Surprising some analysts, prices continued to rise in the 3rd quarter, according to recently released numbers. The average sales price in Manhattan climbed by 8.1% to roughly $1.5 million. The average price per square foot increased by 4.1%.
The disparity between the two numbers is a reflection of the fact that new luxury apartments fueled much of the price increase in Manhattan.
These numbers, however, are incidental in comparison to the changes in inventory and the number of sales.
Manhattan saw a decrease in sales volume of 24.1%. While some of this decline is undoubtedly buyers sitting on the sidelines while the macroeconomic situation sorts itself out, the larger portion of the decline likely comes from a longer-term softening of demand.
The national recession and the current financial market madness plays are both major factors in the reduced demand the New York real estate market. Today the Dow briefly dipped below -800 for the day before rallying back to close at a 3.8% loss for the day.
It is hard to imagine many buyers seeing a -800 next to the sign for the Dow Jones Industrial Average on CNBC getting up from in front of their TVs and saying, “Well, honey, let’s go real estate shopping.”
Similarly, today was especially bad news for the NYC real estate market regarding foreign demand, with the euro falling to its current level of $1.35.
Still, it’s important to not confuse the dramatically horrid news of the past two weeks with the current state of the New York City real estate market. Today’s events were not in response to new events so much as the world’s financial markets waking up to the fact that Europe’s major economies are also in serious trouble, just as much as the US is.
No one – other than, perhaps, John McCain – would say the “fundamentals of the market are strong” when talking about the short term of the NYC real estate market. In many measurements of the market’s 3rd quarter performance – especially those including surrounding suburbs – the year-over-year numbers saw a significant increase, but the quarter-on-quarter numbers showed an equitable decline. That’s always a bad sign regarding the capacity for prices to fall at a rapid pace.
Looking beyond 2009, however, the picture does not seem especially bad, so long as no near-depression breaks out on the national level.
As the government begins its bail-out program in full earnest, many of the jobs lost in New York City’s private sector financial industry will be absorbed by a government which will need thousands of new financial analysts to manage its expanded role in the financial markets.
The macroeconomic picture is indeed bleak right now, but New York City will do far better than most cities in the coming years.