Buildings along the southern lip of Manhattan are still pumping water from their basements almost two weeks after Governor Andrew Cuomo led a chorus of voices warning that violent storms and extreme weather patterns are the new normal. But the market for residential real estate seems, by and large, completely unphased. Hurricane Sandy may have flooded the city, but she has not dampened the desire to buy real estate in Lower Manhattan. At least not yet.
It is, of course, still early to judge what effect, if any, the hurricane will have on the Manhattan market, but real estate professionals say that cold—and wet—feet have not been an issue in showings and closings during the weeks since Sandy hit. (Banks, on the other hand, are feeling less confident, with a number insisting on inspections to rule out structural damage for loans on buildings in Zone A, even those that have long been in contract.)
In fact, some buyers were so unconcerned about the approaching storm that they actually insisted on closing the morning of the hurricane. Town Residential broker Michelle Bourgeois said that she spent that Monday in Tribeca, helping two clients seal the deal on a 4,000-square foot spread on North Moore Street. As winds picked up and final warnings sounded for residents to leave nearby Zone A in advance of the many-foot-high storm surge, she helped to mobilize both attorneys and find an open bank in the mostly-shuttered downtown.
“With the lack of inventory downtown, there’s a huge demand for properties of that size in great condition,” said Ms. Bourgeois. “When you get one that you love, well, you don’t want to risk losing it.”
Ms. Bourgeois added that the unit had been in contract since July (for around $9 million) and the closing had been delayed on several other occasions so the owners were particularly keen to close the deal. Even if it meant taking ownership of a property not far from streets that became a de facto flood plain. Nor did seeing the damage wrought by Sandy, and the lingering power outages that left Lower Manhattan in the dark for nearly a week, give them any second thoughts.
“They did a drive-by, they checked everything out, they’re happy where they are, they’re not on the edge of the water,” said Ms. Bourgeois (the property is in Zone B). “They have no regrets.”
Despite the fact that she hadn’t yet fielded any questions about flooding from other buyers, Ms. Bourgeois did expect that they would be asking more questions in the future—particularly about generators, building mechanicals and whether a building was considering the costly proposition of moving them in the near future.
“Now when buyers go into buildings, they want to know where the gym is, where the laundry room is. I think in the future, people will be asking where the generator is.”
Appraisal guru Jonathan Miller of Miller Samuel said that he didn’t anticipate that there would be any appreciable effect on property values in Lower Manhattan—the damage to the bottom of the borough may run into the billions, but he doesn’t see a single hurricane causing any psychological aversions to the neighborhood, even if more are expected.
“Are people going to shy away from the waterfront? I suspect not,” Mr. Miller said. “After 9/11, a lot of people sort of wrote Lower Manhattan off and in the last decade it ended up being one of the strongest performing housing markets in Manhattan. We’re amazingly short-sighted.”
The real consideration, he said, was frequency—whether or not the neighborhood gets hit with another storm any time soon, resulting in high premiums for flood, hurricane and homeowners’ insurance, but even that was unlikely to have “an astronomical impact.” Mr. Miller said that the biggest change he expects to see in the near future is on the lending side. With a super tight credit environment, lenders are looking for excuses not to lend, and a mortgage for a flood zone apartment could sink an already weak application.
Speaking shortly after the storm blew through New York, Citi Habitats president Gary Malin expressed a similar sentiment. A Long Island resident, Mr. Malin knows how attached people can be to their waterfront properties, come hell, or quite literally, high water.
“I think people have short memories. There’s always people who are drawn to the water and willing to take the risk,” said Mr. Malin.
After all, if the beachfront communities of Florida and the Carolinas rebuild and repopulate year after hurricane-struck year, why wouldn’t one of the most sought-after cities in the world?
“I am confident that the storm will not have a negative impact on overall property values,” Brown Harris Stevens broker Hall F. Willkie wrote The Observer in an email. “It may effect specific homes within buildings or locations which were severely damaged by the storm but not on the long term market as a whole.”
And it seems like even those whose properties sustained significant damage from Sandy have not been spooked from returning to their low-lying homes.
Harold Kobner, a broker with Argo Residential, said that a former client’s first floor condo at Washington and Canal Streets had flooded badly when water spilled over the deck and into the living room.
We asked if the owner was staying in the building. Or even the neighborhood.
“Oh, absolutely!” exclaimed Mr. Kobner. “He’s a trooper. Before he even had electricity, he told me he was going to have Thanksgiving in the apartment.”
Mr. Kobner told us that his downtown clients spent the days following the storm filing insurance claims from their smartphones. He said that he’s spoken to several potential buyers who even want to leave their homes in New Jersey and Westchester to move into Lower Manhattan—as soon as they can finishing cleaning up the tree damage and preparing their properties for sale.
“I think this storm has made people who live in the outer boroughs and suburbs, who were on the fence about selling their houses, want to move back to Manhattan,” he said.