NYC Housing Market Showing Cracks - Barron's

In Manhattan, once a fortress against national real estate prices, Barron’s finds median home price data increasingly skewed. Luxury, multi-million dollar apartments-- which account for 5% of the market-- are selling well. Particularly in high profile buildings like the refurbished Plaza Hotel and 15 Central Park West. But middle-to-low-end apartments are being reduced, and could go down further. In Q1, Manhattan apartments sold for 97.5% of their original asking price on average. Inventory is rising and an online brokerage tracker has seen numerous 5%+ price cuts since May. Expected financial firm layoffs and significantly tighter lending standards could make things even worse.

There are some positives: Median Manhattan apartment prices have risen 136% since 2006, Q1 sales increased 318% for $10 million+ apartments, and Wall Street bonuses haven’t fallen as sharply as feared. Furthermore, NYC’s market is supported by a predominance of co-ops, whose boards notoriously keep buyers tantalized. A weak dollar encourages foreign buyers and rental rates are rising.

Most encouraging? Since NYC’s economic troubles generally lag the nation’s, some see its decline as an indication that the national housing slump has begun its final phase.

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Tim Iacono and Barry Ritholtz have been harbingering for some time that the high-end housing market has been masking the depth of the downturn. In fact, Barry Ritholtz calls in to question all national data reportage. He wrote Saturday that the National Association of Realtors is either willfully misrepresenting statistics, or grossly negligent in their data gathering.  

Seeking Alpha’s Housing Tracker excerpted a Wall St. Journal article that showed NYC’s financial district was starting to see declines because of over-construction. Mark Perry cited a Money Magazine article that said NYC prices were forecast to fall 13.2% by 2009.

Comments

[1worldcurrency:]

I thought Wall Street gave out bonuses at the end of the year. End of the slump? The last time Manhattan apartment prices dropped significantly, after the '87 crash, it took about ten years to break even. TEN YEARS. Many people believe this slump will be worse. Nice headline.

2008 Jun 15 05:42 PM

[bjforeclosures:]

The rate of increase of home prices does seem to be worse than last time.

As you noted, it's going to be the lower end of the spectrum the feels the pain. The influx of new homeowners that were able to buy properties because lenders relaxed standards and allowed the national home price to income ratio to rise to levels never before seen. I don't have specific data for NYC but I have Bergen County NJ data.

Go to my website and click on the blog link and look for a posting entitled "Where should house prices really be and how did they get so high?"

There is also national data and charts there as well. So much for all the government bodies in charge of regulating banks so that things like this don't happen.

2008 Jun 15 11:02 PM

[fatcat:]

A little anecdotal evidence,I just returned from vacation at Emerald Isle,N.C. A nice spot,but it was a little dead...It looked like every 4th beach house had a for sale sign hung on it.Most were 750-1m range.If its like that everywhere on the coast,the financials will take a bath.

Didn't mean to change the subject,I know nothing about nyc real estate!!

2008 Jun 16 04:00 AM

[SA Editor J...:]

Hi Fatcat,

Your comment actually doesn't change the subject. It's really interesting, because up until not very long ago NC was a very strong market. Although it doesn't have the same fundamentals as NYC, I wonder if two makes a trend. Gotta go check out the Seattle market.
Thanks,

Judy

2008 Jun 16 04:07 AM

[bjforeclosures:]

It seems there were a bunch of people that didn't want to sell their homes but did want to benefit from the increased equity in their homes. HELOC's were used to purchase all sorts of things including vacation homes. I'm not sure about the Emerald Isle area, it might be that people are trying to cash in before prices go any lower.

2008 Jun 16 09:22 PM

[pcmodem:]

Not only is Manhatten real estate taking a hit, but so are all the outer boroughs. Meanwhile, speaking to any local realtor will get you a barrel full of "prices won't decline here like they have elsewhere" - as mentioned in the article, NYC seems to lag the country, in this current housing bust cycle it seems to be 1 year behind. The countdown to who is right, the doomers or the realtors, has begun.

2008 Jun 18 11:36 AM