Tuesday, September 2, 2008

Unthinkable Happens: Manhattan Apartment Prices Fall

Recently released city records indicate that apartments in prime Manhattan neighborhoods are selling for less than their purchase prices — a phenomenon that until now was virtually unheard of in the seemingly invincible New York City real estate market.

Among the apartments selling for a loss is a unit at 80 John St., in the financial district, which recently sold for $590,000, much lower than the $720,000 selling price in January. At 515 West End Ave., on the Upper West Side, an apartment recently sold for $2.1 million — $50,000 less than its 2005 purchase price. There are also apartments currently on the market that are listed for below their previous purchase prices: A three-bedroom condominium at 166 Duane St. in TriBeCa — the wealthiest ZIP code in America, according to Forbes magazine — is on the market for $4.495 million, well below the $4.7 million paid for the unit in April.

"This clearly indicates that the market is not what it was," the president of the real estate appraisal firm Miller Samuel, Jonathan Miller, said. "Two years ago, you'd be hard-pressed to find an apartment that sold for less than its purchase price."

Real estate firms have continued to pump out market reports showing high sales activity and rising median prices, largely because they use home sales that took place several months earlier. Newly released city records — it can take several weeks or months before the records are made available — show apartment sales are falling. The data flies in the face of repeated assertions from industry insiders over the past several months that the Manhattan real estate market is impervious to the housing slowdown taking place across the country.

"Everyone's saying the luxury market is so hot, but something like that sends a signal that maybe it isn't," a business analyst at real estate Web site StreetEasy.com, Derrick Gross, said.

In any market, there are some homeowners who are forced to sell their homes quickly for a variety of reasons — divorce, death, and job loss chief among them — and must accept less-than-ideal prices. In the white-hot Manhattan real estate market of the last eight years, even highly motivated sellers virtually always netted a profit, according to Mr. Gross.

In the two years since the site began tracking real estate data, a fall in real estate prices "hasn't really been happening," Mr. Gross said. "It's definitely something new. In a really hot market, this wouldn't happen."

The $200,000 discount on the Duane Street listing "is definitely drastic," Mr. Gross said, especially considering it is in TriBeCa. The apartment, a corner unit, was listed with the Corcoran Group at $4.75 million in June, and the price has been reduced twice, according to StreetEasy.com.

The broker representing the seller, Jared Seligman, said the owners are selling the pre-war loft for personal reasons and that the apartment has an offer but not a signed contract. "Before, it was priced a little high," Mr. Seligman said, adding that in the current market, "if you're not priced appropriately, it's not going to sell."

In Mr. Miller's second quarter market report, the median sales price of a Manhattan apartment exceeded $1 million for the first time since he began tracking the information. In part, this is because of new developments, which tend to be priced higher.

"The market condition story of Manhattan has been clouded by the inclusion of a high concentration of new developments into the housing stock," he said.

While prices of new developments have soared, resale activity is showing modest declines, he said. "When you talk about resale, it's very hard to make the case that the typical apartment today is worth more than it was six months ago," he said.

Mr. Miller added that apartments all over the city, in different income brackets, are now posting declines. "It's a broad-based sample, suggesting it's not an anomaly."

A broker at Prudential Douglas Elliman, Ann Cutbill Lenane, recently pulled a listing off the market at 342 W. 85th St. after three price reductions. Purchased by the owners in 2006 for $1.325 million, the asking price was reduced to $1.25 million when she decided to pull it off the market until after Labor Day. "The market's corrected," she said. "It's not as buoyant as it was."

She said the apartment has attracted "a lot of interest," and that buyers can still be found in Manhattan once the price is right. "We're very lucky given what the rest of the country is going through," she said.

A broker at Gumley Haft Kleier, Donna Sims, recently sold an apartment listed at $799,000, down from the $800,000 the owners spent to buy it in 2006.

In the current market, "if you think you were going to make a big profit, it's going to be a disappointment," she said, adding that sellers often make up for the loss by getting better deals on their new homes. "If you're going to buy something on the other end, you can do well," she said.

The market hasn't completely lost steam, Mr. Miller said — once the real estate market picks up again after Labor Day, there likely will be more sales of new construction apartments at record-high prices. Because of ongoing layoffs on Wall Street and an expected drop in bonuses, though, more apartments will be sold at a loss.

"This is just the beginning," Mr. Gross said.

[Via NY Sun]

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