Zhann Jochinke, an associate broker at Argo Residential, put an alcove studio on the market last year for $525,000. But the offers that came in were as low as $390,000.
“People were putting bids out there just to see if the person had to sell,” he recalled.
More recently, however, he convinced the seller to drop the price to around $490,000.
Offers began coming in at “5 percent or less off the asking price,” he said. Now, the listing is in contract, and expected to close in the next month.
After months of uncertainty, Manhattan buyers and sellers are finally making a market. In the terrifying period after the Lehman Brothers crisis, so few properties were sold that pricing an apartment became a game of roulette. Buyers, too, were unsure what a property would trade for, and their offers were all over the map.
Plummeting prices made matters worse.
“Earlier in the year, recent comps were being considered, and then 10, 15, 20 percent was being subtracted to set a reasonable asking price,” Jochinke said. “It wasn’t uncommon, even at these prices, that offers would still come in well under ask.”
But thanks to the uptick in activity that started in the spring and has carried over into fall, a new batch of closed sales is providing much more accurate information, allowing both buyers and sellers to get a clearer understanding of how much their properties are worth.
“We are able to list a property today at a number very similar to one that closed in the past couple of months,” Jochinke said.
As a result, Antonio del Rosario, the president and co-owner of A.C. Lawrence, said he’s now seeing accepted offers come in within 2 percent of the asking price, or “many times, at the asking price,” he said, adding, “I’m seeing a lot of sellers align with the market.”
A nearby example is Bernie Madoff’s five-bedroom mansion in Montauk, which reportedly sold last month for more than its $8.75 million asking price.
The shrinking gap between buyers’ and sellers’ expectations makes it easier to put listings into contract, said Michael Garr, a senior vice president at Core.
“There is a tremendous increase in competitive offers from savvy buyers, which have resulted in more listings in contract,” said Garr, who recently held an open house for a two-bedroom co-op at 105 West 13th Street in Greenwich Village that attracted 21 people. “Five months ago, I would have had half that number,” he said.
Make no mistake: these deals are trading at lower prices than last year. But properties that have languished on the market for months are now beginning to move.
For example, last month, the Manhattan-based brokerage Marketing Directors sold a three-bedroom penthouse at the Platinum at 247 West 46th Street, a listing that first went on the market in September 2008.
According to city records, the selling price was $5.8 million — down about 17 percent from the original asking price of $7 million.
“If both parties are realistic about the market, deals are being made,” said Jacqueline Urgo, president of Marketing Directors.
As a result, inventory has not risen as precipitously as some had feared it might.
According to Jonathan Miller, the president of the appraisal firm Miller Samuel, there were 8,535 homes on the market in Manhattan at the end of August. That’s 4 percent more than the same month last year.
However, it’s 22 percent less than six months ago, when there were some 11,000 homes available for sale, he said.
“There is still a lot more on the market than there was two years ago,” said Ric Swezey, a senior associate at the Corcoran Group, “but the market has stabilized from this time last year, which has allowed some of the inventory to be absorbed.”
It’s still anyone’s guess how much prices will fall as the recession continues. But brokers report that the steep drop-off in prices that characterized the immediate post-Lehman aftermath seems to have stopped– for the time being, anyway — giving buyers and sellers enough breathing room to comfortably make purchases.
“I can confidently say pricing has finally stabilized,” said del Rosario of A.C. Lawrence.
However, he cautioned, “I don’t know how long it will last, since we have yet to see unemployment rates reach a plateau. Until that part of our economy has stabilized, I don’t think the housing market in [New York] or in any part of the country can stand on solid ground.”
Experts agree with del Rosario that unemployment and other market
fundamentals remain weak, making a speedy return to the boom years –and prices — of the mid-2000s very unlikely.
Also, even as buyers exhibit renewed confidence and interest in real estate, strict lending requirements are slowing the buying process.
“Our contracts and closings are up, but there is still no financing,” said Marilyn Harra Kaye, president of MLBKaye International Realty, adding that buyers have been asking, “When will the FICO [credit] scores come down to get financing?”
The continued underlying market weakness is most evident in the higher-end market, which has been particularly hard-hit by the lack of available jumbo mortgages.
“The weakest part of the market continues to be homes priced above $2 million,” said Steven McArdle, the principal of Urban Marketing. “However, I’m seeing tremendous activity in homes priced at $1.5 million and below.”
Also, on the very high end of the market, some listings are beginning to change hands, or at least generate new interest (see “Trophy listings at lower prices”). Early last month, news broke that a townhouse at 165 East 70th was sold in August for $13.5 million to John Mack, the CEO of Morgan Stanley.
The rental market is exhibiting similar trends, with activity greater than it was in the immediate aftermath of Lehman’s collapse.
In its first-ever peak-season rental report, released late last month, Citi Habitats found that average rents across Manhattan — excluding incentives — dropped by more than 8 percent between May and August 2009, compared to the same four months in 2008. Studio apartments and two-bedroom apartments showed the steepest drop, at 11 percent.
Another rental report, prepared by the brokerage TDG/TREGNY, found that
rents for all categories of apartments had dropped between 6 and 10 percent from September 2008 to last month.
“While activity has increased, the numbers have not shown significant improvement,” the report said. “Rents have stabilized, but at levels nearly 10 percent back from already depressed 2008 numbers.
“And although vacancies showed improvement this month, they have yet to
establish the trend necessary to absorb the considerable amount of excess inventory that is continuing to depress the market.”
Overall, brokers are breathing a sigh of relief, as business appears to be getting somewhat back to normal. But they acknowledge the market is not out of the woods.
“The general sentiment is that we still have a long way to go, but any future declines in the market will be slower and less of a free fall,” said Kristin Hitsous, an associate attorney at real estate law firm Rosabianca & Associates.