"We hear stories about markets like Miami, where the inventory is counted in years, not months," said Gregory Heym, chief economist for Brown Harris Stevens. In Manhattan, by contrast, "Supply has not reached critical levels yet."
The RELA presentation follows on the release of Brown Harris Stevens' Q3 market report which showed declines in average and median prices of for-sale residential units, with deal closings also off. However, Heym pointed out, those declines are by comparison to last year's record highs and the numbers still compare favorably to 2006--which was the record-setting year before '07 came along.
Moreover, the pace of development is certainly going to slow given the current credit market, Heym said. Shlomi Reuveni, EVP of Brown Harris Steven Select, the company's residential marketing arm, asserted, "There is absolutely no financing out there." He cited "heart-wrenching" stories of developers lining up prime locations only to have projects put in limbo when the funding spigot shuts off. Deals of $20 million to $50 million are getting done, Reuveni said, but larger ones are "very difficult to put together."
The result, he said, is that many proposed condominium projects will turn into rental buildings or hotels. Alternately, the developers might pull the plug on them altogether.
However, Reuveni saw hope in the capital sitting on the sidelines, potentially available from both institutions and individual investors, domestic and foreign. "There is still tremendous wealth out there," he said.
On the subject of financing, the difficulty that potential homebuyers have had in obtaining mortgages lately has been a factor in declining volume, Reuveni said. But he added, "The biggest issue is psychological fear." Contracts fail to turn into closings, he said, when buyers are concerned about their job security and therefore uncertain whether they'll be able to make mortgage payments a few months after closing on the condo or co-op.
Finding the price points that homebuyers are gravitating toward in Manhattan as well the outer boroughs is also a challenge, Reuveni said. "People ask me all the time, 'where is the market?'" Nonetheless, he said, most sales are closing at discounts of only 3% to 8% off the asking prices; developers have not yet turned to cuts of 20% or more in order to sell units.
Want to continue reading?
Become a Free ALM Digital Reader.
Once you are an ALM Digital Member, you’ll receive:
- Breaking commercial real estate news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
*May exclude premium content© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
Paul Bubny
Paul Bubny is managing editor of Real Estate Forum and GlobeSt.com. He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group's offices in New York City.
