The end of the 2009 showed some positive signs for the industry, according to fourth-quarter reports published today by several different brokerages: while prices continued slipping, the rate of decline slowed, activity rose sharply, and inventory diminished. Some industry analysts are expecting prices in Manhattan to rise in early 2010–but another dip later in the year is also likely, many say. We’re still an average 25 percent down from the peak, but numbers released by Prudential Douglas Elliman, The Corcoran Group and Halstead Property/Brown Harris Stevens show average sales price in the region of $1.3 million in the fourth quarter, down 9 to 19 percent from fourth quarter 2008. Elliman and Corcoran showed declines of 2 and 5 percent, respectively, from the third quarter.

The Real Deal also found that price drops in sales have decreased by 29 percent from the third quarter, and are 14.4 percent lower than in the fourth quarter of 2008. There was even an increase in sales happening above original asking price–20 percent more often than in the third quarter, and close to 50 percent more than in the fourth quarter of 2008. Meanwhile, activity is up across the board 9 to 10 percent compared to fourth quarter 2008. Elliman had 2,282 closings, or 11 percent more than in the third quarter. Halstead/BHS did 2,519, and Corcoran, meanwhile, reported a whopping 48-percent increase over the last quarter of 2009 (attributing to a different methodology in an interview with The Real Deal). Inventory is slowly being eaten up: Elliman had 6,851 listings in the fourth quarter, or 25 percent down from the third quarter.

Most of the apartments finding buyers are smaller–65.2 percent of fourth-quarter closings were under $1 million, according to The Real Deal–despite figures showing that larger apartments have fallen more steeply in price compared to 2008. This can be attributed in part to the demand surge among buyers availing themselves of the first-time buyer credit, usually seeking smaller starter homes, as well as the tightening in the mortgage market.

What happens in 2010? Unemployment is expected to climb, after all, credit is still tight, the first-time homebuyer tax credit is due to expire in April, and a weak dollar will most likely prompt the Fed to raise the interest rates at some point. However, here at Elika we’re finding that foreign buyers, spurred on by the same weak dollar, are stepping up to the plate, and buyers willing to come in with cash are often able to secure better deals, quicker. With uncertain stock, commodities and currencies markets, New York real estate may attract the more cautious investor to come in and scoop up well-priced apartments.

Numbers unveiled recently by Miller Samuel for the third quarter Manhattan co-op and condo market paint a mixed picture: the median sales for re-sales rose 3.4 percent, to $750,000, and is the first quarter increase in over a year–but that remains 8 percent lower than the prior year quarter’s median of $815,000. New development sales rose to $1,150,000, or 7.5 percent higher than the second quarter, and are actually 1.3 percent higher than prior year quarter’s $1,135,000; however, as percent of market share, new sales now only account for 22.2 percent, the lowest in two years, causing overall median price to be $850,000, just 1.7 percent higher than the second quarter, and 8.4 percent lower than prior year quarter. The average sales price rose 0.8 percent from the second quarter, which is 10.6 percent lower than prior year quarter. More troublesome is the average price per square foot: at $996, it is 5.7 percent lower than the second quarter, and 16.5 percent lower than the prior year quarter. This is the first time price per square foot is below $1,000 since the fourth quarter of 2006.

Number of sales overall rose a whopping 45.6 percent, to 2,230, compared to 1,532 in the second quarter, significantly higher than seasonal trends–but that is still 16 percent less that prior year quarter’s. Due to the increases in sales, inventory fell to 8,389 units, or 10.5 percent lower than the second quarter, and is 4.6 percent lower than the prior year quarter. The surge can be attributed to the $8,000 first-time home-buyer credit, low mortgage rates, and increased confidence from the 24-percent rise on the Dow Jones Industrial Average over the past six months–but the rising unemployment, continued layoffs in the finance industry, the expiration of the buyer credit at the end of November, and restrictive mortgage practices signify that that it’s not yet time to celebrate. To drive the point home, there’s one more stat to take into account: Days on market rose slightly compared to second quarter, from 162 to 167. Bu that is almost 25 percent longer than the 134 days on market in the prior year quarter.

In the co-op market, median sales price was $630,000, 2.9 percent lower than the second quarter, and 8.4 percent lower than prior year quarter. Average sales was $1,005,744–5.9 percent lower than second quarter, and 13.4 percent down from prior year quarter. Per square foot, the $866 is 5.6 percent less than second quarter, and 18 percent lower than the $1,056 in the prior year quarter. It’s the first time the indicator is below $900 in 10 consecutive quarters. By region, the east side remains highest, at $916 per square foot, but 19.8 percent lower than prior year quarter. Downtown was $847, down 18.3 percent; west side was $867, down 18.8 percent; and uptown was $594, down 13 percent.

Co-op sales surged 36.7 percent from second to third quarter, to 995, and were significantly better than the 414 sales in the first quarter of 2009, the lowest since 1995 - but this quarter sales are still 26.2 percent below the prior year quarter. Listing inventory, at 3,840 units at the end of the this quarter, was 9 percent below the prior year quarter, and 12.7 percent below second quarter ‘09. Days on market were 134, a week less than the 141 days in the second quarter, and only slightly higher than the 126 days in prior year quarter. But listing discount is now at 12.5 percent, compared to 8.7 percent in the second quarter and 3 percent in the prior year quarter.

In the condo market, the media sales price of $1,015,124 is 1.6 percent higher than second quarter, but is down 16.8 percent from the prior year quarter. The average sales prices was $1,579,438–3 percent higher than second quarter, but 12.7 percent lower than prior year quarter. Per square foot, however, $1,101 is lower both compared to second quarter and to prior year quarter, by 6.8 and 17.5 percent, respectively. The larger declines occurred in the higher-end units, resulting in an increase of market share in 3-bedroom apartments from 5 to 15 percent year over year.

Not accounting for units ready for sale but not yet listed, inventory fell 0.6 percent compared to last year–but, at 4,549 units, is 8.6 percent lower than second quarter this year. Sales rose sharply from the second quarter, from 804 to 1,235 units in re-sale and new developments, or 53.6 percent higher. That is still 5.4 percent below the 1,306 units sold in the prior year quarter. Days on market continue to rise, to 194 days, or above six months, compared to 181 days and 143 days in the second quarter and this period last year, respectively. Split up, the days-on-market numbers reveal more: Re-sales stayed on market 133 days, similar to the 134 days on market for condos. But new developments were on market an average of 293 days (excluding shadow inventory)–significantly higher than the 192 days in the prior year quarter, reflective of the continued turbulence in new development underwriting in the city. The report further cautions that the “shadow inventory” is estimated to be larger than the current total of both re-sale and new development listings.

In the luxury market, trends were similar to the overall market, with double-digit declines compared to last year and mixed results compared to the second quarter. Median sales price was $3,905,000, 6.7 percent higher than the second quarter and 2.9 percent down from last year. It’s the second lowest level in two years. Average sales price was $4,881,561–2.6 percent higher than the second quarter, and 15.7 percent below last year’s. Per square foot, however, the $1,655 price is lower than both the second quarter and the prior year quarter, by 10.4 and 20.2 percent, respectively.

Luxury inventory has declined 12.4 percent from the second quarter, to 1,616 units, which is 0.6 percent lower than the prior year quarter. New developments are taking a larger share of the luxury market–39.9 percent compared to the 32.6 percent in the prior year quarter, while new development inventory overall has dropped from 30.6 to 25.7 percent in the same period. Days on market for luxury listings is now 181 days, or two months longer that in the prior year quarter, and one day less than the second quarter. Listing discount was 4.1 percent, compared to 8.6 percent in the second quarter, but just 2.9 percent in the prior year quarter.

The loft market saw declines across the board: median sales price was $1,500,000, 19.5 percent lower than the second quarter, and 21.9 percent lower than prior year quarter. Average price of $1,778,140 was 8.5 and 19.6 percent lower compared to second quarter and prior year quarter, respectively. Per square foot, $1,027 is 14.2 and 19.6 percent down from second quarter and prior year quarter, respectively. Sales were up 72.2 percent from second quarter, to 124 lofts, which is 44.9 percent lower than the 225 in the prior year quarter. Inventory fell to 623 units, 15.5 and 25 percent lower compared to second quarter and prior year quarter, respectively. Days on market rose from 130 to 137 days compared to last year, but are just one day less than the second quarter. Listing discount rose to 7.7 percent, compared to 7.2 percent in the second quarter, but almost tripled compared to the 2.4 percent last year.

Most of the talk in New York real estate circles these days has centered on the national recession, the pain it has caused the NYC apartment market, and when it’s all going to end.  The recent Deutche Bank report has fueled the debate, as have recent prognostications of a global recovery – most of latter having stemmed from perpetually overly-optimistic business writers.

While the perennial debate between optimists and pessimists plays itself out in the context of shrinking real estate valuations, the form that the eventual recovery will take is becoming clear.  The eventual construction resulting from the wretched attacks of September 11th with aid a revitalized downtown New York real estate market.  Manhattan is typically the strongest part of the New York apartment market, and changes in commercial real estate supply and demand will, in the long run, make the downtown area even more attractive to businesses and their employees.

A planned strengthening of public transport systems will also make the downtown area a more attractive place for businesses looking to headquarter themselves in New York City or relocate from other parts of the city.

Similarly, the strengthening of residential neighborhoods near the downtown area that occurred during the previous expansion has attracted additional retail activity.

In some ways, it seems like an odd argument:  In the downtown heart of business activity in the business capitol of the United States, additional business activity will help lead the Manhattan real estate market rebound more generally.

There are four major factors, though, that have pointed some observers towards such a conclusion:  First, the reconstruction of areas that were damaged or destroyed during the terrorist acts of September 11th.  Second, the changed market dynamics of residential neighborhoods near to the downtown area.  Third, a resulting further rejuvenation of retail activity.  And fourth, an uptick in supply and concordant downturn in demand for commercial real estate that, over the long run, will make the downtown an especially attractive place for new or relocating businesses.

The weak US dollar will similarly attract additional foreign demand for both the commercial and residential real estate market.  A disproportionate amount of that demand may end up being concentrated in the downtown area.

It’s not enough to fuel a recovery by itself – or even come close.  But what is clear is that when that recovery comes, look to downtown real estate and related neighborhoods to help lead the way.

Total sales volume and the value of properties sold in the second quarter both declined dramatically from last year, according to the latest second quarter numbers. Inventory rose dramatically from last year’s numbers.

While there was little room for optimism while reading the 2^nd quarter numbers, there was also little room for harbingers of doom: Prices are falling, but in a fashion that reflects the market adjusting to new demand levels – not a market whose bottom has fallen out.

It would seem that the 2^nd quarter of 2009 reflected a continued adjustment from the events of the previous two or three quarters.

Median prices of sales completed during the 2^nd quarter of 2009 were down 18.5% from the same period last year. Counting only re-sales – that is, not including figures from New Development sales  – the decline was a solid 25.6%.

While the total volume of sales was dramatically lower than its 2008 equivalent, typical seasonal patterns did hold, with sales volume in the 2^nd quarter up roughly 28% from the previous quarter, according to Prudential Douglas Elliman. A separate report seemed to indicate that the bulk of that sales activity has come not from new New Developments, but from resales.

Perhaps the single most important question left unanswered by the report was what was the relative role of higher mortgage rates. Are natural demand rates being depressed by developments in the financial industry, or is the demand itself depressed due, presumably, mostly to changes in the labor market?

Whatever the sources of reduced demand, sellers are feeling the pinch right now: The average New York City apartment that was sold during the 2^nd quarter was on the market for 162 days – up from 135 days.

Accordingly, sellers were willing to knock an average of 7.8% off of their listing price. While this figure is lower than one might intuit, it’s important to keep in mind that discounts in final sales price do not include the many other details on which sellers and co-op boards are willing to compromise.

Anecdotes quoted in the press have pointed in part to the lack of tolerance for not getting a deal. Sellers that are unwilling to compromise are viewed as obstinate and unnecessary obstacles to a good deal for the buyers.

All in all, the 2^nd quarter numbers seem to show that buyers not deterred by mortgage rates are moving aggressively to capitalize on current weakness.

Finally, the numbers from the first quarter have come out.  The numbers are generally the most reliable set of indicators concerning the state of the New York City real estate market.  This time around, however, they take on special significance.  The first and second quarters of 2009 will likely be the lowest points in the recession.  As such, they give us the best window yet into what the recession means for the New York apartment market.

Sadly, the numbers are starkly negative for New York’s real estate market, even while they have become generally positive for the nation as a whole.  Nation-wide, sales rose by roughly 5%.  In the city, meanwhile, total closings were a full 51% less than the 2008 1Q numbers, and 27% from the prior quarter.

This should not be taken as a sign of particular weakness in the NYC real estate market.  Rather, the higher level of demand means a delayed response to the business cycle.

Fortunately for home owners, the sharp decrease in sales activity has yet to hit the average price of apartments in Manhattan significantly:  Average prices on the island fell just 2%.

That being said, however, average re-sale values fell more than 20%.

Sales of new condo units made up 60% of the sales volume, reflecting the cyclical lag that occurs on units generally sold more than a year in advance.  Indeed, the average price of new unit sales continued to grow, even in the face of the recession, which is currently clocking in at over -6%.

Accordingly, co-op sales dropped to less than a third of overall city sales, as many co-op owners have decided to sit this buyer’s market out.

Condo inventory shot up 35% in the last quarter, reflecting the reality that prices will continue to feel  downward pressure throughout the next two quarters.

For the average unit, the number of days on the market increased dramatically – up 29 days to a full 178 days.

Prices for luxury units continue to skyrocket, continuing to demonstrate that market’s near-invincibility.  The average price of apartments and the average price per square foot both posted modest gains.

Overall, the first quarter numbers are not good news for the economy as a whole.  The New York City real estate market is showing all the signs of a typical recessionary market, with inventory increasing, sales decreasing, and no signs of an uptick on the immediate horizon.  The numbers are, however, great news for potential buyers, who will soon be greeted with the most favorable buyer’s market of the past two decades.

Prudential Douglas Elliman [ Q1 Report ]
Corcoran [ Q1 Report ]