What's next for Manhattan Real Estate

The first quarter of the
year was a bad one for the national housing market. Nothing much new
occurred, however it was an unabated
continuation of last year, which was one of the worst years for the
national market on record. In that environment, however, the Manhattan
real estate market continued to do OK.
Seemingly against all odds, the average
price of New York apartments improved almost twenty percent from the
same time last year. The increase in prices was largely driven by the luxury
market, which saw several new high end buildings go on the market.

Underlying the effect that the strong numbers from the luxury sector
had on the market as a whole, rents actually declined in the first
quarter, even as the average price of New
York City apartments increased. There were a some signs of a new weakness
in the quarterly numbers – inventory,
for example, increased substantially – however, the unexpected large increase
in the average price buoyed confidence in the market for yet another quarter. New
York apartments, it seemed, lived in a different economic universe than the rest
of the nation's housing units.

The fate of Bear Sterns, however, has combined with the continuing
negativity in the national market to finally put a damper on the New
York housing market. Nonetheless, the Spring quarter is typically the
best quarter for the market, so once again, no one is really sure what
the exact fate of home values in the New York market will be. This very uncertainty has given pause to a number
of potential buyers and sellers.
Most
analysts expect prices to decline somewhat, especially among sellers
who have had their home on the market for more than a month. Activity is expected
to decline from what it was a year ago, though quarter-over-quarter numbers won't
seem quite as bad.

Rents are expected to continue to decline, though not at as fast a
pace as they did in the first quarter. All in all, the second quarter numbers
for the Manhattan
real estate market will be truly fascinating. Until the quarter
is finished, and the data is released, however, a sense of uncertainty will place
a drag on the market.
Certainly, any number of events – mostly negative
ones – could clear up that uncertainty. If another Bear Sterns were
to occur, for instance, it would be all to clear which direction the market is
headed in.

For now, though, the only thing that is clear is that the market is
not moving in a particularly strong direction one way or the other. Even if
the second quarter numbers are negative, they will be nothing like what the city
experienced in its last major housing downturn.

Nicholas Adams Judge is a freelance writer specializing in business, politics and economics. He holds a B.A. in political science and will begin his PhD studies in political economy and public opinion next fall. He has studied economics and political science at a number of different institutions, both here and in the U.K., including Amherst College, Warwick University, Oxford University and the University of Massachusetts-Amherst.