Making Sense of the Manhattan Real Estate Market: Not An Easy task

Anxiety levels are high in the Manhattan real estate industry as many eagerly await some sign of market direction in January.  Some signs are already appearing as Fall sales have been slow, inventory is increasing (albeit modestly) and price direction seems to be stabilizing at best.  Lauren Elkies of The Real Deal (check out the entire article, well worth the read) asked some industry experts about the current market.  Here are those responses:

Shai Shustik CEO and founder, Manhattan Residential
There has definitely been a slowdown for the average cookie-cutter unit. People are looking for deals and taking longer to execute. Units that are priced as if we were in 2005 are not moving and just flooding the market with unsold statistics.

Frederick Peters president, Warburg Realty Partnership
There are few bidding wars, and when they do occur it is only on very well-priced properties. Even then, things are not going much over the asking price and there may be two or three bidders, not six or eight. Almost nothing is sold anymore in a week or two.

Kathy Braddock co-founder, Braddock + Purcell, and Charles Rutenberg Realty
The most positive trend in the market right now is that the mortgage problem and the media have not deterred our market. The most negative is that it is still hard for first-time buyers to acquire the liquid assets that they need.

Diane Levine brokerage manager of the Downtown office, Sotheby’s International Realty
Certain sellers are still attempting to push beyond the value of their property. Correctly priced properties are moving. And, those attending open houses tend to be "real" buyers.

Gordon Golub senior managing director, Citi Habitats
Studios as well as larger units (1,600- to 2,200-square-foot two-bedrooms and three-bedrooms) are being absorbed very rapidly, while one-bedrooms are taking longer to go to contract.

Barak Dunayer president and founder, Barak Realty
Overall, the attendance at open houses has been steady. The only noticeable difference is that buyers stay away from undesirable properties. I still remember the times that people bought any hole in the wall.

David Schlamm president, City Connections Realty
The rental market actually slowed down a lot earlier than in previous years. This year we felt it slow down in the beginning of October, where traditionally it really slows down closer to Thanksgiving.

Brian Huang sales manager, City Connections Realty
The overall market has strength in prime locations, but we are seeing some negotiability in "up-and-coming" areas. We’ve also had more interest in larger apartments than last year.

Jonathan Miller director of research, Radar Logic
There is modest appreciation based on median sale price, a relatively tight listing discount and the normal number of days on market so buyers and sellers seem to be in sync.

Because of all the turmoil on Wall Street and the discussion of lower bonuses, we’re expecting to see an expansion of marketing times and some cooling off of the elevated activity. But, we’re still seeing a lot of activity.

Here’s my two cents on some of these comments:

• "Correctly priced properties are moving."  Not all of them are.  I’m here to tell you that some properties that are priced quite aggressively are spending quite some time on the market as we all wait for signs of market direction.
• "Those attending open houses tend to be ‘real’ buyers."  Perhaps they are "real" but they are also "real" patient.
• "People are looking for deals and taking longer to execute."  SPOT ON!
• "Almost nothing is sold anymore in a week or two."  Everyone hear that?  It’s true.
• "Studios as well as larger units (1,600- to 2,200-square-foot two-bedrooms and three-bedrooms) are being absorbed very rapidly, while one-bedrooms are taking longer to go to contract."  In some parts of the city but not everywhere.  I would add that properties over $5M are still selling if priced well and those priced well below $1M are still moving but I don’t see "rapid absorption" right now of anything.
• "We’re still seeing a lot of activity."  Where?  When? Who?  Not in my office of 250 agents.  I’m hearing the same thing from everyone so where are all of these deals being done?

For the record, I have a great deal of respect for many of those quoted in this article.  That said, I’m just not seeing most of what they are reporting.  I’m not at all suggesting that they are spinning things or not reporting things as they see it but the disconnect between what they are reporting and what I and all of my colleagues are seeing is puzzling and frustrating.  Neil Binder of Bellmarc actually seemed to describe the Fall market more closely to what i and my colleagues have observed:

"August and September were bad. If I had a weak August and September, collections will be weak in December and January," said Neil Binder, principal and co-founder of Bellmarc Realty. "Most firms will have to go into reserves to keep the show on the road" those two months.

"The month of October was fine, nothing special, nothing terrible. It was just OK. This particular month looks similar," Binder said in late November.

As far as how I see the market and what current conditions mean for 2008…well….um…it’s not an easy question to answer but here goes my educated guess based on current market conditions and anecdotal information provided by my clients and my colleagues.

Early 2008 will see an increase in activity but not at levels seen in the past few winter markets.  As 2008 progresses, sellers and buyers will finally meet somewhere in the middle regarding pricing thereby generating an increase in transaction volume and a renewed confidence in Manhattan real estate from those who are currently overwhelmed with anxiety. 

Oh, and by the way…I hope that I’m completely wrong, that Wall Streeters are throwing cash around again and that 2008 is a record year.  Not counting on it but who knows when your talking about Manhattan real estate?