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The Residential Market Softens

But Has Not Collapsed

By Carter B. Horsley

In the aftermath of the September 11, 2001 terrorist attacks on the World Trade Center in Lower Manhattan and the Pentagon near Washington, the luxury residential real estate market in Manhattan has been suffering from a lot of anxiety. Anecdotal information indicated that many sectors had dipped perhaps 15 percent or so but some other reports have indicated surprising resilience and a continued healthy demand.

Given the fact that the nation's economy was weakening before the attacks and that the city's economy has certainly taken a considerable beating from the terrorist attacks in terms of substantial job losses and concerns about the travel and hospitality industries, it would be foolish to regard that the real estate markets can continue to climb as dramatically as they have over the past few years to extremely high heights.

Low interest rates and weakened stock markets, of course, have helped greatly in stabilizing the city's real estate markets, which have also been aided by the city's remarkable renaissance and building boom over the past several years that have made the city more attractive in general. Furthermore, the terrorist attacks sparked something of a national love affair with the city in contrast to its former rather disdainful regard.

The most recent report issued in mid-April, 2002, by the Corcoran Group, a leading residential sales and brokerage real estate firm, maintained that "market-wide 2001 was a year of modest growth in Manhattan real estate," adding that "while the first half of the year enjoyed a robust market and interest rates have remained low, the gradually slowing economy coupled with the extraordinary events of September 11th caused a brief period of eroded consumer confidence resulting in decreased sales volume in the fourth quarter, particularly in the condo market."

"Nevertheless," the report continued, "the overall picture of 2001 is one of continued - albeit slower - growth over the previous year.The fourth quarter was a difficult one for the East Side's condo market, with average price corrections around - 13 percent. The coop market remained unconcerned, growing an incredible 16 percent and demonstrating the ongoing strength of this cornerstone of the New York market."

The report found that the average sales price at the end of 2001 for 1,717 closed coop sales from 57th to 96th Streets on the East Side was $911,000, up 6 percent from the previous year and that of these sales studios witnessed the greatest increase, 39 percent, from the previous year to an average of $198,000, followed by one-bedroom units that were up 11 percent in the same period to an average of $353,000.

The average sales price of 1,001 closed condo sales from 42nd to 96th Streets on the East Side was $1,286,000, according to the report, no change from the end of 2000. Of these sales, studio apartments climbed 22 percent to $292,000, while one-bedroom units climbed 18 percent to $538,000. Apartments of three or more bedrooms rose 3 percent to an average of $2,847,000 and $3,095,000 for coops and condos, respectively.

On the West Side, the average sales price at the end of 2001 for 1,248 closed coop sales from 57th to 125th Streets was 8 percent over the year to $674,000 with studios showing a 26 percent gain to $209,000 and one-bedrooms rising 18 percent to $377,000. The average sales price of 796 closed condo sales on the Upper West Side rose 11 percent at the end of 2001 to $870,000 with apartments of three or more bedrooms showing the largest gain, 19 percent, to $2,136,000.

The report, which was based on data collected by The Corcoran Group and Mitchell, Maxwell & Jackson Inc., also indicated that "while high-end property prices in the Downtown area adjusted downward, the overall performance of the district [south of 34th Street] was significantly better than the year before due to the many new building units that closed in early 2001." "This market has remained unexpectedly strong," with fourth-quarter price adjustments isolated to larger properties, it continued.

This report, however, was much, much shorter than in the past several years in which the downtown figures were broken in various neighborhoods and this report did not comment specifically on the Lower Manhattan market that certainly suffered substantially as a result of the terrorist attacks. This report also did not break out its East Side and West Side statistics into smaller categories, such as Fifth Avenue or Central Park West, as it had in the past.

Reporting on 81 closed sales of one- and two-family townhouses in Manhattan, the survey found that the average sales price at the end of 2001 on the East Side had risen 6 percent to $5,015,000 although the average price per square foot fell 8 percent to $721. On the West Side, the sales price fell 13 percent to $2,705,000 with the square foot average declining 3 percent. The report found that the volume of sales decreased by two-thirds over the course of the year.

In a cover letter to the report, Sheila Lokitz, vice president of The Corcoran Group made the following comments:

"The results of this report are a testament to our great city, and the resilience of the New York real estate market. While the fourth quarter was a period of retreat and uncertainty, sale statistics in every part of Manhattan were up over the previous year. As we enter 2002, we are seeing a number of encouraging indicators: a strong increase in market activity, the number of sales contracts signed by The Corcoran Group in January were up 35 percent over the same period in 2001, a high proportion of sales are being made at asking price, renewed interest in the luxury end of the market. If you have been considering purchasing, this is an excellent time. Mortgage rates are still historically low, and prices have just started to move up. And, with the billions of dollars for relief and rebuilding that are being pumped into New York City, and the impending turn around in the economy and the stock market, we expect our real estate market to continue to strengthen."

 

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