Now that the last couple of weeks have seen some glimmer of hope coming from the financial markets, the talk in many markets has once again turned to whether or not we’ve seen the bottom.
What is clear is that the longest recession since the Great Depression is not close to done yet. The two most important national indicators – GDP and the monthly employment figures – will still be the bearer of bad news for many more months. These indicators, however, always lag a national recovery, and it may be that the free fall of the last six months or so has abated.
The question now is whether real estate is a lagging or forward-looking indicator. The national market certainly led us into this recession, so, unlike the past few recessions, the national real estate market may actually be a leading indicator.
The New York apartment market, however, lagged significantly behind the developments of the national market. The fundamental question is whether that lag was just a symptom of exceptional strength, or does it mean that the New York City apartment market will see its bottom long after most major US real estate markets?
New York real estate market-wide figures will certainly continue to decline for the rest of the year and into a substantial portion of 2010. What that means for markets on a neighborhood-by-neighborhood basis, however, is less certain.
There is an underlying confidence in the long-term prospects for the New York apartment market that is hard for any macroeconomic trend to beat down for too long. Some analysts are currently seeing sales prices that are 25% off their 2008 equivalents. The direst predictions call for a fall-off of about 40% of peak value.
With the financial markets transitioning back to their regular dynamics, it is likely that the New York apartment market – which is very tightly connected to the health of the financial sector – will not be too far behind in its recovery.
With inventory levels still bloated, though, it is likely there will be at least one more round of significant price cuts among some of the larger New York developers. Still, notice that all these statements are city-wide. Some neighborhoods have already seen their bottom; some still have a long way to go.
In such a varied market, it is important to actively follow developments and price changes, so that you can make an offer at exactly the right time. Several months of sharp attention to the market may well save you tens of thousands of dollars.