Most of the talk in New York real estate circles these days has centered on the national recession, the pain it has caused the NYC apartment market, and when it's all going to end. The recent Deutche Bank report has fueled the debate, as have recent prognostications of a global recovery – most of latter having stemmed from perpetually overly-optimistic business writers.
While the perennial debate between optimists and pessimists plays itself out in the context of shrinking real estate valuations, the form that the eventual recovery will take is becoming clear. The eventual construction resulting from the wretched attacks of September 11th with aid a revitalized downtown New York real estate market. Manhattan is typically the strongest part of the New York apartment market, and changes in commercial real estate supply and demand will, in the long run, make the downtown area even more attractive to businesses and their employees.
A planned strengthening of public transport systems will also make the downtown area a more attractive place for businesses looking to headquarter themselves in New York City or relocate from other parts of the city.
Similarly, the strengthening of residential neighborhoods near the downtown area that occurred during the previous expansion has attracted additional retail activity.
In some ways, it seems like an odd argument: In the downtown heart of business activity in the business capitol of the United States, additional business activity will help lead the Manhattan real estate market rebound more generally.
There are four major factors, though, that have pointed some observers towards such a conclusion: First, the reconstruction of areas that were damaged or destroyed during the terrorist acts of September 11th. Second, the changed market dynamics of residential neighborhoods near to the downtown area. Third, a resulting further rejuvenation of retail activity. And fourth, an uptick in supply and concordant downturn in demand for commercial real estate that, over the long run, will make the downtown an especially attractive place for new or relocating businesses.
The weak US dollar will similarly attract additional foreign demand for both the commercial and residential real estate market. A disproportionate amount of that demand may end up being concentrated in the downtown area.
It's not enough to fuel a recovery by itself – or even come close. But what is clear is that when that recovery comes, look to downtown real estate and related neighborhoods to help lead the way.
Original Post: http://www.elikaassociates.com/blog/?p=110
The real estate market, in comparison to most markets, moves at a glacial pace. Housing and property are, after all, two of the most illiquid assets you can buy. That illiquidity makes sense: you can never move it; for most lots it’s hard to sell just part of it and keep the rest; holding it costs money; selling it costs money.
What keeps real estate looking so attractive to so many investors, however, are the potentially huge returns. All in all, though, the transaction costs are huge in any real estate market, and that keeps the market from responding as quickly as, say, stock or bond markets.
The glacial pace at which the national market moves is reflected in the Manhattan real estate market. In fact, mainly because the New York market dodged most of the direct effects of the subprime crisis, a significant lag has developed between its price movements and other major national markets.
Like most markets, the real estate markets follow certain patterns. Economic geographic patterns of the business cycle being one of the most predictable. Usually, when the market is dragged down by macroeconomic events – like the New York apartment market was – marginal neighborhoods are hit first, then middle class ones, and then towards the end of the downturn, those luxury markets most insulated from the economic cycle take a hit.
This might be overstating the pattern a bit. All of this happens pretty quickly, but sometimes there is a lag of one or two quarters. We saw this happen with the New York apartment market, as Harlem and other neighborhoods watched property values plummet, even as new condo sales were keeping at least the average price of the luxury market afloat for some time.
Witness, though, the cold hand of time. Two major aspects of the high-end luxury New York apartment market, the Hamptons and new Manhattan condo sales, are coming back down to earth. Sales in April of new Manhattan condos fell roughly 70% from last year’s figures. This number was in part powered by developers and lenders’ unwillingness to lower their prices, relative to other sellers.
The Hamptons, the fabled summer playground of the wealthiest of New Yorkers – I’ve always preferred Martha’s Vineyard, myself – many properties are now selling for less than two thirds of their initial property values.
These markets are still stronger than many others within the larger picture of NYC real estate. The global recession, though, has finally, literally reached home – driving down the property values of those New York financiers that caused it.
The economy is currently in free fall. Try as they might, optomistic commentators can no longer pin the bad news on market psychology. Just today, Harvard Professor Robert Barro was on CNBC and writing in the Wall Street Journal of a study he recently completed. It estimates a 20-30% chance of the recession becoming a depression.
A little while ago, the world’s two most famous traders, Warren Buffet and George Soros predicted diametrically opposed economic fates. Buffet said the bottom had been reached, Soros said it hadn’t. Today, Soros is wealthier than ever before and Buffet’s investment firm is currently under seige from the traders on Wall Street.
Citigroup is almost a pennystock.
If you are yearning for good news: In terms of the free fall itself, it is hard to envision it becoming more rapid: the economy is already shedding jobs almost as fast as it can, given the current structure of the national labor market.
During the past two quarters, this macroeconomic malaise has finally caught up to the New York City real estate market. With the two so entangled, the story of the national economy and the New York apartment market has converged for the time being.
The real question seems to become when are we at the bottom? The middle of 2009 is the most optimistic of predictions, with the end of the year seeming to be the most likely point for national economic growth to again become positive.
Similar predictions are being made about the New York City real estate market. What is clear right now is that the bottom is not here yet. However, that bottom will likely be at some point in the next four quarters.
In the financial chaos of the current times, it is easy to lose sight of the long term opportunities brought on by such loss and volatility. The Manhattan apartment market is declining in value and will continue to decline. Long before it stops, however, it will fall past the point of its typical market value.
The expression is not buy at the bottom, sell high. It’s buy low, sell high. The reason is because it’s impossible to find the exact bottom without a whole lot of luck. Buying low, however, is something that can actually be done. For the next couple quarters of 2009, the New York city real estate market will certainly be at its low.
Buying a home is one of the most important purchases people make and many find the process overwhelming. The Elika Associates First-Time Home Buyers Handbook provides essential insider information on purchasing Manhattan Real Estate and is a comprehensive guide, providing details on everything you will need to successfully achieve this milestone.
NYC Apartment prices are down and are likely to fall even further, in turn creating an increase of inventory. We are also experiencing historically low interest rates and with the government’s new stimulus plan including an initiative for first-time home buyers, now is the most opportune time for buyers we have seen in the last decade.
Download our comprehensive First-Time Home Buyers Handbook to assist you in understanding everything about the home buying process.
First-Time Home Buyers Handbook
Press Release - Feburary 24th, 2009
Elika Associates is New York City's premier real estate buyers broker. We exclusively represent you the buyer and provide exceptional services tailored to each client's unique real estate needs.
ActiveRain Corp. is not responsible for the accuracy of the site's content (which is written by members of the ActiveRain Real Estate Network) and does not endorse the views of the real estate agents, mortgage brokers, and others listed here.
Powered by the ActiveRain Real Estate Network
© 2009 ActiveRain Corp. All Rights Reserved
