Market_Review2

Brokers, however, remained outwardly optimistic. Ubiquitous master-marketer Barbara Corcoran, stated in the March 2001 issue of The Cooperator: �Despite last year�s nail-biting stock-market fluctuations� real estate has stood tall through it all� One thing�s certain: Owning New York City real estate is still the ultimate status symbol among ultra-status conscious New Yorkers. The past year may have been a roller-coaster ride for Wall Street, but our real-estate clients have remained extremely calm and confident.�

Indeed, real estate in any market is somewhat isolated from immediate repercussions of a bad economy. Expectations of lower prices fuel secondary buying activity. In Manhattan, there were not the multiple bidding wars of the previous year, but according to James Ferrari, chairman of Manhattan�s Benjamin James brokerage firm, "The market wasn�t going back," despite forecasts of a slowdown. According to Ferrari, the market remained �excellent� extremely tight and fast." The reason, he says, was the low interest rates that made it easy for someone with good credit to borrow money. That�coupled with buyers� expectations of lower prices�fuels secondary buying activity. Whereas other sectors of the economy feel recessional effects earlier on, the real estate industry remains fairly insulated for a time. It�s not as easy in New York to pull out of a deal when the market dips.

The Evolving Market
Although you would�ve been hard-pressed to find many brokers to admit it in the Fall, Alan Rogers, chairman of Insignia Douglas Elliman, said in October that evidence of panic did turn up immediately after the attack. He told of one Wall Street couple that forfeited their deposit of $500,000 just to be free of their contract and get out of Dodge. There were scattered reports of residents leaving downtown in the aftermath of the attacks. And some residents recounted tales of prospective lessees being lured by lower rental rates. But it was impossible to put a finger on what was going on. Hard data to demonstrate the trend simply wasn�t available. Across the board, there were stories of anxious buyers contacting agents to buy at deeply discounted prices. But according to brokers, there were no deals to be had.

Recently released annual reports, however, spell out the figures. The Corcoran Group�s Year-2001 analysis cites that while the first half of the year enjoyed a robust market, the gradual slowing of the economy, coupled with the extraordinary events of September 11th, caused a brief period of eroded consumer confidence resulting in decreased sales volume in the fourth quarter. The worst hit downtown was the family market�two to three-bedroom apartments. In October through December, sales prices for two-bedroom co-ops were down eight percent and three-bedroom prices were down ten percent. Condo sales in the area were just as bad. The price of a two-bedroom condo slipped a remarkable 26 percent from the third quarter, with the average price falling from $981,000 to $725,000. And the average price for a 2,000- to 2,500-square-foot downtown loft also fell 11 percent, from $1.337 million to $1.194 million.

Brokers now admit that selling froze in September but they say by October, buyers had jumped back into the mix. According to recent reports, things remain just fine for average buyers. Prices have topped out and small apartments are selling fast. It is this activity that appears to be supporting the entire residential real-estate business. The Corcoran Group, William B. May and Charles H. Greenthal all sold more small apartments this November than they did last November. More than half of Corcoran�s November sales were for less than $500,000.

While Insignia Douglas Elliman statistics estimate that the overall average sales price of Manhattan apartments in the last quarter of 2001 was down eight percent to $782,282 from third quarter�s $849,194, the figures merely return the market to 2000�s levels. Significantly, the current average sales price is less than one percent below the fourth quarter statistic of 2000. �After considering the unprecedented attack and reports that Wall Street bonuses are averaging 30 percent below last year, this modest change is quite remarkable,� the Manhattan Market Overview stated. �It is also consistent with market resiliency seen nationwide� Housing inventory, although expanding, is still relatively limited.� And at a cautious time like this, the good old laws of supply and demand just might keep the situation in check. The Manhattan Market Overview suggests that further declines may be tempered by the favorable mortgage rates stimulated by the Federal Reserves� interest rate reductions and the limited supply of apartments.

What are the New Rules?
While it might be tempting to look at the overall statistics and expect your broker to find you a bargain-basement deal, don�t hold your breath. Manhattan real estate is still Manhattan real estate. The figures are down overall, but that�s relative to earlier this year; the market appears to be holding steady at 2000 levels. �The New York City residential marketplace shows very positive signs of a return to business-as-usual,� comments Paul Purcell, president of Insignia Douglas Elliman. �Our brokers are telling me that they are becoming very busy again and that prices are holding on the properties they�re marketing.�

The main difference is the increase in average days on the market. As compared to the fourth quarter of 2000, the listing time last quarter increased ten percent to 134 days. Buyers can--and are--taking their time. And they�re finding that they have some room to negotiate. The average discount from list price more than doubled to four percent from a year ago (a figure that was little changed from the 4.1 percent of the third quarter of 2001, however).

Overall, 2001 was a year of only modest declines. While a sense of uncertainty still lingers, things seem to be just fine for average buyers and sellers. The bidding has resumed and small apartments are selling fast. After months of silent phones, brokers say and they�re busier than they�ve been for a long time. And for some, this activity overrides insecurity about the future. Fueled by the low mortgage rates afforded by the Fed and a general sense that prices have finally topped out, more and more first-time buyers are coming to the table. The only difference is that this time around they�re motivated by frugality instead of lavish luxury.