Ending the buyer vs. seller standoff

Buyers wait for lower prices, but that may not happen soon

In the constant battle between New York City buyers and sellers over the exorbitant costs for apartments, buyers more than sellers have been getting battered and bruised. That may soon change.

Darren Sukenik, an executive vice president at Prudential Douglas Elliman, has about a dozen buyers waiting on the sidelines for sale price markdowns. The buyers feel “tortured and abused” by inflated prices and broken promises, Sukenik said.

However, buyers want sellers to meet them at the negotiating table and, of course, slash prices — even if it’s just a 5 percent cut. “That 5 percent makes [buyers] feel like they’ve won,” Sukenik said, adding, “Sellers would then sell their properties.”

But sellers are standing firm, nursing a sense of entitlement about the value of their apartments. Faced with growing inventory in New York City, those very same sellers may be forced to slash sale prices.

Sellers need to realize “we no longer price in the future,” Sukenik said. He thinks the prudent thing to do is “price based on current inventory.”

For the second quarter of 2006, the number of available apartments listed for sale was up 5.6 percent to 9,699 from the first quarter, when there were 9,182 apartments, according to data provided by the appraisal company Mitchell, Maxwell & Jackson. The statistics cover coops and condos in Manhattan south of 96th street.

“My personal view is that, in Manhattan, with more units — new construction and new conversions — coming on the market than usual, we will have to work through this inventory before the end of the stalemate, and prices can start rising again,” said Eloise Johnson, a senior vice president at Halstead Property.

Robert Shiller, a Yale economics professor and an expert on the national housing market, said that the current real estate psychology has to change.

“I’m thinking that the seller is the unusual case right now,” Shiller said. “They’re the ones that will have to change their minds. Eventually, they’ll capitulate.”

What may make New York owners dig their heels in even further, though, is that as a class they are not as pressed to sell their apartments, according to one agent.

“Only a small percentage of all sellers actually have to sell because of job relocation, divorce or change in the family structure,” Johnson said. “Most sellers in Manhattan have both the time and the resources to ‘wait it out.’ Only the truly motivated seller will lower the price to the point where it will sell in any market — including this market.”

The impetus for the standoff is a lack of consensus on where the market is going, said Jeffrey Jackson, co-founder of Mitchell, Maxwell & Jackson. “Seventeen consecutive [interest] rate increases have caused the buyer to pull back from the market.”

Sign Up for the undefined Newsletter

In addition, “you have a short-term oversupply situation,” he said. “Buyers know this is going on. New Yorkers are very savvy. [So] they’re waiting to see if prices are going to come down.”

There is already evidence that the stalemate is coming to an end. Once the Fed stopped raising the rate, Jackson said he saw a slight uptick in buyer interest.

“If the rates remain stable throughout the year, you’ll see a return to normalcy,” Jackson said.

Agents need to make sure their clients, who often keep abreast of the latest data and trends, are getting an accurate picture of the marketplace. “There’s a bit of a misnomer in the market now,” Jackson said. “The average price is up 6 percent, but that doesn’t mean prices are up 6 percent. You’re really getting more sales of more expensive apartments, which is increasing the median.”

The median sale price for July was $804,000, according to data from Jackson’s company, the greatest amount per month dating back at least a year. The data covers coops and condo sales south of 96th Street in Manhattan.

Appraiser firm Miller Samuel found the average Manhattan apartment sales price hit a record of nearly $1.39 million in the second quarter, which is 6.6 percent higher than the first quarter and 5.2 percent higher than a year ago.

Jackson pointed out that the average price is bolstered by an increase in sales upward of $3 million. While the number of sales exceeding $3 million was up in July, the number below $3 million dropped.

In this tense climate, Sukenik of Douglas Elliman is focusing on educating his clients and being supportive.

“Everyone needs to be really informed and loved,” Sukenik said. “And once they understand the facts, sellers sell and buyers buy.”

The late 1980s were also marked by a major market shift.

A real estate bull market then in Manhattan and a large amount of new construction created a giddy sense of endless rising prices, said Johnson at Halstead.

That was followed by buyer-seller standoffs, and a market decline of the early 1990s. “At this point,” she said, “the future direction of Manhattan real estate is uncertain.”