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Safe Isn’t So Safe

Those neighborhoods that never see a downturn? They’re seeing a downturn.

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We’ve heard the advice so often it’s a cliché: The established, expensive neighborhoods are the ones that hold their value. Buy there, and you’ll be insulated from market caprice. But a look at closings and contracts signed from April to August reveals this economy’s truism: All bets are off. Areas like Tribeca (last year, the richest Zip Code in town) and the West Village are struggling at least as much, if not more, than their fringy counterparts.

To the numbers, then. One excellent indicator of a neighborhood’s situation in the near future is how many closings are taking place there, because it measures both activity and ease of sale. And according to data compiled by the team at StreetEasy.com, between April and June the number of closings dipped 77.9 percent in Tribeca, compared with the same period last year. Three other well-established neighborhoods were also high up in the pack: 52.7 percent in the West Village, 44 percent in Carnegie Hill, and 50.8 percent on the Upper West Side.

And what of the supposedly riskier areas? They’re not doing great, but they’re not showing anything like those Tribeca numbers. Williamsburg is down 49.2 percent; Long Island City is at 24.8 percent. Newer StreetEasy data, from July and August, show the same trend. (By another, slightly less authoritative measure—the number of self-reported deals going into contract—Clinton, East Harlem, and Williamsburg actually saw their activity rise in the second quarter.) The takeaway: “On a macro level, you hear that prime locations are always a safety play,” says Miller. “But that only means they’re less volatile. It doesn’t mean they’re protected.”

Why have prime areas lost their footing? New developments appear to have destabilized them, just in time for all that Wall Street banking money to become scarce. “A core market that’s had lots of luxury development is certainly vulnerable,” says appraiser Jonathan Miller. Tribeca, for instance, is “sadly overbuilt,” admits Prudential Douglas Elliman’s Darren Sukenik. “A lot of the new construction was pretty marginal at best, and they kept building and building, and there were no takers.” StreetEasy’s Sofia Kim adds that those projects drove up prices, and now “the housing stock [in prime spots] is really expensive.” The new buildings are also full of large and high-priced apartments, which are slower to sell nowadays. “Emerging markets have a higher concentration of entry-level apartments, and that’s where you saw more activity this summer,” adds Miller. “It’s less about location and more about the product.”


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