The Real Deal
Summer sales slower than usual
Price cuts increase, signaling weakening residential housing market
July 31, 2008 01:14PM By Lauren Elkies
July was hot, and buyers were not bothered at least when it came to buying Manhattan real estate.
Open house attendance was down, beyond the usual summer ebb, and price adjustments were more frequent — both indicators of a weakened housing market.
Richard Rothbloom, a vice president at Brown Harris Stevens, said that his sales open house attendance last month was "hit or miss."
Stefani Pace, an associate broker at Prudential Douglas Elliman, said that appropriately priced units are garnering heavy traffic at sales open houses, but if they are even "just a little overpriced," attendance drops off.
At Barak Realty's Sunday open houses, there was an average of 6.7 visitors in July versus 7.4 in June. Barak Dunayer, the company's president, said that the drop in the number of house-hunters as well as the increase in the number of price cuts reflect the soft market.
Crowded open houses usually mean a property will sell quickly, said Frederick Peters, president of Warburg Realty Partnership, adding that he does not know if the reverse holds true — that a sparsely attended open house translates into a property that sells slowly.
On the rental side, open houses were doing poorly last month.
"Rental open houses are dead," Pace said. (For a different take on open houses for rentals, see Holding open houses for rentals.)
Lesley Steiner, associate broker at Century 21 NY Metro, echoed Pace's comment.
"There are [fewer] people coming to rental open houses, and in some cases no one shows up," Steiner said.
Apartments have been languishing on the market, but some brokers say that price slashing seems to be effective at increasing buyer and renter interest.
Esther Sapan, a rental salesperson at Adina Equities, said that while the rental market was busier in July, rents were reduced both months to get deals done.
On the sales side, "some apartments are still sitting, but as you do incremental price drops, more buyers come out to look at it," Brown Harris Steven's Rothbloom said.
The discount off the asking price that buyers are getting from sellers has increased. Between the first and second quarters of 2008, the spread between list price and final selling price grew to 3.6 percent from 3.2 percent, according to data prepared by appraiser Miller Samuel for Prudential Douglas Elliman. In the second quarter of 2007, the discount was only 2.2 percent.
Jonathan Miller, president and CEO of Miller Samuel, said the expanding spread does not necessarily mean that price drops were greater. It could be that list prices rose faster than sales prices did. "Either way," Miller said, "it shows a widening gap between buyer and seller."
Ari Harkov, an associate broker with Halstead Property, said, "Properties are still trading, some immediately after coming onto the market and some at full asking or even above, but I think price sensitivity is increasing. This is leading to a larger percentage of properties sitting on the market that may not sell at all or will only sell after several months on the market and several price reductions."
Sha Dinour, president of Triumph Property Group, estimated in mid-July that apartments were sitting on the market 10 to 15 percent longer in July than in June. Second-quarter market reports for Manhattan showed that year-over-year, inventory shot up and sales activity slowed, but home prices still hit record highs. Sales at the high-end 15 Central Park West and the Plaza Hotel, which were negotiated in the first quarter of the year if not before, skewed the numbers.
Looking at just the tail end of the second quarter, only May and June, the last two-month period for which data was available, sales picked up by 12.5 percent to 1,204 sales, according to data from a report by Terra Holdings, parent company of Brown Harris Stevens and Halstead Property. The median sales price receded between the two months by less than 1 percent to $960,000, Terra Holdings determined.
Market takes hit, brokers adjust
As the middle market suffers and buyers demand greater price cuts, brokers are adjusting their approach to keep up with changing market conditions.
The Real Deal sent out its monthly survey to see what some brokers had to say about what they are seeing in the field. Here is a sampling:
Stefani Pace, associate broker at Prudential Douglas Elliman: The middle co-op market is where I am seeing the biggest slowdown. Many of my customers are putting their search on hold and my clients are getting frustrated.
Khashy Eyn, president and CEO of Platinum Properties: If you list a $5 million-plus home, you know that there is a scarcity of homes in this category, and you'll ultimately find an affluent individual willing to spend that amount. What seems to linger on the market the longest are the listings that have 100 other listings or so in the same category — for example, one-bedrooms under $1 million in Midtown.
Steen Rasmussen, senior vice president and sales manager, Warburg Realty Partnership: Brokers are revising and improving their business and marketing plans and preparing themselves for a bumpy six to nine months ahead. They are adjusting to the new pace of the market, which requires more patience working with both buyers and sellers.
JoAnn Schwimmer, sales agent, DJK Residential: The renters [were] back in the Manhattan residential market in July. Buyers are also out there and looking for drastic price reductions as a result of the negative national news, but the New York City market is very strong. Higher-end properties have dropped slightly, but the mid-market prices are steady.
Ken Scheff, managing director, Stribling & Associates: Some buyers of smaller apartments are being affected by tighter financing guidelines.
Cindy Gise, vice president, Prudential Douglas Elliman: I think we have to be tougher and need to tell sellers they need to be realistic if they are serious. Screening buyers is a must and something you need to do from the beginning of your buyer/broker interaction.
Sha Dinour, president, Triumph Property Group: I think no one is denying the slowdown, and we are all just grateful to move our inventory. I think appointments and accommodations by other brokers have improved.
Edward Longley, senior vice president, City Connections Realty: As of this point I have not seen any drastic changes. I am spending a little more time finishing my doctorate, playing with my daughter and so forth, but I think that is just a seasonal thing.