Wednesday, December 31, 2008
That resilient New York City
Wall Street is just about to finish the worst year since 1931. American housing markets are finishing their worst year in recorded history. New York’s economy is highly dependent on Wall Street...These three facts should have created the mother of all price crashes in New York City real estate...Yet New York’s housing prices are doing remarkably well relative to elsewhere in America.
A little light shone through the bleak economic news that I've been reading and posting to Newsreal lately. I ran across New York, New York: America’s Resilient City on the New York Times' Economix Blog, when it was tagged by a member on StreetEasy. Their commenters had a predictably negative take on it, since it points out that the name your own price Manhattan marketplace, is probably not anywhere close to a reality. In it, Harvard economist Edward Glaeser focuses on the historic resiliency of New York City in hard economic times, which he attributes to its ability to attract talented people, and the density in which we live. He puts his faith into the free exchange of ideas and the process of reinvention through innovation.
I hope that in the coming new year, economic stimulus and innovation go hand in hand. From the car manufacturers, to financial services and the oil companies, in 2008 we saw a business culture that fell asleep at the wheel because of entrenched market positions, hubris, and manipulation, rather than the creation of real value in their products. How could that not crash and burn eventually?
It took a national economic crisis to take the wind out of the sails of the Manhattan real estate market, even as the rest of the country was correcting for two years. I don't think that people should confuse that with a sinking ship. The wind eventually picks up again. Glaeser notes that Case-Schiller housing prices indicate a 7.5% drop in New York City prices compared with an 18% drop nationwide last year, faring much better than the rest of the country. Note that Case-Schiller tracks a more regional average of housing prices based on single family homes; so Manhattan coop/condo pricing may not be accurately reflected as a submarket. It would not surprise me if when our local market reports are released in January, the year over year picture is better than that. It is feeling pressure in 4Q 2008, but after looking at my year end bank statements, my money would have been better off being tied up in Manhattan properties rather than in stocks and bonds. The numbers indicate that Manhattan is still a place where people want to live, and unless that changes, housing will be in demand. Buyers looking for the "right" moment, should consider the favorable interest rates right now, the ample supply of apartments, the return of incentives and negotiating to our marketplace, and step boldly ahead.