would definitely be a mistake to price something above what it was in the spring,” he said.

Jeff Wolk, co-founder and co-principal of Fenwick Keats, also said late last month he “expects to see a fairly stable market for the remainder of the year,” and that the market has reached a “plateau.”

Wolk said most people are biding their time until after the presidential election. “There is a lot of nervousness over world events,” he said, noting that buyers and sellers may be waiting to get through the Democratic and Republican conventions with no major incidents as well.

But if there is uncertainty, Scheff said there is less concern about interest rates than in the past.

“In the spring, people were looking to the election as significant,” he said. “People thought maybe interest rates would shoot up. But that is not the perception now. There is no sense that we are on a precipice.”

Miller agrees. “The economy is improving, but we keep getting periodic setbacks, so there hasn’t been a big rise in rates,” he said.

Still, economists at 18 of Wall Street’s 22 largest bond trading companies expect the Federal Reserve to boost its target overnight lending rate between banks to at least two percent by the end of this year.

One person with a different opinion on the overall state of the market is Gregory Heym, chief economist for Brown Harris Stevens.

“Don’t believe people who say there is a slowdown, ” Heym said in early July.

He said a BHS report on the second quarter (see story “Average Price Tops $1M in 2Q”) showed that there were significant price increases in June, the last month of the quarter. There are no statistics yet for July.

“There was a significant increase – and you can’t have an increase like that in the quarter if you have one or two slow months,” he said.

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