MARKET SNAPSHOT: Could There Be Signs of a Recovery in New York?

By Erika Schnitzer, Associate Editor New York—Manhattan may be showing some signs of a recovery, according to CORE’s Quarterly Real Time Report, Second Quarter 2009, a culmination of snapshots of current market inventory, pricing and absorption. However, whether this is due to seasonal activity or pent-up demand remains to be seen, notes Shaun Osher, founder and CEO of CORE Group Marketing LLC, a boutique luxury real estate firm specializing in resales, new development sales, marketing and rentals.The report shows that the Manhattan residential market is in a stage of absorption recovery; June 2009 had more than four times the volume of new contracts signed than January.“It is a glimmer of hope that more people are starting to transact, even in light of the fact that financing is more difficult,” Osher tells MHN. “Between September and April, absorption was almost zero. The market was at a standstill and shell-shocked. Anytime you have a real estate market that freezes like that, there is naturally pent-up demand because real estate, especially in New York City, is a function of everyday life.” As a result, he adds, “These are not frivolous transactions; they are transactions driven by necessity. We are lucky in the sense that our market is not speculative like other markets in the nation, so a lot of the end-users aren’t looking to dump units.”However, June also saw the lowest prices for contracts signed for studios, one- and two-bedroom units, while asking prices in smaller units continue to decline. CORE’s report indicates that the Manhattan residential market is selling close to 40 percent lower than its highs from 18 months ago. Between May and June, the original list price for studios was down 11.1 percent, while list to signed was down 21.68 percent in June. For one-bedrooms, the original list price was down 3.22 percent month-to-month, while list to signed for June was down 17.13 percent. Original list price for three-bedroom residences was down 14.34 percent month-to-month, with list to signed down 22.94 percent. Two-bedrooms saw a 0.82 percent increase in original list price month-to-month, with a 27.27 percent decline in list to signed for June.Even for those units whose original listing prices increased—four-bedrooms increased 18.42 percent from May to June—list to signed declined. “In a good economy it was more of a norm to pay asking price or above. Buyers today won’t pay asking price—the perception is to negotiate,” Osher observes.The second quarter saw a decline in re-sales, which may be a sign that people are unwilling to sell at the current value.“There are parts of this market that are refreshing because there seems to be a return to fundamental behavior, which, in essence, is the best way for a real estate market to be honest,” Osher tells MHN. “People are buying for the right reasons; when people are getting financed, they know they can afford it.”While not much new development has been brought to the market, Osher asserts, “Most of the new developments with longer lead times have suffered because of uncertainty. I think there is a hesitancy in the buyers to pull the trigger on something that is long-term.”Neighborhood-wise, the East Village sold more larger apartments and experienced an increase in prices, while Chelsea saw a decrease in contract signed prices. Meanwhile, in Soho, in June, larger units went into contract, and three- and four-bedroom residences were priced higher.“Neighborhoods that were not traditionally residential by nature are the first to feel the effects of a weaker market, and buyers going into those neighborhoods today have a greater expectation of value,” Osher says.While some signs point to a beginning of a recovery, it is still unknown when the market will actually turn. Osher does think, however, that New York will be one of the first markets to bounce back since there is very little speculation. Furthermore, Osher notes, “I think what potentially could happen is once the market does turn, we could face a housing shortage because 95 percent of most new developments have stalled. When the market turns, buyers will look for good product and there’s a shortage of that, which in turn will drive prices.”Click here for last week’s Market Snapshot on Tucson, Ariz.