By Carter B. Horsley
A mid-year 2002 report by Stribling & Associates, a leading luxury residential real estate brokerage in Manhattan, on "luxury" Manhattan softened the high-end residential market but not dampened "strong demand for well priced, quality residences."
The Stribling report, prepared by Kirk Henckels, the companys senior vice president and director of private brokerage, is particularly astute at analyzing the high-end of the market.
Mr. Henckets provided the following commentary:
"At the close of 2001, the market for $4m and up cooperatives and townhouses had suffered a serious decline in total sales dollar volumne of 33.3 % and 58.1 %, respectively, since the peak of the market in 2000. This decline was due to not only the effects of September 11th, but also to a preexisting and pervasive 'wait and see' attitude on the part of buyers reacting to a weakening economy and real estate market. What was different from previous drops in the market was the curious fact that cooperative buyers continued to actively shop for homes, but they simply would not bid, reflecting a very large latent demand. Townhouses suffered for different reasons. Traditionally, the least expensive form of family housing on a square foot basis, townhouses had excalated well above $1,000 per foot and were competing with cooperativees. At the end of 2001, townhouses began to significantly reduce their prices and buyers responded enthusiastically, reversing the downward trend as we entered 2002. Cooperatives behaved similarly."
Low interest rates and prospects of an improved economy led a surge in cooperative contracts at the start of 2002 and by April, Mr. Henckels reported, the inventory of family housing up to the $8m to $9m range was "nearly" depleted: "What little inventory building that occurred in the down market of 2001 was devoured and once again the market saw evidence of bidding wars and multiple offers. Indeed, there were 51 closings of $4m and up cooperatives in the first six months of 2002, versus 44 in the first half of 2001 and even exceeding the 44 in the market peak of 2002. Prices firmed and in many instances increased, but with few exceptions, did not exceed those of 2000."
More expensive apartments, those starting at $10 million, however, was dampened by "various negative factors" such as the crisis in the Middle East, the Enron scandal and other corporate misdeeds, renewed talk of terorism, all followed by the stock market woes of the summer," Mr. Henckels wrote, adding that "As a result, the $10m and up cooperative market never recovered and is the weakest segment. There were only 4 sales over $10 million the first half of 2002, versus 8 in 2001 and 8 in 2000....The euphoric atmosphere, which is a necessary catalyst for 'trophy' sales, is simply not present." Mr. Henckels suggested that some of the most expensive units are finding "that they need to bring their prices down 30 percent in order to find serious buyers."
Townhouses, on the other hand, "regained their popularity" with lower prices. Mr. Henckels cited the fact that "buyers were found for all six of the architecturally important Lycee Francis townhouses once their prices were dramatically reduced," adding that almost all will be converted to residences. "There wee 24 sales of townhouses over $4 million in the first half of 2002 versus 15 in 2001 and 31 in 2001," he continued, noting that "good properties continue to move, but at the right price. This is a not a market for overpriced properties."
Despite the generally sober nature of the report, Mr. Henckels concluded tha "Despite the significant decline in consumer confidence since June 1st, real estate is still viewed as a wise investment, with the added benefit of enhancing the quality of one's life. Indeed the decline in the stock market has served to funnel money into real estate. Both residential inventory and interest rates continue to remain low."
"Similar to cooperatives, the first half of 2002 saw brisk sales of condominiums under $10m but a major decline in transactions over $10m," according to Mr. Henckels.