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Tuesday, April 7, 2009

First quarter 2009 Manhattan Market report shows a slow down in transactions and re-sale price declines of 8%

"There are three types of people who emerge when a market shifts. First, those that fearfully predict the worst and are unnecessarily pessimistic; second, those who hopefully wish for the best, believe they can't fail and are unrealistically positive; and, third, those who respect the fact that they might fail, actively prepare for the worst and strive for the best...They are matter-of-fact about the market and sensible about their situation"

1Q 2009 Corcoran Manhattan market report Corcoran Manhattan market reportI'm reading a great book called shift by Gary Keller of Keller-Williams Realty, which is a "how to" for agents working in shifting real estate markets. The quote above describes agents' attitudes, but they characterize those of buyers and sellers, as well. Since the economic crisis began last November transactional volume has been way down. Corcoran's first quarter 2009 Manhattan real estate market report (6.8 mb download) cites a 60% drop in the number of deals getting done, owners who want to sell are not yet embracing the new realities of the market; they hopefully wish for the best. Buyers, on the other hand, can be dire in their predictions about the market, fueled in part by negative press and blogs that irrepressibly look for the worst case scenarios. They miss the fact that scenarios are just that, a projection. They can get lost in an ocean of data all day long, but most will miss the market bottom anyway, because their point of view is based on the hope that they will emerge victorious from a negotiation with the deal of a lifetime. Both suffer from unrealistic expectations, hence a marketplace with reduced activity. Buying or selling property is a hugely important event in most people's lives, so it should be no surprise that in uncertain times making a commitments of this magnitude is going to be more difficult. Corcoran's report includes this five year trend chart of sales activity which speaks volumes.

click on the chart to enlarge
nyc real estate sales volume- 5 year chart

a buyer's market?

There can be good opportunities right now for buyers and sellers, whose view is rooted in real market knowledge and guided by a competent broker. The slow down of sales, means rising inventories of apartments, and one would expect a shift to a buyers market. But is it really a buyer's market yet? If you define a buyer's market as one in which there is a great choice of properties that are fairly priced, then there are still some adjustments to be made. Buyers have a good choice of properties, and a potentially higher degree of negotiability today; But sellers need to adjust expectations, and then adjust pricing, to meet the market and be successful. We're starting to get there, but sellers need to get ahead of the market instead of chasing it down. I've had several unsuccessful negotiations on behalf of buyers where the properties have subsequently been reduced to asking prices south of the one we offered. The market has changed quickly and those sellers have arguably left money on the table.

manhattan sales prices trend down— rapidly
Here's an excerpt of the market wide 1Q 2009 sold and closed sales data in the report. It shows both median apartment prices and average price per square foot down 8% from a year earlier. However the market snapshot we published last month on contracts signed in the same period paints a different picture. The reason is that the sold & closed deal figures show the market negotiated three or four months prior. As 2009 has unfolded, we have noticed even greater price reductions in the market and more negotiability than is reflected in the Corcoran Report; in February, sellers lowered their asking prices by an average of 9% and negotiated another 10% from the revised ask before a contract was signed. The aggregate difference between original listing price and selling price in February was somewhere around -19%; it was about -4% in 2008. Download the full report and feel free to email questions or leave a comment.

click on the chart to enlarge
manhattan real estate market prices q1 2009

first quarter 2009 Manhattan real estate market report (6.8 mb pdf) »
buy the book "SHIFT: How Top Real Estate Agents Tackle Tough Times" by Gary Keller »

related post:
A snapshot of today's Manhattan residential market
download the first quarter 2009 market snaphot of contracts signed (212 kb pdf) »