The Real Deal New York

Flipping buyers the bird

Tempers flare as the residential market standoff heightens

March 31, 2009
By Candace Taylor

This month, a broker at Platinum Properties received an unpleasant surprise.

A seller was so insulted by a buyer’s offer that she sent the agent “an e-mail with an attached picture of herself giving the finger,” reported Khashy Eyn, CEO and president of Platinum.

That image could symbolize the enduring standoff between buyers and sellers in Manhattan real estate. It’s been months since September’s fall of Lehman Brothers sent markets crashing, but many buyers and sellers still can’t seem to agree on prices, a situation worsened by several continuing X factors, such as the massive federal stimulus package.

“Buyers expect things to get worse before they get better, and sellers think we’ve already bottomed out,” Eyn explained. “There’s still a huge gap between how buyers are looking to get deals done, and where sellers are priced or are willing to come down.”

As a result, while the paralysis of October and November is over, and some deals are finally getting done, the market is still wildly unpredictable.

“You can’t predict what will sell and what will not,” said Jacky Teplitzky, a managing director at Prudential Douglas Elliman. “The market has not stabilized; our heads are spinning. We all need to land somewhere.”

Until that happens, widespread pain is likely to continue.

March transaction volume is 40 to 60 percent down from last year, estimated Philip Kent Kiracofe, president of the Manhattan Association of Realtors, adding that properties over $2 million are the slowest moving.

Marilyn Harra Kaye, the president of MLBKaye International Realty, estimated that sale prices have fallen 30 percent compared to this time last year.

Meanwhile, the inventory of available homes for sale increased 36.4 percent from the same month last year, to 10,835 in February, according to the latest data available from Jonathan Miller, president of real estate appraisal firm Miller Samuel.

One factor that may lead to some improvement is the recently enacted stimulus package, though it’s unclear how much New York City will benefit.

“There is plenty of speculation of just how much the stimulus efforts will directly impact the Manhattan market, but the brokers are happy for all the help,” said Kiracofe.

Business in April, traditionally one of the strongest months of the year for real estate, “will depend on what the government does for the economy,” Kaye said. “If people have confidence in the strategies, the market will be stronger. If they don’t, it will be weak.”

Any improvement won’t come a minute too soon, said some brokers, especially those who deal primarily in sales.

“For us, March has been dormant,” said Leigh Zaph, president of Manhattan Homes. “At this point, sales volume can only increase.”

Rentals, on the other hand, continue to show more activity, and many brokers continue to focus on them.

“For me, March has been slow because I did not make the transition to rentals fast enough and the rental market is now the center of the New York City real estate market,” said Alicia Littman Lazansky of DJK Residential.

In part, that’s because some Manhattanites are still moving around in search of good deals.

“We’re seeing a lot more people moving to buildings in close proximity to their previous one, almost as if they are swapping apartments just to take advantage of the market,” Eyn said. “One person moves out to get three months free. In order to rent out the apartment he just left, the owner then offers three months free, which someone else takes advantage of, and so on and so forth.”

Hopes are particularly high for rentals as the spring arrives.

“Spring is always a good rental market with recent graduates coming to New York,” Lazansky said.

Here’s a sample of what real estate professionals had to say about market conditions in response to The Real Deal’s monthly Manhattan residential survey:

“It’s a great time to buy, but a difficult time to sell.” Frances Katzen, senior vice president, Prudential Douglas Elliman

“I’m seeing 20 to 30 percent below-ask offers and we expect this to continue, with the gap widening.” Maggie Kent, sales associate, Core Marketing Group

“Buzz among the agents is definitely focusing on what contracts are being signed, now more than ever. There is also a lot of talk about pent-up demand — what’s it going to take for all of the buyers out there to decide the time is right to sign a contract?” Ellie Johnson, vice president, Sotheby’s International Realty

“There has been an increase in activity but obviously not as many people as in previous markets who are ready, willing and able to purchase.” Farrah Mogh, vice president, Halstead Property

“What truly surprises me is the general reluctance of developers to incorporate creative solutions for the problems they’re facing. Perhaps time will inspire some ingenuity on their behalf.” Luigi Rosabianca, principal attorney and founder of real estate law firm Rosabianca & Associates

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