The bloom is off gentrification and trophy homes

The New York Times yesterday managed to discover a long-held precept of real estate sales: What we euphemistically term “transitional,” “gentrifying” or “emerging” neighborhoods are the first to suffer in a downturn.

At the same time, recent quarterly Manhattan market reports, which are summarized in my biweekly newsletter, document how severely the uppermost tier of supply has languished and how precipitously prices have dropped.

When the market is tough for buyers, they push beyond the fringes of popular neighborhoods, creating a level of demand and thus of development and thus of prices that had vanished long ago.  Thus the glut of condos in Williamsburg and the changing face of many of Harlem’s streets as two among numerous examples.

When the market turns, however, and inventory soars in “traditional” or “established” neighborhoods, guess what happens:  Those hitherto desperate buyers transform themselves into skeptics whose aim (to the extent that they are still in the market) swerves away from the edges to the center.

Who needs to be a pioneer, they reason, when, for the same money they were willing to spend previously, they can live like a prince or a princess?

Yesterday’s front-page piece in the Times focused on Harlem, particularly the block of W. 134th Street Between Frederick Douglass and Adam Clayton Powell Jr. boulevards.

In this photo by Tina Fineberg for the Times, Craig Charie, who paid $750,000 for a brownstone he had hoped to resell for for as much as $1.6 million, is pictured. The property is for sale for $599,000.

In this photo by Tina Fineberg for the Times, Craig Charie, who paid $750,000 for a brownstone he had hoped to resell for for as much as $1.6 million, is pictured. The property is for sale for $599,000.

The story also recounted the status of four other properties, between 221 and 259 W. 134 St., in which their owners are taking a bath.  According to the StreetEasy Web site, the median price for townhouses in the area swelled by approximately 150 percent from 2004 to 2007, reaching $1.4 million.

But, predictably, brownstone shells are now going for half of the $1 million they commanded two years ago.  And fewer of them are changing hands – 11 so far this year, according to brokers cited by the Times, as opposed to 27 during the same period last year.

Coincidentally, the newspaper also ran a story in its Arts section that directly bears on the situation. The headline: “Mapping a Bird’s-Eye View of Foreclosure Misery.”

Curator Larissa Harris at work on the Panorama.

Curator Larissa Harris at work on the Panorama in a photo by Ruth Fremson.

The Times relates how an artist named Damon Rich marked each block of the 9,335-sf Panorama of the City of New York built for the 1964 World’s Fair with plastic triangles to demonstrate where three or more home foreclosures have occurred.  (You can see the thing in person at the Queens Museum of Art.)

Bedford-Stuyvesant, Crown Heights, East New York, Canarsie, Ozone Park, Cambria Heights, Jamaica and Corona suffer swaths of triangles.  In Manhattan, however, only two triangles appear.

If you ever have longed for graphic evidence of the mortgage scandal – and I doubt you have – this enterprise could not be more compelling.

It’s hard to feel much sympathy for the owners of luxury housing – the top 10% of sales by appraiser Jonathan Miller’s definition. But they are hurting too, in their own way.

According to the Miller-Samuel report, the median sale price fell 26 percent in the second quarter from the same period one year earlier, to $3.66 million from $4.95 million. The number of sales, 153, was down by more than half of the previous year. And the number of days it took for properties to find buyers grew by 32.8 percent, to 182, from 137 – and that was from the most recent listing date, including updated pricing.

Nationally, at the current sales pace, there’s about a 40-month supply of homes on the market for $750,000 or more, according to the National Association of Realtors. That’s more than double the stock in mid-2007, before the credit crunch. By contrast, there is now under a 10-month supply for all homes.

“The high end is the worst performing sector of the residential real estate market, unquestionably,” said Bernard Baumohl, Chief Global Economist of the Princeton, N.J.-based Economic Outlook Group, told a reporter.

Did I mention that the second-home market also is in serious trouble? Did you see yet another Times piece, that one about a guy in Nantucket who is resorting to an auction with no minimum to get rid of his multi-million place? He just doesn’t want to deal with the carrying costs of that palace in addition to the one he’s already purchased on the same island.

Times are tough, but tougher on some folks than others.

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Malcolm Carter
Licensed Associate Real Estate Broker
Senior Vice President
Charles Rutenberg Realty
127 E. 56th Street
New York, NY 10022

M: 347-886-0248
F: 347-438-3201

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