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Apartment Market Stays Steady

Following frenzied buying and selling in the first half of the year, residential brokers in Manhattan said they are now seeing a stable and steady marketplace.

Rising interest rates have cooled the market, buyers are feeling less pressure to make a decision, and brokers say prices are increasing more slowly.

"We're at the flat part of the stairs," said Donna Olshan, president of Olshan Realty. "We're taking a breather from that torrid spring and basically going back to more of a stable market."

Neil Binder, principal of Bellmarc, said that buyers "don't feel the same pressure. They're saying, if I don't make a decision quickly, maybe I can make a better deal in a few months."

As a result, "a lot of brokers are not out there as aggressively as they were," said Binder.

The drop-off was apparent by May. For that month, there was a 17 percent decline in signed contracts in Manhattan south of 96th Street compared to April, the largest decline in nine months, according to a report by appraisers Mitchell, Maxwell & Jackson.

In June, the number of signed contracts actually increased by one percent, according to an MMJ study. The report also found the average contract price for the month edged up one percent, to close at $917,864, compared to $910,548 recorded in May.

"We anticipated the number of signed contracts to continue dropping, and this may have been the last gasp before mortgage rates climb again," said Jeffrey Jackson, chairman of MMJ.

Jacky Teplitzky, executive vice president at Douglas Elliman, said that much of the frenzy that has abated has occurred in the market for one-bedrooms and studios.

"In the two-bedroom, two-bathroom category, the inventory is very tight, so it's a different story," Teplitzky said in late June. "The luxury market has also been very active, because it's not so driven by interest rates."

Pricing of apartments has also changed since the first quarter. "From January to February or from February to March, I would take what happened the month before and add 5 percent," she said. "Now pricing is the same as the month before."

Binder said there have been some price reductions at Bellmarc. "On about 10 percent of our exclusives, the price has come down," he said.

Some sellers still want to believe it's the overheated first quarter, said Teplitzky.

"I just turned away two listings that were way overpriced," she said. "The sellers were living in la-la land." Teplitzky said that nearly all buyers mention the press coverage several months ago about the average apartment price in Manhattan reaching $1 million. "That's the first thing they tell me about," she said.

Michael Goldenberg, Halstead's executive director of sales for the West Side, agreed. "Some people are testing to see if they can get a price considered aggressive," he said. "But if you want to sell, you are adjusting."

Binder said the "pause" that he sees in market will "readjust soon, and we'll have a very good fall." He added that he doesn't think increases in interest rates will go anywhere dramatic. The Fed raised the benchmark interest rate by 1/4 point at the end of June.

Teplitzky said the slower market may just be a seasonal adjustment, and "we don't know if this is a permanent change."

Olshan pegged a resurgence at the start of next year. "I think the market will come roaring back in early 2005," she said. "The economy is getting better. The dollar is getting weaker, and the Euro is getting stronger, and I think we'll see a lot of foreign investment."

Alan Rogers, chairman of Douglas Elliman, said at a recent industry conference that he thinks the market will "be steady for the next two years."

"When interest rates climb, there will be an overreaction against that," he said. "People will psychologically take a while to get used to it."

Despite the less frenzied climate, however, brokers still said that the market remains strong.

"I like to tell people that the last quarter was a good year," said Binder.

"Never in the history of our company had I had a period like that. It was 100 percent over the year before."

"There is a tremendous amount of demand that is still present now," he said. "It's a more durable market, more under control."

Goldenberg pointed out that interest rates remain low.

"In 2000, we were at 8.75 percent," he said. "And everyone is freaking out about 7 percent interest rates."

 

 

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THE JACKY TEPLITZKY  TEAM

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