The Financial Times reports that residential real estate prices fell in the third quarter in Manhattan, according to data from a real estate appraisal firm.
Getting good data about Manhattan real estate activity can be a tricky affair, since a big chunk of the market is co-operatives (buyers acquire shares in the co-op corporation, which then give a proprietary lease to the unit) and those sales are not recorded with the city. However, the seemingly favorable comparisons have masked earlier signs of decay. As happened in other markets, demand for the best properties held up well, while the rest of the market eroded, and a higher proportion of big-ticket sales led to rising averages.
The story also does not mention that the city was in the throes of a major building boom, and there are more apartment buildings coming on the market (two large ones within a ten minute walk of my apartment, for instance). That inevitably will have a further price-depressing effect.
From the Financial Times:
Manhattan real estate prices have joined the rest of the US in a downward tumble.
The average sales price of property on the island fell by 11.3 per cent to $1,480,363 in the three months to the end of September according to data from Miller Samuel, a real estate appraiser, compared with the previous quarter.
The data points to still deeper plunges ahead because it registers closings of sales, which are normally at least three months – and in the case of newly built apartments can be more than a year – after parties agree to a sale.
Real estate brokers say that sales have come to a near standstill since the government takeover of Fannie Mae and Freddie Mac in early September…
“The events of the second half of September in the financial markets and Washington have not shown up in the market data for the quarter aside from the continuation of a lower level of sales activity compared to last year’s record levels,” said Jonathan Miller, who runs Miller Samuel…
Over the year, the picture appeared rosier, with average prices significantly higher, up 8.1 per cent on average. The median price was up 7.4 per cent to $928,263.
The sharp drop in price more recently came as banks tightened lending standards and the number of properties changing hands shrank, but also because initial sales of super-luxury properties costing as much as $40m at locations like 15 Central Park West and The Plaza have nearly completed.
The median price of the top 10 per cent of properties sold fell by 18.7 per cent in the quarter, even as the inventory of these high end apartments and condos soared by 89 per cent.
However, even excluding the sales of properties at these spots the sales price of apartments was down 6 per cent at $1,399,524, according to data from Brown Harris Stevens.
The price of condominiums (which fell by 6.6 per cent to $1,809,684) held up better than that of co-ops ( which dropped by 9.3 per cent to $1,161,302). Condominium prices were stronger.
A litany of other figures underlined the downward slope that the market appeared to be on.
Sales fell 24.1 over the year to 2,654 units compared with 3,499 units sold a year ago.
The inventory of homes for sale was up 34.6 per cent to 7,003 units from the prior year total of 5,204 units.
The average number of days properties waited on the market rose by 11 to134 days.
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This leaves peninsular San Francisco as the last hold out.
But, as I hear repeatedly, “It can’t happen here.”
Whatever.
Prices at the top end in NYC (> $7M) are off by up to 25%, per a realtor I know in that bracket.
Condos can be more desirable than co-ops because renting is usually allowed, foreign buyers have an easier time, and higher LTVs are accepted. More desirable until foreclosures reduce common fee collections and possibly endanger the underlying building mortgage. There are a surprising number of I/O and neg am mortgages on NYC condos.
In the late 80's in NYC, prices of less desirable apartments dropped by up to 50% and rents plunged on the UES and in Brooklyn Heights.
Manhattan’s biggest problem is that every loan is a
jumbo, beyond even the recently increased GSE limits.
That means, in the absence of securitization, which has dried up, every loan stays on the books of the lender. This is not the best time to be shopping for
a loan given the capital constrained state of lenders.
Manhattan will be 60% down peak to trough – didn’t everyone get the memo?
also, to be taken into consideration is the huge # of buildings that are 1/2 way done or only at foundation level that have lost their construction financing.
i/o/w get ready for vacant lots & squatters' paradise.
can anyone say local agriculture in NYC?
Anyone have a pointer for price-to-rent ratio history for the city? (And where are we now?)
I have a question about this sad story of Addie Polk, 90, of Akron, Ohio. Fannie Mae said it will set aside the loan of a woman who shot herself as sheriff’s deputies tried to evict her from her foreclosed home:
Fannie Mae forgives loan for woman who shot herself.
I’m a bit confused about how exactly the current banking crisis lead to her own personal financial crisis.
The article gives some details:
“In 2004, Polk took out a 30-year, 6.375 percent mortgage for $45,620 with a Countrywide Home Loan office in Cuyahoga Falls, Ohio. The same day, she also took out an $11,380 line of credit.
Over the next couple of years, Polk missed payments on the 101-year-old home that she and her late husband purchased in 1970. In 2007, Fannie Mae assumed the mortgage and later filed for foreclosure.”
Question 1: She’s 90 — what does it mean she took out a 30-year, 6.375 percent mortgage? Did she borrow $45,620? What was the $11,380 line of credit for?
Question 2: she with her late husband purchased the house in 1970. She must own the house by now. Again, why would she take out a 30-year, 6.375 percent mortgage?
Anyway, it’s a very sad story, but I’m wondering exactly what mistakes or mis-calculations Ms. Polk made, if any. Thanks!
The price drop in Manhattan will only accelerate as the crime rate inevitably starts to rise. More crime means incrasingly panicky foreign selling. 2009 will be a rough year for Manhattan.
Couple of observations:
1. A friend is developing a building building into luxury condos (full floor apartments >$3mm). He has been advised (4 months ago) that the only bidders will be from Europe, and he was being fully marketed there. (No update post Euro crash/London real estate crash, but I don't think the US luxury buyer market has picked up…)
2. Another developer I know predicts major disaster for the developers now rushing to complete the 80% filled buildings (4 of which are within 2 blocks of my (rented) home in Brooklyn.) These were all built/financed using straight line price projections on $/sf historical growth. No one was expecting a reversal. But these are construction loans (5 year terms). If the condo buyer market implodes, it will be next to impossible to convert these to rentals – lenders won't want the exposure. Expect deep price cuts.
R in NY
The good news is that it really will be a great buying opportunity when the bottom finally comes. We’re talking 1980s prices.
Anonymous of 4:19
In 1986 you could buy a building in soho (manhattan) for $30 per square foot. (I did) Today you can’t BUILD a building for $300 per square foot, EXCLUDING the
land. So I would rethink my hyperbole.
dmd,
Correct you are. San Fran hasn’t been hit quite as bad in the credit crunch, because layoffs have not hit us yet. 2009/2010 will be interesting times for local real estate. Look for decent bargains in Spring 2010.
SilverDollar
RK,
Prices/sq ft on completed buildings can drop below replacement cost, so I think anonymous 4:19 may indeed be right. Unfortunately, that means repeat of 1930s, but it has happened before.
In the fiscal crisis (late 1970s, when the city verged on bankruptcy), and to a much lesser degree in the 1991-1992 downturn, you could buy apartments with high maintenance (usually because the co-op corporation had a large mortgage) simply for assuming the maintenance. Zero payment at closing.
But you also had to have good enough financials to be approved as a buyer by the co-op.
she with her late husband purchased the house in 1970. She must own the house by now. Again, why would she take out a 30-year, 6.375 percent mortgage?
Cash-out refinance of the existing home equity.