"Reviving the Economy: Real Estate"-New York Layoffs
Thursday, April 09, 2009SUSIE GHARIB: President Obama is encouraging Americans to take advantage of historically low mortgage rates. Today, he said up to nine million Americans could benefit from refinancing. New York City is also hoping those low rates will spark home sales. A year ago, we surveyed Manhattan's housing market and it was much stronger than the rest of the country. As we continue our series "Reviving the Economy: Real Estate," Suzanne Pratt looks at how big layoffs on Wall Street are now bruising the big apple.
SUZANNE PRATT, NIGHTLY BUSINESS REPORT CORRESPONDENT: A look at this upper east side building illustrates much of Manhattan's new real estate story. In the 30-floor condominium, few lights are on. That's because many of the building's units remain unsold, an increasingly familiar reality. After a magnificent decade for New York real estate, Manhattan now has too much supply and very little demand. In that environment prices can only go one direction: down. New York real estate appraiser Jonathan Miller says in the last seven months, prices have plummeted on homes all over Manhattan from the financial district to the upper west side.
JONATHAN MILLER, PRES. & CEO, MILLER SAMUEL: We're looking at from August to today on average a price correction of about 25 percent on average. That doesn't matter whether we're talking about a studio or we're talking about a $10 million apartment. It's a pretty universal thing.
PRATT: Sales in the first quarter of this year crumbled, falling nearly 50 percent from the same period last year. Meanwhile, inventory continued to expand. It's up more than 34 percent. Manhattan's real estate market held up reasonably well last summer, at the same time other cities were already fraying from sub-prime mortgage problems. Conditions here began to soften in the fall when Lehman Brother's collapsed and the government had to bail out AIG, Fannie Mae and Freddie Mac. That's when some buyers began to have trouble getting credit. Economist Greg Heym says more recently Wall Street's layoffs and vaporized bonuses have destroyed demand.
GREGORY HEYM, CHIEF ECONOMIST, TERRA HOLDINGS: Now, we're seeing this really as a Wall Street centric event instead of a sub-prime crisis or a mortgage crisis. So, now New York City is taking the worst of it right now.
PRATT: But, taking the worst of it has built something New Yorkers haven't seen in years: a buyer's market. For 29-year old banker Zev Garell, now is the right time to look for his first place, with the help of his real estate agent Lisa Weiner-Koenig. Today she's showing him a one- bedroom in the west village. The duplex apartment has been on the market since last June and has had three price reductions. It's currently offered at $799,000.
ZEV GARELL, POTENTIAL BUYER: I've seen probably about 25 apartments. I've looked at hundreds more online and out of all the apartments I think this is clearly the best. It fits my character. And, I guess that's the operative word. This apartment has character.
PRATT: It may have character but Garell thinks the price is still too high. So, he's willing to wait. Koenig says there is a disconnect between buyers and sellers, mostly when it comes to price. But, the realtor's starting to see sprouts of life in the all important spring market.
LISA WIENER KOENIG, VICE PRESIDENT, HALSTEAD PROPERTY: Nobody knows how to time the bottom. But, the people who are out looking now feel that we are close enough there. We're not 100 percent there. We're maybe 90 percent there and they're using this time to get knowledgeable. And they are actually in some cases pulling the trigger, which is very different from three months ago.
PRATT: Some experts however, are more negative on the outlook for Manhattan real estate. Jonathan Miller thinks prices could fall another 15 percent. And says it may take three to four more years before the market starts to recover, longer than the rest of the nation.
MILLER: The New York market is going to probably go through a similar window of pain and suffering as it relates to housing. But, we're going to be last out. Meaning, we were the last to see it and I think we're going to be the last out of it.
PRATT: Forecasts for Manhattan may be more dire because New York real estate is so closely connected to Wall Street. It's still unclear how long it will take for the financial industry to restructure and for that sector to stop losing jobs. Suzanne Pratt, NIGHTLY BUSINESS REPORT, New York.
