It’s an enviable problem: You’re rich enough to be a prospective buyer in New York City’s luxury market, but right now isn’t the best time to buy. Maybe in a few months, after the year-end Wall Street bonuses, or maybe a bit beyond that, after prices come down more. Until then, join the growing line of would-be luxury buyers who simply aren’t putting money into an increasingly uncertain housing scene.
“The luxury market is waiting on the bonuses,” said Christopher Mathieson, managing partner of JC DeNiro & Associates, which brokers a lot of over-$2 million apartments. “Just anecdotally, I think if you looked at the numbers from the fourth quarter of 2004, you would see a slowdown in the market as well.”
In 2004, Wall Street bonuses totaled $15.9 billion, according to estimates released by the state Comptroller’s office. That was the fourth-highest yearly bonus total on record. If tradition holds, 2005’s Wall Street bonus money will flood the luxury market by the spring with new buyers.
For now, though, at the start of the fourth quarter, the New York housing market sagged in comparison to the record-setting days of early 2005 and late 2004.
The average sales price of a Manhattan apartment was $1,088,941 in October, falling 8.4 percent from the month before, according to a report from Halstead Property. The apartment market has given back most of its gains over the past year so that the average price is now up only 1 percent compared to a year ago, Halstead reported.
Meanwhile, the median price saw less of a month-to-month decline, further indicating that the weakness lay primarily in the luxury end of the market. The median price of an apartment was $699,000 in October, down 6.7 percent from the month before but still up 6 percent compared to a year ago, Halstead reported.
Gauging the market month to month can be difficult, but Halstead’s October numbers keep with a general downward trend first analyzed in third quarter market reports that showed a pricing slowdown although not the burst.
A third quarter report from appraisal firm Miller Samuel showed an average sales price drop of nearly 13 percent over the second quarter, though it also reported a record $984 average sales price per square foot. Halstead’s October report also showed the market continuing to look strong on a price-per-square foot basis, up 17 percent compared to the same time a year ago.
Median prices on studios, one-bedrooms and two-bedrooms throughout Manhattan continued to remain high in October, according to Halstead. Prices for one- and two-bedrooms on the East Side, in particular, were up a dramatic 27 and 28 percent, respectively, from a year ago.
But lack of activity on the luxury end dampened the market as a whole. In particular, Halstead reported that sales prices are down 23 percent on East Side apartments with three or more bedrooms compared to a year ago.
“I think it’s a combination of things,” said Halstead chief economist Gregory Heym of the reasons behind the luxury inactivity. “One, I think people are a little uneasy right now. They’ve read a lot and heard a lot about an imminent [market] decline. And, obviously, the bigger the price tag, the more hesitant people tend to be. Maybe they want to see what happens over the next couple of months.”
Enter the bonuses.
Wall Street accounts for only 5 percent of all jobs in the city, according to a 2004 report from the Comptroller’s office, but it provides more than one-fifth of all wages paid in the five boroughs. And the bonuses on these wages often total in the six figures, Mathieson said, opening a financial door for their recipients into a luxury real estate market where a $2 million sales price (yawn) is often baseline.
In fact, bonuses for 2005 should be 5 to 10 percent higher, on average, than in 2004, according to an analysis from financial consulting firm Johnson & Associates. Investment bankers could see bonuses as much as 20 percent larger.
And these payouts may stretch further when it comes to housing, market observers say, because luxury prices have started to come down and buyers are gradually gaining the upper hand in negotiability. Plus, luxury market buyers tend not to be affected by fluctuations in mortgage rates, which have been steadily increasing since the summer. The fixed rate on the average 30-year mortgage, for instance, reached in November its highest level in more than two years, the Wall Street Journal reported.
“I have clients from Wall Street,” Mathieson said, “and they’ve been saying these prices are out of control, they have to come down… They’re on Wall Street. They know numbers.”