NO ROAD BUMPS IN SIGHT FOR THE HOUSING MARKET
By Esther O. Perez
Real Estate Weekly
April 25, 2007
While the national residential market appears to be on the brink of a crisis, New York hasn’t even felt a bump, and the first quarter residential market reports have the numbers to prove it.
“The whole country is going crazy and Manhattan is not. I feel like we’re in another world,” said Esther Muller, co-founder of the city’s Real Estate Academy, referring to consumers outside the city who were tempted by mortgages offering 100% financing.
While on the face of it the deals appeared ideal, many people have been stung by no-interest mortgages whose repayments climb rapidly after two to three years. “In New York, the banks and the co-op boards did not allow them to finance 100%, and the buyers are much more qualified,” said Muller.
Another factor that played a part in the national housing frenzy was investors. “Throughout the country, there was a lot of over building, and investors took advantage of the opportunity and came in to buy and sell and move on. In New York, we have relatively few to no investors in our market,” explained developer, Daren W. Hornig, managing partner of Shea Commercial.
All of these factors set New York apart from the rest of the country. “We had
a great first quarter. We have a robust market where there are even bidding wars for apartments that are going substantially above asking price,” said Jacky Teplitzky, executive vice president, Prudential Douglas Elliman.
Although market report numbers vary slightly between the major firms,
they all depict a vibrant and healthy housing market. According to The Corcoran Group, the average sales price for a Manhattan apartment
moved up 4% from the fourth quarter of 2006 to $1.363 million, while Halstead stated that the average rose to $1.218 million, a 6% increase
from last year’s fourth quarter.
“We have the strongest market in the country,” said Dottie Herman, president and CEO, Prudential Douglas Elliman, while speaking on a New York Times residential panel, also featuring Adrianne Albert, president, The Marketing Directors, Inc; Pam Liebman, president and CEO, The Corcoran Group; and William Zeckendorf, owner and co-chairman, Terra Holdings. “As far as interest rates go, I don’t see them spiking up anytime soon,” said Herman.
According to Herman, the nation continues to experience record low in interest rates with the most recent Freddie Mac report showing the average rate on a 30-year mortgage at 6.17%. Not everyone agrees that the current low interest rates are a good thing, though. “Currently, rents are so high
that, if interest rates came down, it would take the pressure off of the first
time buyer. I think it would be a great thing for that part of the market,”
Stribling Private Brokerage, a division of Stribling & Associates which handles the high-end luxury market, reported a boom in deals over $20 million with much of that business generated by those employed in the hedge fund sector. Average prices for townhouses increased from $8.821 million to $10.727 million, according to Stribling and condominiums did not lag behind. The Plaza Residences and 15 Central Park West experienced sales over $20 million and a couple over $40 million.
The even bigger surprise, was that sales of cooperatives over $5 million exceeded the $1 billion mark for the first time, going from $980,426,421 to $1,376,542,286.
“While we are clearly past the peak of the cycle, the negative attitude that was so prevalent last summer has abated,” said Kirk Henckels, executive vice president and director of Stribling Private Brokerage.
According to Citi Habitats, despite the price hikes, the rental market is healthy. Average rents have started to increase and vacancy rates are beginning to fall, and the traditional peak Spring rental season has yet to hit full stride.
Rental prices for one-bedroom apartments showed the biggest increase, jumping up 2% to $2,515. Directly behind, studios increased 1.2% to $1,889 average rent. Rents for two and three bedroom apartments have stalled with two bedrooms up 0.1% to $5,047.
Teplitzky believes the city’s residential market is settling into an equilibrium after several years of roller-coaster price hikes.
She said, “I think we finally reached equilibrium, because market buyers are ready to move ahead and there is not an avalanche of new product coming into the market all at once, it’s coming in a staggered way, which is good for the market. New inventory comes, gets absorbed, and a new wave comes and that gets absorbed, and there is no overflow.”