It’s one year ago to the day since the Lehman Brothers collapse that rocked the financial world and, subsequently, the real estate market. Yet some sectors of the industry — commercial, in particular, still struggle — and experts even question whether a new, commercial real estate market-driven collapse is on its way.
In the days after the global financial services group’s bankruptcy, market experts were scrambling to predict just how severe the collapse would be.
Ultimately, Sept. 14, 2008, ushered in the worst economic crisis the U.S. had seen since World War II. And the New York City residential and commercial real estate markets were not immune.
Thousands of real estate projects across the country stalled or were canceled due to a dearth of financing.
And market conditions have not fully rebounded.
The median price of a Manhattan home is $1.05 million today, marking a 14.3 percent drop from the price a year ago, according to data compiled by Streeteasy.com for The Real Deal. In terms of inventory, the average number of homes on the market is 9,347 today, up from 8,499 units a year ago.
Which is why, on this one-year anniversary, the tempered optimism, let alone the effusive enthusiasm, that some in the real estate industry show today is unexpected.
The Lehman Brothers collapse resulted in a near standstill in activity for several months, said Jonathan Miller, the president of real estate appraisal firm Miller Samuel, and preparer of market reports for Prudential Douglas Elliman. Sales have begun picking up again, he said, but thanks to the post-Sept. 15 delay, “contract activity peaked in August,” he said. “It normally peaks in May.”
As a result, he said, it may be difficult to determine the extent of the damage when market reports come out Oct. 1, since the summer saw a large amount of pent-up demand from the spring.
“The seasons are out of sync,” he said.
Still, much of the doom and gloom of last year has faded, he said.
“Everyone’s relieved that we had a busy summer,” he said. “There’s been a lot of contract activity. That’s because of the market correcting to the point where people felt comfortable to come in.”
Real estate market experts, both residential and commercial, have echoed Miller’s sentiments, and are tentatively gaining back their optimism.
Kathy Braddock, co-founder of Charles Rutenberg Realty in New York City, said that she’s seen gradual improvement in consumer psyche, something that could translate to tangible change in the residential market.
“I think that the average consumer is not in a free fall as they were a year ago,” she said. “There is much more psychological stability. Companies are not folding right and left.”
Braddock said she doesn’t expect a dramatic market change by a year from today, but anticipates that the environment will continue to stabilize throughout the next year.
“I think we will have more of the same — steady, down at about the same place [and] buyers buying because the market has been stable,” Braddock said.
Rena Goldstein, a senior vice president at Halstead Property, saw decreasing interest among buyers following the market collapse, but says today her business is brisk.
“Today, I am showing my listings every day to serious buyers,” Goldstein said. “My buyers are now more determined to move forward with purchases.”
Diane Saatchi, a senior vice president at the Corcoran Group based in East Hampton, said her business is rebounding.
“A year ago today, I received four calls within an hour from buyers all backing out of deals,” Saatchi said. “What a difference a year makes. Three of those buyers are back, looking and making deals, a bit more cautious than before, but eager.”
On the commercial side, Adelaide Polsinelli, an associate vice president at real estate investment services firm Marcus & Millichap, said that there was significant panic in the market, following the Lehman crash. The result was a brand new playbook for the industry.
“A year ago, there was the ‘deer in the headlights’ syndrome amongst investors,” Polsinelli said. “Most were frozen in their tracks, uncertain about where to turn for information, financing and direction. Market data was scarce and past performance was wiped off the monitors. We started with a new slate for pricing, values and comparables.”
But, by Sept. 15, 2010, she expects a turnaround.
“By next year at this time, we should see financing start to come back which will revive the sales market to some better degree than where it stands right now,” Polsinelli said. “Investors will be taking positions in real estate ownership and securing leases as it will be the most opportune time to be in the markets.”
Additional reporting provided by Lauren Elkies and Candace Taylor.