Reading reports of new-home sales and what is oddly called existing-home sales, you might be forgiven for wondering whether Manhattan is headed for another crash.
If the national data are the source of your concerns, think again.
It was, I believe, in January of 2007 that I wrote about Manhattan being a peninsula, not an island, when it came to the housing market. At the time, the borough had avoided the same sort of bubble bursting that was endemic in the nation.
What I meant by “peninsula” was that our housing market was headed for trouble. On September 15, when Lehman Brothers imploded, Manhattan prices and sales volume nosedived. Last spring and summer, this market showed clear signs of recovery, and those signs are now increasingly evident, if continuing to be tenuous.
Although I continue to preach about macro imponderables such as unemployment, U.S. and global economic health, expiration of the buyer tax credit and inevitably rising mortgage rates, I remain cautiously optimistic about our little island. These days, it feels less like a peninsula, though I readily concede that our market cannot, to an unknowable extent, fail to be vulnerable .
On the plus side are Wall Street bonuses ($20.3 billion, less of it in cash than in the past and more deferred compensation) that enduringly astound; pent-up demand that is showing itself in thronged open houses and occasional bidding “wars;” the unique amalgam of the city’s attractions and culture that exert an irrepressible draw on Americans and foreigners alike; and the limited amount of space for residents to house themselves.
If you take at face value the following latest U.S. statistics (from my forthcoming bi-weekly e-newsletter to be issued Friday), you’d have ample reason to be depressed and wary of purchasing real estate in New York:
- Sales of new single-family houses in January were at a seasonally adjusted annual rate of 309,000, HUD reported. The estimate was 11.2 percent below December and is 6.1 percent below one year earlier.
- The median sales price was $203,500, the lowest in six years, and the average sales price was $254,500.
- Sales of existing single-family, townhomes, condominiums and co-ops fell 7.2 percent in January below December but were 11.5 percent above January 2009, according to the National Association of Realtors.
- The median price for all housing types in January was unchanged from one year earlier at $164,700, in part because of the 38 percent of sales attributed to distressed homes.
- Standard & Poor’s Case-Shiller Home Price Indices – which exclude apartment sales and include whole Metropolitan Statistical Areas (MSAs) – show that U.S. prices fell in the fourth quarter.
- In December, the 10-City and 20-City Composites collected by Case-Shiller recorded annual declines of 2.4 percent and 3.1 percent, respectively.
- Applications for mortgages dropped during the week ending Feb. 19, the latest data available, to the lowest level in 13 years.
The problem with these numbers is that they bear virtually no relation to the situation in Manhattan. For example, the average sale price in the last quarter was $1.296 million and the median was $810,000, according to the Miller Samuel appraisal firm. At the same time, sales went up 10.9 over the previous quarter.
Further, new-home sales are meaningless for a borough in which single-family homes (i.e. townhouses) account for no more than 2 percent of sales. And those are old homes.
As for the Case-Shiller numbers, I have railed about them forever. Not only do they overlook apartment sales but they embrace whole regions – all of the city’s five boroughs plus suburban Westchester County and New Jersey.
Finally, the week of falling mortgage applications was also a week of wicked winter storms.
I would be foolish and, not incidentally, open to criticism for being one of those lying, self-interested brokers were I to forecast a rosy future.
The most I’m willing to say is that I don’t feel like the sky is falling and that I’m basically optimistic – cautiously so, as I mentioned before, very cautiously.
Licensed Associate Real Estate Broker
Senior Vice President
Charles Rutenberg Realty
127 E. 56th Street
New York, NY 10022