No. Why the worst is over.
By Deborah Schoeneman
1. Because the market already corrected.
In 2002, the market finally slipped, as economic woes and terrorism fears finally got hold of buyers’ psyches. The thing is, the drop wasn’t as bad as people feared (prices rose in many neighborhoods), and now it’s over. Take it from a guy named Trump. “I have never seen the residential market better!” booms the Donald. Okay, that’s Trump. But plenty of comparatively sane people agree. “January is always a slow month, but this January has exceeded all of our expectations,” says Corcoran Group COO Scott Durkin. Adds Corcoran broker Sharon Baum, “I’m not pessimistic; I’m realistic. And I’m bullish.” She has reason to be: She sold $30 million worth of property in January.
2. The economy is turning the corner.
Read all the gloom-and-doom headlines you want. The truth is, we’ve probably bottomed out. “I’m generally positive,” says JP Morgan Chase senior economist Jim Glassman. “The worst is probably over.” Glassman thinks the lower-Manhattan revitalization will be a “dynamic magnet” and that Wall Street is finding its footing after two years of downsizing. He also says interest rates are likely to stay low. “And if they don’t, that means the economy and Wall Street are picking up again.”
3. Speaking of interest rates . . .
Just about every week seems to bring a historic low. This week, the rate for a five-year adjustable-rate mortgage stands at 41⁄4 percent—the lowest in more than 40 years. More than one observer suggests that another year or so of low interest rates will act as a bridge, keeping the market from really tanking while the economy picks up. And rates aren’t likely to go up soon, “unless the government wants to kill the economy,” says Trump.
4. There’s no perfect storm.
The last time the market tanked, in the early nineties, the real-estate market faced a triple whammy: A flood of new condos glutted the market, the murder rate skyrocketed with the crack epidemic, and the economy and the stock market were reeling. This time around, we don’t have the crime and overbuilding problems. On the demand side, that means people aren’t flocking out of town. On the supply side, “there’s not a lot of product out there,” says real-estate consultant Yale Robbins. “That will keep prices up.”
5. Wall Street money has to go somewhere.
Yes, the Street is in a slump, but that can be good news for real estate. Money pulled out of stocks and bonds doesn’t just evaporate, and many people are putting it in homes. The reasoning: “Interest rates will remain low, and the real-estate market will outperform the equities market,” says Melissa Cohn, president of the Manhattan Mortgage Company. Then there’s the emotional factor: In these anxious, post-Enron times, home and hearth appeal to people more than a stock certificate.
6. The high end is holding.
Jet-set buyers can be an indicator of larger market trends (because they have more money at stake, they scare easily). And at least some of those premium buyers are writing checks. Kirk Henckels, director of Stribling’s private brokerage, points out that since November, there have been seven deals for $10 million– plus co-ops. In all of 2001, the entire real-estate industry had only ten co-ops sell for more than $10 million. Louise Sunshine, CEO of the Sunshine Group, which markets the AOL Time Warner building, says sales in the building since 9/11 have totaled more than $400 million. Ricky Martin, for one, paid $8 million for a condo overlooking the park.
7. Brokers see optimism.
Take James Lansill of the Sunshine Group. He says sales in Tribeca, one of the neighborhoods hit hardest last year, have been picking up. Since Christmas, contracts have been signed for 7 of 33 units at 7 Hubert Street, a new condo building, and he expects another ten purchasers to jump in by the end of the month. “There seems to be an optimism,” says Lansill, who had about four appointments per week with prospective buyers last fall and now has twenty or so. “Around Christmastime, we seemed to clear a hurdle.”