Luxury market still has room to fall, Core says

Jun.June 02, 2009 05:33 PM

Sales at the low end of the market have picked up since the doldrums of this fall’s financial crisis, which caused real estate activity to grind to a virtual halt, but the luxury market still shows little improvement, according to Core Group Marketing’s Real Time Report for the second quarter of 2009, released today.

The report, which pools data from Core’s database, shows real-time residential market trends throughout a three-month period. The firm’s data showed 582 contracts signed in May, the most of any month in 2009 to date and the fifth straight month of increased apartment sales in Manhattan. For example, the brokerage had 82 contracts for studios signed in May, up from 58 in April and 53 in March.

The report was launched by Core in January 2009, so there’s no comparative data yet. But it’s likely those sales figures are far below last year’s. According to market reports released by the major brokerages this spring, Manhattan real estate sales plummeted by one half in the first quarter of 2009 from the same period last year.

According to Core’s data, the luxury sector is suffering even more. The average contract price of a four-bedroom unit decreased 43 percent from the original asking price to about $2.77 million in March. The four- to seven-bedroom market consistently showed the largest price downturns throughout the quarter, with the contract prices of four-bedroom units dropping 33 percent in April and 29 percent in May.

“The high end of the market still has room to fall and it’s falling rapidly,” said Shaun Osher, founder and CEO of Core. “A unit on Park Avenue went on the market for $25 million in May 2008 and recently sold for $8 million in May 2009.”

He added: “There were only 15 new deals over $5 million in all of Manhattan in May 2009.”

While the report showed that the high-end sector still has yet to bottom out, signs of stabilization are evident on the lower end.

“We are finding more activity and prices seem to have settled down in the lower sector of the market,” Osher said.

One-bedroom units saw the biggest increase in contracts signed between April and May, and the report shows that signed prices in studios to three-bedrooms have also remained consistent for the past three months, another indicator of low-end market stabilization.

There has also been a leveling out of average days on the market for smaller units, whereas larger four-to-seven-bedroom units have seen spikes, according to Core’s data.

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