Housing Bust Hurts Once-Immune Cities
Their home values remained steady for months, but now they are showing weakness.
July 2, 2008— -- While most of the country has been suffering from falling real estate prices, home values in Manhattan -- some of the most expensive land in the world -- have, for the most part, remained strong.
But now, even New York's precious properties are showing some signs of weakness.
The average price for a Manhattan apartment fell 2 percent in the second quarter to $1.66 million, according to Halstead Property, a New York real estate firm that tracked 2,988 apartment sales.
And Manhattan isn't the only once-immune city now feeling the pinch.
Charlotte, N.C., Seattle and Portland, Ore., had bucked the trend and seen increasing home prices, while the rest of the country suffered. But a recent report showed that, even homes in those cities are starting to lose value: 0.1 percent, 4.9 percent and 4.7 percent, respectively, compared to last year.
For Manhattan, this is the first quarterly decline Halstead has seen since the third quarter of 2006, when home prices fell 10 percent.
This decline comes after Manhattan experienced record sale prices earlier in the year, mostly because of two large new, ultra-luxurious condo buildings opening for occupancy: the Plaza Hotel and a high-rise at 15 Central Park West.
Even with the second quarter decline, however, Manhattan's real estate is doing a lot better than the rest of the country. The quarter might have been bad, but the whole year hasn't.
Sale prices are up a whopping 36 percent from last year's second quarter. Even when the two new developments are removed, Manhattan still saw a 21 percent increase from last year's sales.
Compare that to the rest of the country, where home prices in April were down 15.3 percent from the prior year, according to Standard & Poor's Case Shiller report.
New York might still be strong, but there are now, for the first time, signs of weakness.
"What we are seeing is definitely some hesitancy in the marketplace in terms of the buyers not seeing the urgency that they might have felt a year ago," said Diane M. Ramirez, president of Halstead Property. "They have a little more time to choose the product. It's just not as frenetic as it once was. But they are still buying."
Ramirez said the overall number of listings was also down slightly.
Sellers also weren't getting quite as much as they hoped for in the most recent quarter. Manhattan owners got 97.5 percent of their asking price, down from 97.8 percent a year prior.
Manhattan's lack of available land -- thanks to being an island -- means that there is almost always a shortage of apartments, helping to keep prices high. The market is also helped, in part, by foreign buyers who are essentially getting apartments for deeply discounted prices because of a weak dollar.
Another factor helping New York is the high percentage of cash that well-off people have to put down when they buy, insulating the market a bit from credit problems. Still, Ramirez said some buildings now require 25 percent down when they might have only required 20 percent before.
New York is also home to many Wall Street employees who have either lost their jobs or watched their bonuses shrink because of a collapsing stock market.
"Some of the numbers that we are looking at are off an unbelievably record year in '07," Ramirez said. "All of that will always have to be kept in perspective."