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New York City stays afloat while rest of U.S. sinks

New York City stays afloat while rest of U.S. sinks

By Philana Patterson

While real estate agents and brokers in other markets around the country have faced slowing sales and falling prices, the New York City market has held its own.

A look at changes in several categories -- including median price, number of sales, inventory, foreclosures and rental vacancy -- show that New York City's market outperformed the nation's over the past year.

Nationwide, the median sales price of a home rose a mere 1.1 percent in 2006, to $222,000, according to the National Association of Realtors.

The median sales price for an apartment in Manhattan grew nearly 10 times that amount. Prices were up 10.7 percent to $830,000 in 2006 from $750,000 the year before, according to Miller Samuel.

Median prices hit an all-time record in the second quarter of the year in Manhattan before falling somewhat in the fourth quarter, helping spur more sales activity.

Manhattan also outperformed the nation when it came to the number of sales.

The amount of U.S. existing home sales dropped 8 percent to 6.48 million last year, according to the National Association of Realtors.

Unlike the country as a whole, Manhattan saw a rise. Sales volume climbed 9.2 percent, with 8,490 sales in 2006, according to Miller Samuel. While much of the year was seen as a slow time for doing deals, activity in the fourth quarter helped boost the yearly total.

"Spring has started out reasonably well," said Wendy Maitland, a senior vice president at the Corcoran Group. "I don't think it's a buyer's market at all. There's a lot of activity and the market is moving at a brisk pace."

New York shook off a downturn that began in mid-2005 -- and avoided the more severe slowdown seen in the rest of the country -- for many reasons, among them a strong economy, limited speculative activity in the market, lower foreclosure rates, and its ongoing draw as a world financial and cultural capital. The weak dollar also pulled in many foreign buyers.

The number of homes on the market jumped nationwide, while the figure was up only slightly in Manhattan by the end of the year.

The number of existing homes on the market nationally was up 23 percent at the end of 2006 compared to the end of 2005, with 3.51 million homes for sale.

Meanwhile, Manhattan inventory was down 0.5 percent at the end of 2006 compared to the year before, dropping to 5,934 units. While Manhattan inventory spiked earlier in the year, a fourth-quarter inventory decline of 22 percent made for the rosy numbers.

Renters take the plunge

The city also benefited from a low vacancy rate that pushed many renters, who were on the fence about buying, to take the plunge.

A report by investment brokerage Marcus & Millichap found New York City to have the lowest rental apartment vacancy rate in the nation -- 2.8 percent -- in 2006, as well as the strongest growth in rents.

Nationally, vacancy is nearly four times that level. The National Apartment Association reported a 10.1 percent national vacancy rate for rental apartments in the fourth quarter of 2006.

Speculation no easy feat in NYC

New York of course also retained many barriers to entry that prevented the massive speculation that pumped up bubble markets in places like Florida, Las Vegas, Phoenix and San Diego. The prevalence of co-ops in the market, which make up about 75 percent of residential for-sale inventory in New York City, makes it difficult for people who won't occupy their units to buy up many properties. Co-op boards scrutinize buyers much more closely and require large down payments -- sometimes as much as 50 percent to 100 percent of the purchase price.

On the condo side, New York developers have rules that discourage speculative activity, said Prudential Douglas Elliman executive vice president Jacky Teplitzky, who heads the Jacky Teplitzky team at the firm.

"This is not a flipper's market," she said. "You're not going to have a situation where they close and then they put a lot of apartments on market, and you have a glut of apartments in a specific building. Developers won't allow you to assign to another buyer."

Still, there are possible storm clouds on the horizon when it comes to foreclosures, though the rest of the country has been harder hit than the city.

The number of city foreclosures jumped 18 percent in the last half of 2006, according to Profiles Publications, which tracks foreclosure figures.

Still, New York City numbers are a far cry from the nationwide rise in foreclosures, which were up 45 percent from the corresponding period in 2005, according to a report in Crain's.

In New York, it's Brooklyn, Queens and Staten Island that are particularly vulnerable and show some similarity to the national numbers. Jessica Davis, president of Profiles Publications, said foreclosures were up 45 percent in those boroughs in the last half of 2006 and into 2007. Davis says her best guess is that co-op foreclosures in Manhattan, which typically has much lower numbers than the rest of the boroughs, are up 10 to 15 percent so far in 2007.

A February weekly update of her firm's Manhattan foreclosure auction schedule listed more than 20 upcoming foreclosure auctions.

"What I'm seeing is many more co-ops coming up for auction than at this time last year," Davis said. "People who make a lot of money still can manage to overextend themselves. Doctors, for example, are notorious for this. Just because you make a million a year doesn't mean you can't blow through a million a year."

New York continues to benefit from a large number of high-wage jobs and employment growth. The city has seen a sharper drop in unemployment than the rest of the country.

The city's unemployment rate fell to 4 percent in December 2006 from 5.6 percent a year earlier. Nationwide, the unemployment rate stood at about 4.5 percent in December of 2006, down from 4.9 percent a year earlier, according to the U.S. Department of Labor.

 

 

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