The rest of the country is finally coming to terms with the subprime crisis. Year-end reports that noted that 2007 was the worst year for housing prices since the Great Depression helped wake up the general business press to the depths of the many problems facing the national housing market.
Throughout 2007, however, New York apartments kept growing in value in a way that seemed to render the market a Hercules-like figure that was near-immortal.
Finally, signs that the rest of the country’s economic fate effects the luxury New York City real estate market began to show up in the more in-depth quarterly reports of the 2007 4Q.
With foreclosures across the country expected to outpace last year’s rates by about a million houses – due to changes in the interest rates of many subprime loans that will go into effect this year – it seemed that finally the national market had caught up with the value of New York apartments. Thus, it was expected that the relatively weak 4Q numbers were just the beginning of a rough patch of time for the New York City real estate market.
At least in Manhattan, though, that rough patch has yet to be felt. A new study by one of the nation’s most respected sources of real estate data, Prudential Douglas Elliman, suggests that average sale prices on the island actually increased in January. By massive numbers, actually: a 21% increase over the 2007 4Q numbers.
Unfortunately for most New York apartment owners, however, that statistic does not do a good job of representing the actual market dynamics. While the mean increased dramatically, the median stayed roughly flat, at about $857,000. This affirms what many Manhattan realtors have experienced recently: While the rest of the New York apartment market has remained relatively flat, the luxury market has continued to grow in value at breakneck speeds.
Indeed, while a number of mega-deals – including a record-breaking $46 million deal for a home on fifth avenue – have pushed average sale price in the Manhattan luxury market to record levels, the rest of the luxury market has also remained strong.
More is at work than just the falling dollar here: The New York City luxury real estate market is demonstrating once again that it is one of the most independent markets in the country. Few, if any, markets can claim such a firm separation from the effects of the rest of the economy’s cyclical shocks and swings.