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Manhattan (New York City) real estate-spring market update

Real Estate Agent with Keller Williams Prestige Properties

The $64,000 question:

The Manhattan residential real estate market is down about 17% since 2008, but we agents have seen a pickup in buyer traffic & contract activity lately. Is it sustainable- and are we out of the woods yet?

 A fly in the ointment:

No doubt, higher unemployment is weighing on our market: ~22%-of NYC salaries are tied to the financial sector and we all know that's restructuring big-time, leading to fewer transactions. In fact, New York City's Budget Office expects its financial sector to lose more than 33,000 jobs from the 2007 peak through mid-2009.

 The recent uptick in real estate activity may just be pent-up demand at work: like the Standard & Poor's stock index being up a whopping 31% since its March lows, proving that markets tend to have a real emotional component. Only it seems that market's come too far too fast! 

 We're cut from the same cloth:

Let's keep it real- while no one expects Manhattan to hit the skids like Phoenix (down 50% from their 2006 peak) Los Vegas (down 48% from its peak) or Miami (down 45%), New York City isn't immune from the national recession either.

 As proof, Manhattan "listing inventory" through early spring increased more than 30% from 2008, say local appraisers.

 Another key measure I follow is called "absorption". It's the number of months it would take to exhaust existing inventory at current rates. It's also deteriorated, and is now nearly 14 months, after averaging 9 months since 2000.  

 So, unlike in 2007, when 30% of all Manhattan condos were bought by foreigners, we no longer have a weak U.S. dollar to attract foreign buying. Worse, the International Monetary Fund predicts that the world economy will shrink by 1.3% in 2009 (2.5%-3% economic growth is the safety zone).

 Focus on fundamentals: prices are just stickier in Manhattan

On the upside, Manhattan's real estate market enjoys a big supply/demand imbalance: Manhattan's population is 1.6 million and total current listings total ~11,500. Only about 30% of residents own their own home, and not too surprising: the median sales price of a Manhattan condo resale last quarter was $985,000, for co-ops it was $587,500.

 Also keeping prices up are the co-op boards that scrutinize potential shareholders & often require them to have stellar financials: one of the more selective Park Avenue buildings requires applicants to provide 12 references and have 3-4 times the value of their apartments in cash/liquid assets after closing (no problem!!): Some of our otherwise well-connected clients can still get sticker shock.    

 Bottom line: the uptick in activity I've seen is due to buyers responding to lower prices, more flexible owners & seasonality effects. Of course we'll help all of our clients understand, and make the most of each opportunity; only I'm not so sure we're totally out of the woods yet.