From Frederick Peters, President Warburg Realty

The second quarter of 2010 behaved like March in the old adage: it came in like a lion and went out like a lamb. April was the acme of a sales avalanche which began gaining force in the fall of 2009. Throughout Manhattan and western Brooklyn residential properties of every category were snapped up, often with competitive bidding, at prices averaging only 10-15% below the 2006/2007 peak. Numerous... [more]

The second quarter of 2010 behaved like March in the old adage: it came in like a lion and went out like a lamb. April was the acme of a sales avalanche which began gaining force in the fall of 2009. Throughout Manhattan and western Brooklyn residential properties of every category were snapped up, often with competitive bidding, at prices averaging only 10-15% below the 2006/2007 peak. Numerous all time price records were set, especially in mid-sized and larger apartments, during March and April. Confidence and the stock market surged higher. Buyers began emerging and becoming active during the fall of 2009, as gradually rising prices made them apprehensive lest they miss the opportunity to purchase while the market was still depressed. The wave of purchasing gained traction during the winter, and by March inventory had dropped from a 19 month supply to an 11 month supply, essentially normalizing the marketplace. Larger properties saw particularly robust gains during this period. While the absolute top of the market (properties asking $20 million and above) remained sluggish, demand for properties of six to twelve rooms was intense. It was precisely these properties for which demand had declined so precipitously during the period between September of 2008 and September of 2009. There was little available in this category, especially on the Upper East and Upper West sides, and only those buyers who acted quickly and aggressively succeeded in making a purchase. The early months of 2010 were replete with cognitive dissonance: buyers simply could not believe that they had missed “the bottom” and that failure to act decisively once again left them empty handed just as it had three years earlier! The smaller apartment market, which had suffered less during the recession, rebounded less dramatically. The one- and two-bedroom markets did see significant absorption, but with lesser price increases and little competitive bidding, as supply for the most part continued to outweigh demand. The inconvenience surrounding construction of the Second Avenue subway depressed prices along that corridor and helped moderate demand for the postwar inventory which makes up the bulk of the housing stock north of 59th Street and east of Third Avenue. In the Village, in which the housing stock remains primarily rental, scarcity drove the market as it had before the recession, with many buyers competing for the few available offerings, especially in the larger two- and three-bedroom categories. In both Tribeca and the Financial District an overhang of unsold inventory from the condo construction boom helped keep prices moderate, while at the same time demand remained strong for the “old” Tribeca lofts, with their high ceilings and enormous windows, in the prewar industrial buildings for which the neighborhood was originally known. In Williamsburg, developers responded early and dramatically to the recession, slashing prices at their buildings and guaranteeing a level of activity which was the envy of most other emerging and more recently gentrified neighborhoods. As April moved into May and May into June, first economic and then seasonal factors came to bear on the marketplace. Debt crises in Greece and Spain and a falling euro sidelined many Eurozone investors whose interest in New York real estate had buoyed the condo market for years. In our new global economy those European debt concerns began to weigh heavily on OUR equity markets as well. Consumer confidence here at home was further shaken by the program trading driven rout in stocks on Thursday May 6, which temporarily reduced many issues to near zero values. Although the market rebounded, the confidence did not. The jobless nature of our recovery, our mounting national debt burden, and government gridlock, both in Washington and Albany, further depressed the Dow, which lost value during much of June. And then, of course, summer arrived. Real estate purchasers react in different ways to times like these. While recent developments have certainly taken the sizzle out of our market, deal flow remains healthy as buyers see a home purchase as an alternative to stocks and bonds, with significant collateral benefits. The latter half of June, July, and August are always slower in the residential sales, as both buyers and sellers spend more time out of the city. But with the market a little slower, real opportunities exist for buyers. Some sellers will still be holding out for pie in the sky, but for now that mad moment seems to be over. [less]