After months of contending with the credit crisis and national housing slump, New York City’s residential real estate market is facing another very sizable hurdle: the fall of Wall Street.
With much of the city’s money tied up in the financial industry, brokers are bracing themselves for the real estate market to take a hit as financial giants like Lehman Brothers, Merrill Lynch, and the AIG are floored.
“What we have here is an elevation of anxiety that’s hit the market,” said Pamela Liebman, CEO of the Corcoran Group. Brokers must act as “part psychiatrist, part hand-holder,” she said, as increasingly more cautious buyers and sellers approach the market.
Joyce Pohs, a sales associate at Bellmarc Realty, said she is already feeling the crunch.
“There is a definite sense of ‘let’s wait this out, and see how far the real estate market will fall,’” Pohs said. “When Lehman fails, AIG is in disarray and Merrill gets absorbed, it’s hard to argue with a wait-till-December-and-see approach. I just had an offer for a posh Fifth Avenue residence withdrawn.”
Veronica Raehse, an executive vice president and sales manager at Bellmarc, agreed that buyers are going to become even more cautious, but notes that despite Monday’s bad news, Tuesday was a busy day at the Bellmarc West Side office; there were three accepted offers and two successful rental transactions, but she agreed that bad economic news will only make buyers more hesitant to pull the trigger.
Newer brokers may struggle the most.
Barbara Fox, president of Fox Residential Group, said that newer brokers “who have only known boom times” may be in for a shock as the market tightens. “Deals have been falling out of heaven for the last 10 years, and they’re not going to be falling out now.”
In terms of the city, the Financial District will feel the hit more than the rest of Manhattan, Fox said.
Apartments there are “a very tough sale right now,” she said, and with the week’s bad news, it will be even tougher. “People are not moving in to the financial industry, they’re moving out of it,” she noted.
Citywide, “I don’t think any business in New York is going to be exempt from this particular set of events,” Fox said.
But people aren’t walking away from signed contracts, they’re simply holding off on making offers until the market settles down, Corcoran’s Liebman said.
She said she remains optimistic that New York’s real estate market will not suffer long-term. “New York is very different. It’s a place [where] everyone wants to be,” she said.