Harlem condo sales plunged a staggering 76 percent annually in the third quarter of 2008, from 237 closed deals last year to just 57 for the three months ending Sept. 30. That’s according to an analysis of data, provided by research Web site PropertyShark, on Manhattan condo deals between roughly 110th and 155th streets.
Despite the anemic sales volume, accounting for the paltriest sales quarter since the start of 2007, Harlem condo prices increased 3 percent year over year in the third quarter, rising to a median sales price of $598,000.
The slowdown in buying activity is opening a window for an oversaturation in the Harlem condo market, as several upscale projects like 119th & Third and Graceline Court at 106 West 116th Street are scheduled to open in the coming months. The guiding principles of economics would suggest that something has to give, and although prices are firm now, it appears price cuts are imminent.
“This almost looks like a complete crash; prices are going to have to drop,” said PropertyShark CEO Bill Staniford.
The prospect of a drop in Harlem condo prices almost seems unimaginable to brokers and developers, especially considering that prices uptown are already substantially lower than in the rest of Manhattan. The median sales price for a new uptown condo was $560,000 in the third quarter, whereas the median price for a downtown one was $1,275,000, according to the Corcoran Group.
But the possibility of substantial Harlem and East Harlem price chops has potential apartment buyers giddy at the reintroduction of a nearly extinct New York species: the newer $300,000 (and under) Manhattan condo.
It’s been at least four years since newer condos were common at those prices.
Mr. Staniford predicts Harlem condo prices will fall 20 to 25 percent in the near future. According to Corcoran, the median sales price for an uptown condo in a new development was $560,000 in the third quarter; a theoretical 25 percent price drop brings that figure down to $420,000. The same report found the median sales price for an uptown studio condo in a new development to be $450,000; reduce that by just 20 percent and buyers would have to pay only $360,000–or less.
In a brave new real estate world defined by stricter lending, that may be all that potential home buyers can afford, particularly in neighborhoods like Harlem, where developers and sellers depend primarily on buyers priced out of Manhattan’s more expensive neighborhoods.
Vie Wilson, an uptown-based senior vice president at Corcoran, attributes the slower uptown market to an uncertain economy rattled by the ongoing financial crisis: “There are still a lot of people out there looking, but they are not really pulling the trigger.”
Ms. Wilson declined to predict a price drop, noting, instead, that prices are frozen at their current levels and will eventually move (or stay the same) depending on how things play out in the economy and the credit markets.
“Developers and sellers are waiting to see what happens,” Ms. Wilson said.
With fewer buyers competing for more, often new condos, gone is the fear that, unless you buy now, some richer, more aggressive buyer with double your credit score and twice your annual bonus will swoop in and steal the apartment of your dreams. Buyers have more time to mull things over and, with looming price cuts, are probably asking themselves: Why buy now?
If Mr. Staniford of PropertyShark is right, and Harlem prices do fall by 20 or 25 percent in the next several months, who is to say they don’t keep falling and inch closer to $250,000 or $200,000 per condo in many cases?
Anthony DeVivio, the sales director in Halstead Property’s Harlem office, is as optimistic as Mr. Staniford is pessimistic about the condo market there and doesn’t predict any significant price softening in the future.
“There is no doubt that business has slowed down, but it’s still a healthy market up here, no doubt not as healthy as a year ago, but still healthy,” he said. If Mr. DeVivio is correct, developers can weather the slower market by offering a mix of more amenities and free upgrades in basic services and forestall any permanent price reductions.
The market is still unsettled, and developers, who will no doubt closely monitor the credit markets and the year-end Wall Street bonuses, have some time to plot their courses of action. If this slow Harlem condo market bleeds into next year, a continued tight credit market or a weak bonus season could lead to substantial price cuts not only uptown, but throughout Manhattan.
Just as unsettled is the interplay between Harlem’s newer condos and the traditional and long-established identity of the neighborhood. The area has seen rapid development during the prolonged real estate boom, and certain areas above 110th Street, like Hamilton Heights and Morningside Heights, are well past the emerging-neighborhood label.
At the same time, other uptown nabes, like Central and East Harlem, are hitting the financial crisis and credit crunch in an awkward transitional phase of gentrification.
Some people may no longer have the means to afford Harlem condo prices, and others, assuming there are price chops throughout the city, may look elsewhere and invest in other, suddenly more affordable neighborhoods. Brokers and real estate professionals working around Harlem are concerned about the direct and indirect ways a recession will impede future development in the area, but they remain cautiously optimistic that the newer condos will draw buyers.
“I think Harlem will still gentrify, but I don’t think it will be at the same pace,” Ms. Wilson of Corcoran said. “It won’t stop, because we’ve gone too far to stop.”