Manhattan’s housing market takes a beating

By Candace Taylor | April 01, 2009 06:22PM

 Left to right: Jonathan Miller, Sofia Kim, Diane Ramirez

Hard data now confirms months of whispering about drastic declines in the post-Lehman Manhattan residential real estate market.

Walloped by the credit crunch, housing downturn and recession trifecta, the total number of Manhattan real estate sales plummeted by half in the first quarter of this year from the same period last year, according to quarterly Manhattan market reports released by the city’s major brokerages and real estate data firms today.

The number of closed sales in new developments fared even worse, dropping 67 percent from the prior-year quarter, according to the report released by the Corcoran Group and prepared by Propertyshark.com. Contract signings, which provide a more accurate picture of current market conditions, in the first quarter plunged 40 percent to 1,324, from 2,225 in the prior-year quarter, according to a first-quarter report released by real estate listings Web site Streeteasy.com.

“It’s safe to say the bubble has burst,” said Sofia Kim, vice president of research at Streeteasy.

In the first quarter, 1,195 Manhattan co-op unit and condo unit sales closed, down 47.6 percent from 2,282 in the prior-year quarter, according to a report released by Prudential Douglas Elliman and compiled by Jonathan Miller, the president of real estate appraisal firm Miller Samuel. Corcoran’s report pegged the annual decrease at 52 percent. Brown Harris Stevens and Halstead Property, subsidiaries of Terra Holdings which formulated their reports based on data from ValuExchange, a propriety database of closed sales, reported a sales decrease of 58 percent year-over-year.

Sales prices tell a more nuanced story. All of the firms recorded a sharp decrease in resale prices, but reports varied for new condos because of the very long lead-time between signings and closings in new construction.

“New construction is the wild card,” Miller said.

According to Elliman, the median price of a resale apartment in Manhattan was $675,000, sliding 20.8 percent from $852,500 in the prior-year quarter. The new development median price, on the other hand, rose 31.4 percent year-over-year to $1.51 million, reflecting closings of contract signings that occurred a year or more ago.

“The meeting of the minds occurred a year ago,” Miller said.

The average sale price of a Manhattan apartment rose 6 percent to $1.83 million in the first three months of this year from $1.72 million in the same period of 2008, Miller’s report found. But because the market has changed so drastically in the wake of September’s Lehman Brothers collapse, he said, resales are a more accurate indicator of current market conditions than new developments.

“We had a sharp market reset in September,” Miller said. “Anything that happened prior to that is not relevant to understanding the market.”

Corcoran found that the median price of a resale apartment dropped 11 percent to $749,000 from $839,000 in the first quarter of 2008.

Several other factors are troubling, Miller said. Listing inventory leaped 34.3 percent to 10,445 in the first quarter, he said, up from 7,778 a year ago. That’s the highest level of inventory in a decade, Miller said, as is the average listing discount of 12.4 percent and the average number of days on the market: 170, up from 146 days at this time last year. 

That indicates a lingering stalemate between buyers and seller, likely precipitated by the rapid turnabout in the market.

“This disconnect, that’s always what you see in a market downturn,” he said. “This time, it’s more exaggerated because the correction was so rapid and sharp.”

Diane Ramirez, president of Halstead, said the figures mirror the day-to-day experiences of her brokers.

“This is what we saw coming,” she said. “It’s a reflection of the hesitancy in the marketplace.”

Still, she said, activity has improved lately.

“January was the slowest, February definitely picked up, and in March we had a nice amount of business coming in,” Ramirez said. “I believe there’s a building momentum, and confidence will come.”

Miller the appraiser said that he too has noticed that more contracts are being signed, but said the real estate market nearly always improves as winter turns to spring.

“It’s rising because it’s supposed to rise at this time of year, but it’s at a far lower level than last year,” he said. “Just because we’re going into a better time of the year doesn’t mean that the housing market has stabilized.”

Streeteasy’s Kim said her company determined there was a 7 percent increase in contracts signed in first quarter 2009 from 1,233 in the fourth quarter of 2008, but the number of contracts has plunged year-over-year.

In a sign that Manhattan is not out of the woods, Streeteasy.com found that the inventory of available units steadily increased each week in the first quarter of this year, with an average of 403 new listings coming onto the market every seven days, an increase of 9.3 percent from last quarter, when an average of 369 new listings came on the market per week.