Condo market finally reflects today’s reality

By Candace Taylor | July 01, 2009 10:57PM

This round of quarterly market reports has finally begun to reflect the beating new developments took at the hands of the financial crisis this fall.

September’s Lehman Brothers crash is now several quarters behind us, long enough for contract signings from that time to begin to close (or not close, as the case may be.) Meanwhile, closings at 15 Central Park West and The Plaza are now mostly completed, allowing the reports for the first time to begin to show trends in pricing, not skewed by closings of spectacularly priced homes in those buildings.

According to Prudential Douglas Elliman’s second-quarter report, released today, the median sales price for a new development unit in Manhattan in the second quarter was $1.06 million, down 6.7 percent from $1.14 million in the same quarter of 2008. That’s the first time in two years prices of new developments have showed a quarterly year-over-year decline, according to Miller Samuel CEO Jonathan Miller, the preparer of the Elliman report. For the last few market reports, the prices of new development condos have shown gains despite the real estate slump, since new development sales often take years to close.

A quarterly report by the Corcoran Group found that the average sales price of a new development apartment was $1.75 million, down 18 percent from the same quarter of last year, while the median price dropped 4 percent to $1.275 million, and the price per square foot slipped 14 percent to $1,252.

“New developments have been overpriced and have taken a price cut, said Bill Staniford, the CEO of Property Shark, which partnered with Corcoran to produce the report.”They are going to need to take more of  a price cut to make those types of properties attractive. There are not a lot of people out there willing to spend that type of money.”

The Corcoran report showed a 67 percent decline in the number of new development sales year-over-year, and a 26 percent decline from last quarter.

New developments have lost market share to resales this quarter, with new developments representing 27 percent of all sales, the lowest level in 18 months, Miller said, noting that real-time sales of new developments are probably even slower.

“They’re frozen,” Miller said.

And for the first time in two years, there were more co-op closings in the second quarter (734), than condo closings (653), according to Gregory Heym, the chief economist at Terra Holdings, who prepared the market report for sister companies Halstead Property and Brown Harris Stevens.

Though co-ops still represent the majority form of homeownership in the city, “over the last few years, with all the new developments that have been sold, it tilted the scale towards condos,” Heym said.

But luxury condo sales have been particularly vulnerable to the credit crisis, since new Fannie Mae guidelines make it more difficult to get mortgages in buildings that are less than  75 percent sold. They’ve also been impacted by unemployment and pay cuts on Wall Street.

“New developments and the luxury market, those are the sectors that have been hit the hardest, without a doubt,” Sofia Kim, vice president of research at Streeteasy and the preparer of the company’s market report. “Today’s market is certainly different from a year ago, because that market was driven by new development, and today it’s being driven by the lower-end and first-time home-buyers.”

Halstead’s report found that new developments sold for an average of $1,198 per square foot in the second quarter, 16 percent less than a year ago.

For more market report coverage, click here and here.