Housing Market Heats Up Again in New York City

February 19, 2007

NY Times

Since the new year began, a burst of activity has broken out in Manhattan and several Brooklyn neighborhoods as New Yorkers frenetically hunt for co-ops, condominiums and town houses, sending prices higher despite sluggish sales in many other cities.
Preliminary indications from real estate firms showed that this increased activity, with open houses jammed and bidding wars taking place, has occurred in all price ranges — from tiny studios in the East Village to red-brick mansions on the Upper East Side — in counterpoint to the heavily weighted record sales of luxury properties that led the market in the late summer and fall.
Real estate brokers and statisticians are quick to point out that not every single apartment is flying into contract. During the last quarter of 2006, the major real estate agencies differed on which way prices were headed.
But now, the three largest real estate companies in the city agree: for January, at least, both prices and the number of signed contracts rose in double-digit percentages compared with the same month in 2006.
With higher Wall Street bonuses, a strong regional economy and pent-up demand from New Yorkers who were once worried that the city’s real estate market would crash, buyers’ attitudes have done an about-face. “Their psychology has changed,” said Frederick W. Peters, the president of the Warburg Realty Partnership. “For almost two years, they’ve been scared that the market would plummet and they’d end up like fools who paid too much.”
Real estate experts say they see no reason for the trend to not continue, with economists predicting stable mortgage rates and a continuing city budget surplus. However, other factors may alter New Yorkers’ renewed interest in buying real estate, including an expansion of the Iraq war, a changing employment picture or another terrorist attack.
Yet, there is “cautious exuberance,” according to Steven L. James, director of Manhattan sales for Prudential Douglas Elliman.
A week ago, one open house attracted 100 people to an Upper West Side one-bedroom; a $2.475 million house in the Park Slope neighborhood of Brooklyn sold in a day.
Across the board, the prices of Manhattan apartments are rising. Jonathan Miller, the president of Miller Samuel, an appraisal firm, said the number of contracts signed this January was 19.4 percent higher than in January 2006. Prices were up 14.4 percent in the same time period. Inventory, which was mounting last summer, is shrinking fast.
Now, according to Mr. Miller, statistics showed that sales of studio and one-bedroom units, stagnant over the past year, were up 13.7 percent in January. “It’s not like a lot of huge sales at the high end skewed the average up.”
According to a report released last week by the National Association of Realtors, prices are falling in many other metropolitan areas around the country. The report covered only the last quarter of 2006, and showed a modest increase of 3.1 percent for the New York area, which includes parts of northern New Jersey.
Anecdotally, there isn’t much talk of falling prices in Manhattan and in the most sought-after neighborhoods in Brooklyn, where young people looking for a break, empty nesters looking for a guest room and foreigners looking for a pied-à-terre say they want to live.
Katalin Staveley, a 30-year-old bedding designer in Manhattan, devotes her weekends to scanning the classifieds and attending open houses, searching for just the right one-bedroom apartment for less than $750,000. She can’t find it. “I made a mistake,” she said last week. “I should have started looking before Thanksgiving.”
Mr. Miller said New Yorkers had been reluctant to buy because of the feeling of an impending crash. “Last summer, a lot of information was being dumped on the consumer: stories about the glut of condos in Miami, Washington, D.C., and Las Vegas, exacerbated by the constant debate on the blogosphere about housing bubbles, mixed together with a barrage of negative predictions,” he said in a telephone interview.
Although no one can pinpoint the moment when New Yorkers started feverishly buying again, Kirk Henckels, the director of the private brokerage division of Stribling & Associates, said he thought the luxury market picked up after Labor Day.
He and others said the resurgence was partly fueled by the fall’s record-setting (and well-publicized) sales of a few multimillion-dollar apartments and town houses, like the Stanford White limestone palazzo at 25 East 78th Street bought by Mayor Michael R. Bloomberg for $45 million and the Harkness mansion at 4 East 75th Street sold in October for $53 million.
Then came this year’s stratospheric Wall Street bonuses, and the market exploded, real estate executives said.
“The plunger that freed up all the hesitation at all price levels was those bonuses,” said Diane Ramirez, the president of Halstead Property. “It cleaned the pipes and gave confidence to even small apartment buyers.”
Within the last month, the Corcoran Group, Halstead and Prudential Douglas Elliman, three of New York City’s largest real estate sales firms, say they have recorded double-digit increases in contract prices and in the number of transactions.
In a real estate market where 18 and 22 percent price increases were recorded in 2004 and 2005, last year’s 6 percent increase was depressing, Mr. Miller said.
Pamela Liebman, the president of the Corcoran Group, reported that the company’s contracts for this January totaled $1.3 billion, an increase of 53 percent from January 2006.
Prices in many areas of Brooklyn are going up, too. According to Marc Garstein, the president of Warren Lewis Realty in Park Slope, prices in what he called the downtown neighborhoods — including Brooklyn Heights, Park Slope, Carroll Gardens, Cobble Hill, Prospect Heights and Windsor Terrace — are now approaching 2004 highs, after being off about 10 percent in the last two years.
A town house at 171 Garfield Place in Park Slope, priced at $2,475,000, sold for the asking price one day after it was put on the market. Fifty people had shown up at the open house, Mr. Garstein said.
Customers said they had expected a buyer’s market in which they could call the shots, but found a race track, instead.
Jane LaFarge Hamill, a 25-year-old painter who lives in a “small, kind of stinky” studio in Chinatown, said she had looked at 60 apartments over three months, trying to take advantage of the lull she had noticed. “We decided to look while sellers were still worried that the market was crashing,” she said.
When she started looking last fall, there was still “wiggle room,” she said. But now, there is frenzy, said her mother, Leita Hamill, who, with her husband, Bill, is helping her daughter search for and buy a new home. The Hamills had gotten into a bidding war, one of many reported by brokers these days, for a two-bedroom co-op in Gramercy Park. They had started bidding above the asking price, but it wasn’t enough.
“There were people bidding on the apartment sight-unseen,” Mrs. Hamill said. The victors got the co-op through a sealed bid, she said. “It was like a pair of shoes that you absolutely had to have,” she said.
Real estate executives say they do not know how long the market’s heat will be turned up, although they say the regional economy looks strong.
They also say that the first two quarters of the year — the spring market — are traditionally stronger than the last two. Thus, the average for the whole of 2007 may or may not show the double-digit growth that the first part of the year is showing. “It’s all about price now,” Ms. Ramirez said. “The market is not in a spike mode, when anything, for any price, will sell.”
Ms. Ramirez, who has sold real estate for more than 30 years, said she expected that the current rocketing growth would be followed by a period of slower yet steady increases. “I don’t want to hear, ‘Oh my gosh, the market is slowing up again,’ ” she said. “With the number of deals we had last week, it has to calm down. But I feel much more confident than at any time in the last five years when the market had fits and starts and there was always a certain underlying nervousness.”
Toward the end of 2004, the real estate market in the city was booming. But then, brokers started seeing “great concern among clients that mortgage rates were about to jump and that house prices would suffer a sharp correction,” Mr. Miller said.
Since then, there has been change of leadership in Congress, Mr. Miller noted. In the region, unemployment has dropped. Mortgage rates didn’t soar. “Two years ago, we were predicting they’d be up to 8 percent now,” he said. (Rates for a 30-year fixed loan on a New York City co-op hover around 6.25 percent, according to the Manhattan Mortgage Company.)
After months of trying to push shoppers over the edge of indecision, brokers now say they spend time warning house hunters not to rush in heedlessly — advice the would-be buyers don’t always listen to.
“When my wife and I got into the market in mid-December, people told me there was a glut of one-bedroom apartments and I could take my time,” said Shelly Cohen, 51, an empty-nester. “When we actually got into the market, I found it was just the opposite.” He just found a newly created condominium in a beige brick high-rise at 1438 Third Avenue at 81st Street and quickly signed the contract. He said he felt he had to.
Mrs. Hamill, the mother of the young artist in Chinatown, offers her own advice to friends.
“Now I tell everybody: Be ready to write the check the minute you see something you love,” she said. “If it’s any good, it’ll be gone by the next day.” She paused. “Or, even by that same day.”


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