Faced with only 24 hours in the day, I've been focusing on my core brokerage business and blogging a bit more lightly recently. I expect that the pace of posts will pick up again moving forward. I'm a real estate broker who blogs, not a blogger interested in real estate. Let's dive right in with today's report on the fickle first quarter of 2008. —Peter

download the complete Q1.2008 corcoran report
The Manhattan market has been interesting recently. It is hard to characterize it as either a buyer's market, or a seller's market. Its just a real estate market, and a more balanced one than in the last few years. People are considering their purchases carefully. We are seeing more offers starting below asking prices, yet well priced apartments are selling briskly, even with multiple offers. There is substantial buyer demand out there, but it's being tempered for the moment by uncertainty in the economy.

Customers are acting more cautiously since the Bear Sterns buyout last month. Whether the hesitation is justified depends on if you feel the fundamentals have actually eroded or not. How much damage to the global economy was caused by the sub-prime crisis is a matter of continuing debate. I've heard it described by some industry leaders as if you had a choice of 10 bottles of water to drink, but you knew that one was poisoned — you wouldn't drink any. The whole thing needs to unwind. However let me point out that the availability of credit for residential purchases has not been affected as much. Most people willing to put 20% down (less in some cases) and who have good credit ratings are still able to get mortgages at historically low rates. It's just a real estate market.

Additionally, developers now faced with putting more equity into their deals may put some of their plans on hold, restricting supply in the construction pipeline, and setting the stage for lower inventory a couple of years out. The available inventory of apartments in Q1 2008 rose to about 6% higher than in Q1 2007, mostly during the second half of the year as economic uncertainty began to cause some people to "wait and see". The number of apartments available to buyers in Manhattan bounced around 9000 units, but is trending higher, with more new developments coming online, and a buyers taking longer to decide.

The good news is that for buyers, this hesitation may have created the best opportunity to buy Manhattan real estate in the past 10 years, unless you feel that long term, New York City is spiraling downward into an abyss (a point of view that I haven't come across very much). There is a good selection of apartments available, and an environment more receptive to negotiating. No one is giving anything away, but fair deals are being struck every day.

mixed messages: what do the numbers say?

The hesitation has not translated into lower prices. The corcoran report showed that first quarter sales figures from 2008 looked pretty decent overall, but also showed that the number of co-op transactions has dropped 22% compared with a year earlier. Condo closings rose by 36%, and 60% of the condos were in new developments which have a greater lag time to being reported since they go usually go into contract during pre-construction, often many months before closing. They therefore don't actually reflect the current market activity as well as co-op transactions do.

click chart to enlarge

People still seem genuinely interested in real estate. 'New York Luxury Living' was an event hosted recently by the New York Observer at the Puck Building, which featured 40 new developments in a trade show style showcase. My agent friends were overwhelmed by the public response: 2,256 people paid ten bucks a head, to walk into a bazaar of developer's sales teams, hawking their products. That's way more than the expected attendance; "sorry we ran out of brochures", was the catch-phrase of the day. Newly developed condo sales accounted for a disproportionate amount of sales activity in the first quarter. This is sexy new product, with slick presentation. Could it be that older co-ops may need to consider doing that long put off lobby renovation or other upgrades, to help keep up with the market and hold value? Open houses for correctly priced properties under a million are busy, as are any where the perception of value exists. We price properties based on good research as to what has actually sold and closed, which always fare better than those based on competitive properties in this market. The marketing and sales management has to really kick in now, more than ever. It takes more than a few postcards and a web site to deliver results. Differentiating your home by graphic design, staging, a record of obtaining publicity, and an outstanding luxury broker network creates a more compelling proposition to help our clients achieve their goals.

I'll be focusing on sales in the downtown market in an upcoming post.

» download the complete Q1.2008 corcoran report

Here is the 2007 Year End Corcoran Report (2.5 MB). It's a snapshot of the past year's tends in residential Manhattan real estate. Throughout last year, the press has inked reports about the challenges facing the national residential real estate market stemming from the sub-prime mortgage crisis, over built inventory, slowing sales and increased foreclosure rates. In sharp contrast, this report shows that Manhattan continued to demonstrate strength last year, especially in luxury properties. We've been largely insulated from the sub-prime crisis by the rigorous financial review process by co-op boards on prospective purchasers of shares. This still represents the vast majority of NYC housing stock. Here are some highlights of what happened from 2006 to 2007:

• The average sale price of all Manhattan apartments was up 12% to $1,395,000
• Condominiums sold briskly and made up 55% of all deals for the first time.
• Condos increased by 9% on a price per square foot basis to $1,222
• The median condo price was up 17% to $1,100,000
• Co-ops increased by a more modest 3% price per square foot to $918
• The median co-op price was up 2% to $666,000

Favorable rates of currency exchange for international buyers continue to catalyze foreign investment in property too.
I read it as a vote of confidence by the world on the long term health of Manhattan real estate.

the pulse of the market

The year was epitomized by a number of high profile luxury residences, closing at record setting numbers; most notably uptown were Robert A. M. Stern's15 Central Park West & The Plaza hotel conversion. Further downtown, we saw more sales records achieved by cutting edge projects like Herzog + de Muron's 40 Bond Street, Jean Novel's 100 Eleventh Avenue in West Chelsea as well as 40 Mercer Street in Soho; and SOM's 101 Warren Street in Tribeca. All are among the most significant residential architecture being envisioned and built in the world. Quality design, construction, visionary development, and lifestyle amenities are the essential selling points for luxury buyers in Manhattan. Overall there continues to be a shortage of quality inventory in every price category. This limited inventory and a concentration of high net worth individuals are unique, distinguishing characteristics of our local market. Favorable rates of currency exchange for international buyers continue to catalyze foreign investment in property too. I read it as a vote of confidence by the world on the long term health of Manhattan real estate. One example is my exclusive at 9 West 19th Street where 8 of 10 offers were transmitted from overseas buyers— now in contract, at full asking, to customers from Spain.

the flight toward quality

At best, reports on housing tends to lag the current market by a few months. Reporting is for sold and closed deals, which were negotiated 60 to 90 days prior. Our year end report report comes at the end of a particularly volatile week in the worldwide financial markets, which was underscored by the Fed's surprise rate cut on January 22nd; along with news of a temporary economic stimulus package, the financial markets seems to be pacified— for the moment.

Yes, it is reasonable to think that if the overall U.S. economy slows in the upcoming year that NYC will not be immune to its effects; but I predict that this will be seen as a opportunity to buy; counter balancing the effect. In times of uncertainty it is also reasonable to see a flight toward quality in one's personal investment strategy. Few seem as high quality to me as Manhattan real estate. I personally expect that to continue. Demand will continue to outstrip supply.

So where are we headed today? There are several positive signs in our market. First is the previously mentioned demand for quality property. When asked about it earlier this week, a majority of my colleagues reported that they are busy with clients and/or have offers on listings. Bidding wars are not uncommon on desirable, and properly priced homes. Inventory is tight, the market is far from spilling over with properties for sale. For buyers, the news environment has encouraged them to test the market and try negotiating more favorable prices. There is a bit more horse trading going on. Open house traffic is normal, and deals are being made.

Real estate is not a liquid asset, it is inherently complex. It can't be traded with the click of a mouse. Unlike a block of stock traded on Wall Street, the block you live on is a rather personal, special choice. Each parcel is unique. With slumping housing prices in many parts of the nation, we don't see people who want to be New Yorkers packing up and moving to the mid-west, where it would seem some property bargains might exist today. It's more than housing— it is New York City itself which people are buying into. Property markets are local and interdependent with their communities. The majority of Manhattan homes are personal residences, not speculative investments. In my opinion that means that the marketplace will react more to the long term confidence in Manhattan as a great place to live, not the gyrations of the financial markets. The city is safer than ever, schools are improving, and investment in infrastructure is up. Our population is growing and projected to continue. People are choosing to retire here because of the services and excellent medical care. Put simply, it is is a place where people want to live and work. The fundamentals of the city are strong. Our buyers are seeking homes for themselves and their families, to live in the most exciting city in the world. I'm fortunate to live and work here.

For my clients, it is a time when having professional guidance in pricing, marketing and purchasing a home are more crucial than ever to their success. I help them to acquire and re-sell newly developed condos, green homes, co-ops, townhouses, and small buildings. Please feel free to ask any questions you like in the comments section, drop me an email, or a call, if you are wondering if this might be the right time to buy or sell your property.

download the 2007 Year End Corcoran Report (2.5 MB)

updated 01.27.2008

"Manhattan’s condo market continues to be robust"

Each month, the Mayor's office publishes the Monthly Report on Economic Conditions (230kb pdf)— providing a snapshot of the macro economic environment and a very local take on it. It has been a while since we've taken a look at one here, but you can subscribe to this report and get past issues at The NYC Economic Development Corporation site. On the city's residential market, the outlook sounds mixed; "Manhattan’s condo market continues to be robust. Demand for recently completed condos has outpaced supply, resulting in a decline in inventory. In fact, according to Miller Samuel data, the combined condo and co-op inventory dropped 31.7 percent in Q3 2007 from a year ago. In addition, the average sales price rose 6.3 percent over the past 12 months to a staggering $1.37 million. The market for 1-3 family homes (largely outside of Manhattan) however, is behaving much more like the rest of the nation, as has been the case in past market cycles (see chart)."

The relationship between real estate markets in Manhattan, the rest of the five boroughs, and the nation are not clear. The mortgage market is national, and its upheaval is touching everywhere; however the real estate market is affected by more than that. There is no national housing market. There are many smaller, local ones. High rates of owner occupancy, a low level of exposure to sub-prime loans, and population growth, have all contributed to the conditions which have fueled the local Manhattan market's continued growth. How will the volatile year on Wall Street affect bonuses which often are spent on real estate? How might rising unemployment affect us? Are these long or short term considerations? It is hard to predict how next year will look, but I'm inclined to see the glass as at least half-full. Where do you think we are headed?

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Now available for download is the 3rd quarter 2007 Corcoran Report (1mb pdf) on the Manhattan residential marketplace, which shows solid performance as the average sale price in the borough increased by 14%, with a record setting median price increase of 5% to $1,414,00 (that's the price most commonly paid for a Manhattan apartment). It is said that all real estate markets are local. Our particular conditions, and strong demand, continue to cause Manhattan to perform in sharp contrast to the rest of the nation. Co-ops still comprise the vast majority of the city's housing inventory for sale. We have benefited from the extra financial scrutiny imposed by co-op boards. It seems to have insulated us so far from the fallout of the sub-prime mortgage implosion that has set back the credit and housing markets elsewhere. Corcoran data showed that available housing inventory for sale has dropped by at least 16% over the past 12 months; Jonathan Miller of appraisal firm Miller Samuel put the decrease in available listings at 31.7%. Unlike many markets which have become overbuilt, the scarcity of land available for development, a growing population, and demand as a global destination city would have caused a severe housing supply crisis here, if the pace of new construction had slowed recently. If you have questions about how your home might be priced in today's market, or any other questions about the Q3 report, please contact me.

Updated October 20, 2007

Third quarter 2007 sales numbers were released a couple of days ago by all of the major NYC brokerages including The Corcoran Group, and the results showed very clearly that the Manhattan real estate market was still red hot. The news was released almost simultaneously as the Stock Market peaked at a new all time high, shaking off the uncertainty caused by the sub-prime mortgage jitters, as the damage is increasingly seen on Wall Street as being manageable. I'll be posting the entire Q3 Corcoran Report on the market as soon as the downloadable versions are ready, but I'd like to take a moment to look at the downtown numbers and particularly those of my own neighborhood of Tribeca.

third quarter sales 2007 vs. 2006

Corcoran reported that the median selling price of a home in Tribeca, that's the price most people paid for a home, was $2.3 million, up 36% over Q3 2006; the average sale price was $2.286 million, up 25% over Q3 2006. Price per square foot was down by -8% indicating that the deals closed were on larger homes. Manhattan-wide, the number of deals closed was up by 20%, however fewer deals were done with -54% closed when compared with a year earlier. I believe that this actually reflects a shortage of inventory downtown as prices have risen, indicating increased competition for whatever is available.

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