Wednesday, 3 December 2008

New York home woes catching up with Main Street

The economic crisis is finally crashing New York’s real estate party, forcing the city’s residents to start sharing the rest of the country’s pain.

1 comment:

Guanyu said...

New York home woes catching up with Main Street

Reuters in New York
3 December 2008

The economic crisis is finally crashing New York’s real estate party, forcing the city’s residents to start sharing the rest of the country’s pain.

And with so much of the city’s financial well-being and its citizens’ psyche invested in both Wall Street and the prices of its homes, the decline is triggering fears of a return to the dark days of the 1970s and 1980s.

At its worst that triggers images of trash piling up on the streets and a higher crime rate.

In a few pockets of the city, prices have already fallen as much as 30 per cent from their highs, some brokers say, and the declines will spread to other areas by January as job losses mount and as bankers come to terms with vanishing, or at least diminishing, bonus cheques because of the financial mayhem of the past year.

“There’s going to be even more supply, people are going to have to drop their prices even more,” said Elaine Clayman, a broker at property group Brown Harris Stevens, which has operations in the Hamptons and Palm Beach as well as New York.

She is already advising sellers of Manhattan apartments to slash their asking prices by 10 to 15 per cent compared with prices on similar properties, and will not work with sellers who overprice.

“It’s just going to be a bad relationship. I don’t need that.”

It is the end of a chapter in the storied annals of Manhattan real estate. Until about three months ago, the real estate industry was issuing calming noises and pointing to figures that showed the average price of an apartment in Manhattan was still climbing. “New York was an oasis,” said Bob Toll, chief executive of Toll Brothers, the largest US luxury builder, which has projects in Manhattan and Brooklyn. “New York had its own separate market.”

Now, Toll is saying layoffs in the financial sector, 16,000 from securities companies in October alone, means that New York has lost some of the advantage it had.

“In another market, this apartment would be gone,” said broker Maureen Smith as she walked up the sunny stairs of a US$799,000-priced one-bedroom duplex in an Upper West Side high-rise. Two years ago, Lynna Gott, Ms Smith’s partner, sold a similar unit in the building for US$860,000.

Ms Smith was there on a recent Sunday afternoon to show the apartment, but traffic was thin, Ms Gott said. “It’s a slow season,” Ms Smith said. “But it’s also the market.”

Inventory is piling up because of the falling numbers of sales, and the move by some people in financial distress to put their homes on the market. A strong dollar is also dampening foreign demand.

Manhattan’s October listings were up 37.3 per cent compared with last year, said Jonathan Miller, president and chief executive of appraisal firm Miller Samuel.

While the median price of a Manhattan apartment, US$928,263 in the third quarter, still rose 7.4 per cent from last year, that might not hold true in the fourth quarter, he said. Today’s typical apartment is often worth less than it was a year ago.

The latest Standard & Poor’s/Case-Shiller home price indices showed that prices in the larger metropolitan New York area fell an annual 7.3 per cent in September. That was before the worst of the stock market meltdown in October.

Prices in parts of the city have been sliding rapidly. In Harlem and East Harlem, areas that had been gentrifying quickly, they fell 20 per cent in the third quarter from a year earlier to an average US$440,000, according to Miller Samuel.

In the areas of Hamilton and Morningside Heights, which are in and just south of Harlem, the drop has been an even steeper 30.1 per cent to US$397,500 median price for co-op apartments and condominiums. Even the average price in Soho and Tribeca, two of New York’s stylish neighbourhoods, fell 21 per cent to US$1.9 million.

And while some neighbourhoods had seen prices hold up or even rise that might be deceptive, said Jed Cohen, a vice-president at brokerage Cooper & Cooper.

More and more, developers are paying closing costs, which can amount to 6 per cent of the sales price. For renters, landlords were often paying the broker’s fee and up to two months’ rent, Mr. Cohen said.

“I’m encouraging all of my clients at this point, ‘Hey, make an offer’. Some landlords are more desperate than others.”