C arol Candiano walked into the sales office of a new condo in west Chelsea last December looking to buy. She asked to tour a few units and fell in love with a 736-square-foot one-bedroom with floor-to-ceiling windows and a small terrace. But the agents didn’t seem interested in talking to her. Maybe it was because she’d asked to negotiate the price—$910,000—or maybe they were just too busy. “They had lots of showings,” Candiano remembers.
Put off, Candiano looked elsewhere. But in July, she and her broker learned that the unit was still on the market. The asking price hadn’t changed, but the market had, and this time around, the agents were all too happy to make a deal. She got the apartment for $875,000.
After five years of paltry inventory, rising prices, and bidding wars, the seller’s market has finally started to turn into a buyer’s market—or at least the beginning of one. According to a report released this summer by appraisal firm Miller Samuel, the number of sales last spring—traditionally the busiest season—were down 14.8 percent from the year before. A typical home now sits on the market for 144 days, 42 days more than the previous year. And while the average sales price of a Manhattan apartment so far this year is $1.38 million, 5 percent higher than last year, prices aren’t accelerating anywhere near as high, or as fast, as they did in 2004, when appreciation clocked in at 30 percent. Futures traders at the Chicago Mercantile Exchange forecast that New York City prices will fall 6 to 8 percent by next August, while our own city’s most recent budget report predicts sales volume and prices will sag for the next four years.
All of this adds up to what Jonathan Miller calls “a market in transition”—though the rest of us might call it confusion. Those who own homes—particularly those who bought at the exuberant height of the market—are wondering if now is the time to cash out and take cover in a rental. Some sellers are still getting bids within a day of putting their homes on the market, while others are watching weeks turn into months. Some, in a hurry to unload, are slashing prices twice and three times.
Buyers too, meanwhile, are wondering whether to take advantage of the market’s favorable turn, or if there will be even better deals in six months. Alyssa Gelper, a lawyer who abandoned her search for a two-bedroom, two-bathroom apartment last spring (“I didn’t want to be the last sucker to buy high before the market tanked”), has decided the waters are safe to wade in: She just started poring over listings last week. Open houses no longer feel like cattle calls, and buyers who luck into something they like don’t need to steel themselves for a battle of best offers.
In a very short time, the rules of the real-estate game have changed dramatically—and buyers are more in control than they have been in a while. “They’re taking their time, and they’re not afraid to make an opening offer that’s 10 to 15 percent off the asking price,” says Corcoran’s John Gasdaska.
Some brokers characterize the market’s softness as temporary, describing it as a “lull.” They say Wall Street bonuses—anticipated to hit new heights this year—are going to drive prices back up. “[Wall Street types] love to spend those bonuses on real estate,” says broker Michele Kleier, president of Gumley Haft Kleier. “How many cars can you own? How many diamonds can your wife wear?” And while the market has downshifted, they note, it’s still moving. “When you’re doing 80 miles per hour and you see a state trooper and go down to 55, it feels like you’re barely moving, but you are,” says Prudential Douglas Elliman’s Dottie Herman.
Read one way, the economic tea leaves suggest that this downturn might not be as dramatic as the last one, when prices sank nearly 30 percent between 1989 and the mid-nineties. Over that period, mortgage rates crossed into double digits; there were twice as many properties for sale as there are now; and the city was suffering major financial difficulties, not to mention a crack-fueled crime epidemic. Families were fleeing for the suburbs, and changes in tax law made owning more than one home so unfavorable that investors—who made up about 30 percent of buyers in the eighties, estimates Miller—flooded the market with their holdings. (Only 4 percent of Manhattan’s sales are investor-driven these days, he says, compared with, say, 40 percent in Miami and 28 percent nationally.) Although mortgage rates have crept up to about 6.77 percent (based on national averages culled from the Federal Housing Finance Board’s Monthly Interest Rate Survey), that’s a far cry from the 10.2 percent they hit in 1989, when the market began its precipitous drop. Crime is down and schools are better; New York is a much more family-friendly city than it’s been in a long time.