Back to the Future on Manhattan Housing: How This Movie Ends

The New York Times on the local housing market: “Even at the peak of the spring buying season, brokerage offices

The New York Times on the local housing market: “Even at the peak of the spring buying season, brokerage offices across the city have been eerily quiet, buyers have been holding out for steep discounts and the inventory of unsold apartments has been growing.”

That was June 1989. A years-long wave of co-op conversions had helped drive the market to dizzying heights, altering not only neighborhoods, seemingly forever, but the very perception of home ownership in New York. If you have family or friends of a certain vintage, you’re probably still hearing how they got the East Village duplex for $100,000 or the CPW two-bedroom for $250,000—and saw its value jump.

As the same Times story, by Thomas Lueck, noted, prices during the 1980s had become inflated, with owners believing their condos and co-ops were worth a lot more than they were—and buyers and the real estate industry, for a time, going along.

Even the stock market crash of October 1987, an economic calamity not to be equaled until September 2008, couldn’t dull their confidence. They had bought in right before the run-up; things would only get better, property prices would only rise.

Dress the set. It’s time for another run.

New second-quarter market reports from leading brokerages show Manhattan apartment prices and sales plummeting farther from the steamy heights of the departed boom. The Prudential Douglas EllimanMiller Samuel report pegged the borough’s median sales price at $835,700, the lowest since early 2007; the Corcoran GroupPropertyShark report pegged it at $849,000, a 13 percent drop from the second quarter of 2008. (More stats from more reports here.)

Like the 1980s, the Manhattan housing market of the ’00s has featured obscenely steep price jumps, which, counterintuitively enough, have done nothing to deter sales. Apartment sales notched a 20-year quarterly peak in the second quarter of 2007, with 3,939. That was even as the median sales price rose quarterly over 7 percent.

Cut to the last three months.

The price and sales falls evidenced in the new reports brim with stunners. Take four-bedrooms in the Douglas Elliman-Miller Samuel report: The median sales price was $7.35 million a year ago; it was $3.92 million by July, a 46.7 percent drop. The Corcoran-PropertyShark report showed a 67 percent annual decline in the average West Side townhouse price. Both reports said apartment sales dropped by about 50 percent annually.

Yet, the market isn’t in free fall. Sales were up from the prior quarter; and the average apartment, by any measure, remains comfortably above $1 million. The market still has the capacity to stun as well: The Observer’s Max Abelson on Tuesday broke news of the biggest deal in 11 months—$37.5 million for a Time Warner Center penthouse. Also, unlike 20 years ago, mortgage rates remain at or near historic lows; and the city is not struggling to shake crime-fueled dissipation. New York’s still shiny.

But the new reports clearly show an intermezzo.

The early 1990s recession, coupled with property transfer tax changes, finished off the housing boom. Manhattan apartments settled into a lull. The median price, according to Miller Samuel, by the end of the ’90s was roughly $400,000 in today’s terms. Sales were around 8,000 annually. Uptown and Downtown were still final frontiers.

Meh. You could do it if you wanted.

Then, the ramp-up—the median Manhattan apartment price during the ’00s would increase over 139 percent (compared to about 37 percent in the ’90s)—and now the downturn.

It’s almost like it’s all going according to script.

“[E]conomists maintain that the changes in the market are providing a long-awaited respite from feverish price escalations that should benefit the city as a whole,” Mr. Lueck wrote in The Times 20 years ago this spring. “As long as it lasts, they say, a flat market for cooperatives and condominiums will give more of the city’s renters a chance to accumulate the money necessary for home ownership. It should also make New York City more attractive to professionals elsewhere in the nation. …”

  Back to the Future on Manhattan Housing: How This Movie Ends