The Real Deal New York

Residential sales up, but prices flat

New Yorkers remain 'shell-shocked' by economy, while foreign buyers continue to prop up the market

October 04, 2011
By Leigh Kamping-Carder

Last month reminded New Yorkers of two dark days: the terrorist attacks on the World Trade Center, now a decade past, and the third anniversary of Lehman Brothers’ slide into bankruptcy. In addition, the failings of the financial system jumped to front of mind as protestors camped out in Lower Manhattan’s Zuccotti Park to “Occupy Wall Street.”

But while many New Yorkers were preoccupied with the past, real estate professionals looked to the future, hoping the third-quarter residential market reports would bring positive news.

They weren’t entirely disappointed. Sales activity in Manhattan jumped 16.7 percent from the same period last year. Meanwhile, prices essentially held steady, with the median sales price in Manhattan falling a scant 0.3 percent to $911,333, according to a report from Prudential Douglas Elliman. Average price per square foot rose 3.2 percent, while the average overall sale price dropped 1.5 percent, according to Jonathan Miller, CEO of appraisal firm Miller Samuel and the report’s author.

Miller noted that the jump in sales activity was partly due to artificially low volume a year ago, following the expiration of the federal first-time homebuyers’ tax credit.

Another factor, he said, is the continued influx of international buyers into the marketplace.

“Foreign buyers are the reason that the new development market has gained traction,” Miller said.

Whatever the cause, “we’ve heard from both buyers and sellers that they are very surprised by the boost in activity,” said Andrew Barrocas, CEO of brokerage MNS.

Still, over and over again, brokers used the word “cautious” to describe buyers, especially domestic buyers.

Victoria Shtainer, a senior vice president at Elliman, said she is much busier than a year ago, but buyers are attending showings with iPads in hand, and closely tracking listings.

Kelly Killian, an agent at Bond New York, noted the effect of an uncertain job market on her clients’ behavior. Two clients are waiting until the spring to list their properties while they sort out employment situations, she said.

“The domestic buyers are still a bit shell-shocked regarding current joblessness rates and nervous about their own company’s position,” Killian said. As a result, they’re “carefully and critically thinking through deals.”

Those getting into the market are individuals with rock-solid job security, purchasers taking advantage of low interest rates for long-term buys (see “Are low interest rates played out?”), or people compelled to move for personal reasons, such as needing more space, brokers said.

In the rental market, continued tenant demand coupled with the lack of a corresponding increase in inventory has allowed landlords to keep holding the line on prices and avoid major concessions, brokers said.

“There has been very little [rental] inventory compared to last year, with just as much volume, if not more,” said Christine Ra of City Connections Realty.

Average Manhattan rents last month inched up 0.8 percent over August levels, according to MNS’ September rental market report. That brought the average monthly rent for a Manhattan one-bedroom to $3,820 in a doorman building and $2,999 in a non-doorman building. Compared to the same period last year, average September rents rose considerably more, with rents for one-bedrooms up 9.4 percent, the report said. But the rental market may see a shift later in the season.

That’s because many leases in large rental buildings signed in the summer of 2010 included a month’s free rent or more, extending leases to 14- or 15-month terms. “Those will soon be expiring, dumping more units into this year’s availability inventory,” the MNS report said.

Still, residential real estate professionals remain cautiously optimistic about the months ahead.

Barrocas said he expects prices to increase in more established neighborhoods such as Gramercy, the Flatiron District, Soho, Tribeca and the Village.

At the Apex Condominiums, above the Aloft Hotel on Frederick Douglass Boulevard in Harlem, prices are almost 10 percent higher than when the 44-unit development opened roughly a year ago, said Jacqueline Urgo, president of the Marketing Directors.

“Good buildings and good locations are back in demand,” Urgo said. She added: “With some product moving and still a scarcity of new properties being introduced, we expect to see less inventory available to buyers, and believe closing prices will be closer to asking prices.”

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