Although Manhattan real estate is an expected casualty of the financial carnage, it nevertheless serves as a useful, albeit lagging indicator of the depth of distress.
Even though residential purchases have fallen over the last year, the price impact (so far) has been muted. That is in part due to the fact that 2007 was a good bonus year for Wall Street, and the fact that “better” apartments (higher quality in their category) are less affected and presumably still selling (just like bonds, in downturns, the AAA-equivalents, such as Fifth Avenue and Central Park West apartments with Central Park views, suffer less than, say, lofts in Tribeca).
Another factor that may be skewing the data is that new construction is apparently selling at nominally higher prices. As we saw with newly constructed homes, developers may be throwing in freebies (flat panel TVs, features that would normally be extra, like granite countertops, for no additional charge), meaning there may be hidden price concessions.
In really bad downturns, high-maintenance co-ops would sell for close to free (as in the seller would unload the apartment to a buyer who could assume the maintenance). We are a long way from that at this point. However, the fourth quarter appears to have pretty bad (duh, October would put most buyers on hold). And if the NYC economy deteriorates, and services, particularly policing, are cut severely, the city could soon be perceived as not entirely safe, which would have a marked impact.
Manhattan apartment sales fell for the fourth straight quarter and office rents declined the most in at least two decades as the recession hit New York City.
Fourth-quarter apartment transactions dropped 9.4 percent from a year earlier as prices for the most expensive units declined, appraiser Miller Samuel Inc. and broker Prudential Douglas Elliman Real Estate said in a report today. Office rents for the period slid 4.8 percent to $69.44 a square foot from the third quarter, commercial broker Cushman & Wakefield Inc. said….
“This quarter was like no other quarter we’ve ever seen before,” said Joseph Harbert, chief operating officer of Cushman’s New York metro region, in an interview. “It’s as if someone let the helium out of the balloon. The downfall of Lehman really changed the real estate consumer’s psychology, and put everyone in a cautious, wait-and-see, don’t-make-a-decision attitude…
In the Manhattan residential market, the overall median sales price rose 5.9 percent, Miller Samuel and Prudential said. Luxury prices dropped 3.9 percent and the median for all resale apartments slid 3.6 percent.
Yves here. The median price increase may simply reflect a shift in size, more large, multi-bedroom apartments selling, fewer starter studios and one bedrooms. The latter are also typically hard hit in NYC slumps. Back to the piece:
The inventory of apartments listed for sale rose almost 40 percent from a year ago to 9,081 units. Apartments sat on the market for an average 159 days before selling in the fourth quarter, up 21 percent from a year earlier….
In the luxury market, defined as the top 10 percent of sales by price, the median apartment price fell to $4.13 million in the fourth quarter from $4.3 million in the fourth quarter of 2007. Inventory rose 26 percent to 1,730 apartments. Luxury units stayed on the market 169 days, 52 more days than the same period a year earlier.
“The end of the year marked the beginning of Manhattan’s entry into a new kind of market,” said Jonathan Miller, Miller Samuel’s chief executive. “For all of 2008 we were seeing a fairly sharp decline in the number of transactions every quarter. Now we are starting to see prices decline.”
The median in the Miller Samuel-Prudential survey rose to $900,000 in the fourth quarter. The median price of resale apartments declined to $732,500 from $760,000. The median for new developments rose 5 percent to $1.26 million….
In the office market, fourth-quarter rents dropped 4.8 percent..The decline was led by Class A offices, particularly in Midtown Manhattan, where financial firms have been migrating from Wall Street. Rents for such offices, the most expensive, best appointed spaces in the market, fell by 5.8 percent to $80.59 a square foot in Manhattan. For Midtown’s top-tier offices, the decline was 7.2 percent to $92.59 a square foot.