There are those speculating that the residential real estate market in New York City has recently suffered its first full body blow in years with the results posted for the third quarter of 2005.
According to two recent market reports, while average and median prices for apartments are up significantly from third quarter last year, they have fallen from this year’s record-setting second-quarter prices. Those reports, compiled by real estate appraisers Miller Samuel and real estate brokerage Halstead Property, say the slight depression is largely due to a slowdown in the luxury market one that couldn’t be offset by increased activity among smaller apartments.
But those who market residential real estate say the sluggishness is normal for the summer months, and the extraordinarily fast absorption of new development is just proof of the robust real estate market pudding.
“Currently, supply of new development is being absorbed so rapidly, and so much in advance of completion dates that a slowdown from this point would probably just be normal,” said Daniel Cordeiro, director of research services and senior project manager at the Corcoran Group.
Cordeiro has been marketing more than a handful of new projects over the course of the past year, including Orion Condominium at 350 West 42nd Street, which he believes may have set absorption records.
“There are 551 units total, and the speed at which we got the absorption that we did was shocking,” he said. “By last May, after two months of sales, we were 60 percent sold. Currently, we have 474 signed contracts, so we’re 86 percent sold.”
About 20 transactions had closed at the Orion between mid-September and mid-October, Cordeiro said, even though the remaining units are costly ones on top floors, which marketers kept off the market intentionally until the building was topped off.
And just to demonstrate that sales may be picking up after the traditional summer sluggishness, Cordeiro cited activity at J Condominium at 100 Jay Street in Brooklyn’s Dumbo neighborhood, where 56 contracts among the 267 units had been signed as of mid-October after two weeks of sales.
“The story is really in absorption,” he said. “The fact that we can move 474 condominiums before a building is built and we’re not even planning on delivering the Orion for another four to six months is amazing.”
“So if the market were to slow down, maybe we’d be finishing things up right as we were having the first closings on the project, but that’s not what we’re seeing in the current market.”
But how are new constructions and conversions faring as the real estate market is swinging into a period where a large number of new units is expected to come to market?
According to Halstead Property, the average price per square foot of new construction and conversions fell about 12 percent to $1,138 from a high of $1,294 from the second quarter this year, though it is up 13 percent from the prior year quarter. There are also some reports that developers in some gentrifying areas of New York City, such as neighborhoods in Brooklyn, believe residential prices have peaked and are seeing sagging land prices.
But marketers of new development in Manhattan staunchly deny they are cutting prices. Reports of “price chopping” on real estate Web sites, such as Curbed.com, have been on resale.
“At 200 Chambers Street in Tribeca, which opened July 1 in a whisper campaign to a wait list, we’re still increasing prices,” said Jackie Urgo, executive vice president of The Marketing Directors, Inc. “That building has 258 residences, and we’re already over 55 percent sold there, and we’ll deliver units in November 2006.”
Another project being marketed by The Marketing Directors is 1600 Broadway on the Square, where more than 65 percent of the 137 units were in contract in mid-October after four weeks on the market, Urgo said. Those units will be delivered in the spring of 2006.
“Studios, ones and twos are moving beautifully across the board,” she said. “If a product is plannedécorrectly for the market, and the amenity package and size of the homes and finish level are targeted perfectly to the market you’re going after, people see the value. The absorption rates are astronomical, which is a new thing.”
Michael Shvo, founder and CEO of the Shvo Group, agreed, saying the right product sells immediately. Though Miller Samuel reported that the number of days it took to sell an apartment in the third quarter increased by a month to 133 days as compared to the prior quarter average of 102 days, Shvo asserted that product that lingers has shortcomings.
“Product that sits on the market is normally product that’s not as attractive; that’s more ordinary; that doesn’t have something unique to offer,” he said. “At Bryant Park Tower, which we’re currently marketing, we opened in July and within the first week or 10 days, we sold almost 65 percent of the building,” which has 94 units.
Bryant Park Tower, located in the Fashion District/Times Square, a conversion to luxury condominiums, had units specifically designed to appeal to the market, Shvo said, which meant they were smaller units with a view.
Shvo said he believes the rate at which new development is absorbed is not necessarily dependent upon such indicators as unit size or even price. Everywhere in New York City, there are new units sitting, he said, because they weren’t marketedécorrectly.
“It’s about how special the project is,” Shvo said. “That’s especially important in new developments today, because we’re going to see a lot more inventory come to the market.”
New development aside, there are indications that some residential real estate brokers are seeing some resale units linger on the market, unless they use price reductions and other incentives to move them. This may be happening in units that are only one degree removed from being brand-new construction.
Valerie Dominguez, a broker with The Corcoran Group, is marketing Senneca Terrace at 324 East 112th Street in East Harlem, and has sold 80 percent of the 20-unit development since July, with only higher-priced units remaining.
Still, she said, in all honesty, she’s having harder luck on resales. In mid-October, she was only able to move a Midtown apartment after a month on the market by reducing the price $50,000 from asking to $850,000 and increasing the commission from 6 to 7 percent with 4 percent as a buyer incentive.
The apartment had sold to an investor only a few months earlier as new construction for $730,000.
Dominguez said that once she employed those strategies, the 713-square-foot apartment with 60-square-foot terrace got three solid offers.
“So we sold it at $850,000 cash with two backup offers,” she said. “I think you just need to be more in tune with price now than you had to be the past couple of years.”
Danny Anitian, a broker with Nest Seekers International, is, like Dominguez, also handling resale in a new development, the 96-unit Crossing 23rd in Gramercy.
“Six months ago, you could sell it in two weeks,” Anitian said. “Now it takes much longer. No honeymoon is forever. New development used to be a magic word, but no longer. It’s not that one sells very good and one doesn’t sell at all. This is affecting the whole market.”