Deal are still getting done in New York City. Just not by hedge fund types. Perhaps NYC won't fall into the Hudson as those with cash, and more importantly, cash flow, continue to shop for bargains. Two things to think about after reading the NYTimes article below: Apts that were prices correctly sold and perhaps a pull back in Manhattan real estate prices will bring some diversity back to NYC!!

Someone Still Has Money

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DESPITE faltering sales, it appears to be far too soon to declare the luxury market dead, especially now that we can raise a glass to what may be the most expensive condominium ever sold in the city, per square foot: a three-bedroom apartment on the 38th floor of 15 Central Park West, which changed hands for $27 million. The price works out to $9,480 per square foot, not counting the 22-foot-wide terrace facing Central Park.

Librado Romero/The New York Times

12 East 76th Street

Even so, that sale, filed with the New York City Department of Finance last week, reflects some of the new realities of the luxury market, now that the boom years are over. Deals are still being done, the records show, but often far below the asking price, and bankers and hedge-fund types, who once drove prices ever higher, are a fleeting presence.

In deals that came together over the last month or so, the buyers included Bruce Nauman and his wife, Susan Rothenberg, who are both artists; an Italian fashion designer who sold his business just before the retail slowdown; some lawyers; and a wealthy writer who is a small-magazine publisher.

Or as David Javerbaum, the executive producer of “The Daily Show With Jon Stewart,” observed in an interview, “Having a comedy-writing job these days is steadier income than having a job on Wall Street.”

In October, Mr. Javerbaum and his wife, Debra, closed on the $3.65 million purchase of a 2,500-square-foot apartment on the fifth floor of the Yves Chelsea, on Seventh Avenue and West 18th Street, to make room for their growing family.

But they are still trying to sell their loftlike two-bedroom apartment just down the street at 144 West 18th Street. They have already cut their price by $200,000, in two stages, to $1.7 million. Jon Isaacs of Core Group Marketing is the broker.

Ms. Rothenberg, a painter, and Mr. Nauman, who works in neon, video and performance art as well as sculpture, drawing and printmaking, bought a town house on a 45-foot-deep lot on East Second Street in the East Village, surrounded on two sides by the New York City Marble Cemetery, a landmark that dates back to 1831. They went into contract on Nov. 11 and closed a week later for $3.3 million.

Last May, Luca Orlandi, the founder and designer of Luca Luca, a fashion house with retail stores across the country, sold the business to a boutique investment firm, the Equitium Group. The price was not disclosed, but at the end of October, Mr. Orlandi, who is from an Italian family with interests in textiles, signed a contract to buy a town house at 12 East 76th Street off Fifth Avenue. He closed the week before Christmas for $12.35 million.

The five-story brick building needs work. It had been owned by the same family since 1954, and is divided into a ground-floor doctor’s office and two apartments. Still, the sale price was quite a bit below the $13.5 million asking price and was far lower, per square foot, than the price of similar houses off the park in the more robust market of only a few months ago.

The sale price works out to about $1,900 per square foot; other town houses in the East 70s off the park sold for $2,600 a square foot or more in the last year or so.

Kathy Cooper, the broker with Brown Harris Stevens who had the listing, would not discuss Mr. Orlandi’s purchase, but said the house had been priced to sell. It went on the market in mid-September and was in contract within six weeks.

“If people price their properties properly, they will sell,” Ms. Cooper said. “The worst thing a seller can do is follow the market down.”

The record-setting apartment on the 38th floor of 15 Central Park West at 62nd Street has 2,848 square feet, a lot by Manhattan standards (and a bit more than Mr. Javerbaum’s new apartment). But it lacks the spaciousness of some other apartments in the building.

It is small, for example, compared with the 6,744-square-foot penthouse bought in 2007 by Sanford I. Weill, the former chairman of Citigroup, for $42 million, or $6,287 a square foot.

Still, the apartment has 14-foot ceilings and huge windows with views on three sides. The master bedroom faces Central Park, the two other bedrooms face the Hudson River, and the living room looks south over the city.

The seller was Richard T. Fields, a developer of casino resorts, who recently bought the Trump Marina hotel and casino in Atlantic City for $316 million.

Mr. Fields signed a contract to buy the apartment for $13.35 million in March 2006, while the building was under construction. But when he closed on it at the end of June 2008, he immediately put it on the market for $35 million.

Many people were amazed at the asking price. Mr. Fields was forced to reduce the price by 23 percent, but the property still set a record. The identity of the buyer was not disclosed in the city filing.

The WSJ reports that New York City real estate prices may have further to fall. Because NYC prices are falling slowly, the pain that Manhattan feels may be more pro-longed. From what I am seeing in my real estate business at Commodore Property Group, I think that there is a disconnect, as the article mentions, between sellers and the market. Until sellers get more in line with current realities, prices will remain high and inventory will continue to sit on the market unsold. Sellers who are out in front of the market and price their properties correctly, will sell. There are buyers in Manhattan...and they now have leverage, and if a property is over priced, then they are going to wait until the market moves lower before they pull the trigger.

By JUSTIN LAHART and CONOR DOUGHERTY

WSJ

Although New York has been at the epicenter of the financial crisis, housing prices in the city haven't dropped nearly as fast as cities elsewhere. The same is true of the financial hubs of Boston and Charlotte, N.C.

But that doesn't mean these cities are skirting the worst of the housing bust. Rather, markets where price declines have been slightest may be in worse shape, because prices still have further to fall before enough buyers step in to bring housing activity to normal. Meanwhile, heavy foreclosure activity in hard-hit areas like Phoenix, Las Vegas and San Diego are bringing prices into equilibrium. Those cities may be closer to a turnaround.

In October, single-family-home prices in the New York metropolitan area were down 12% from the all-time high they reached in 2006, according to the S&P/Case-Shiller home-price indexes. That is roughly half the decline registered by the 20-city index and well short of Phoenix's 41% drop. A separate index of New York-area condo prices was down just 4% from its peak.

Part of the reason New York housing prices have held up is that lot of New Yorkers are holding on to their homes rather than selling for less than the Joneses got last year. Esty Lobovits, a 31-year-old lawyer in Manhattan, has been looking to buy an apartment since the summer but says she isn't willing to pay what she considers to be inflated prices. Many apartments she has viewed are empty or filled only with staged furniture, and brokers are more aggressive, sometimes following up with her broker even if Ms. Lobovits hasn't placed a bid.

Although sellers have been open to negotiation, Ms. Lobovits says prices haven't budged as much as she would expect. About two months ago she looked at a one-bedroom, first-floor apartment for about $700,000, roughly $100,000 more than comparable apartments. "I haven't seen any steep lowering of prices," she says. "It's a little surprising to me that [sellers] wouldn't want to be more aggressive."

In the language of Wall Street, with asking prices not dropping to levels where bidders like Ms. Lobovits will pick them, the market isn't "clearing." The Federal Reserve Bank of New York noted in its "beige book" survey of regional conditions this month that many would-be buyers have opted to rent out their apartments rather than sell, driving rental prices lower -- particularly in higher-end buildings.

Full WSJ Article

Happy New Year to all. Here's hoping for a better 2009! While many feel as though we are in for more of the same, I like to think that as all of the liquidity that has been injected to the economy over the last couple of months finally kicks in, things will start to improve. Also, a new administration should be a plus as well. On the other hand though, Manhattan real estate still will be in for more pain. The New York City economy will continue to contract as the lack of Wall Street bonuses starts to take hold. Restaurants will go out of business, commercial vacancies will increase, and new condos will go unsold. Hey, we all enjoyed life while the bubble inflated...well now we will have to deal with some pain as the air gets let out. We didn't creat this mess overnight, and we will not get out of it overnight either.

My wife and I are enjoying some R&R in the Carribean, and the condo complex where we stay has more units on the market than either one of us can ever remember. One owner who bought his condo in 2008 is all ready trying to sell and he also has his home in CT on the market as well. His stock portfolio is down 40%, he is leveraged, and he is seeing the last 40 years of his hard work go down the tubes. Unfortunately, he is not an isolated case. So while New York City is down 20% from Q4 of 2007, there may be more pain ahead for Manhattan real estate. Great opportunity for first time home buyers who have down payment cash that they kept ut of the stock market....not such a good time to be one who needs to sell.

Bloomberg posted an article today that effects many home owners in major US markets (read: New York, LA, San Francisco). While conforming mortgage rates have been dropping and mortgage applications are way up (45% or so in the last week), jumbo rates (for mortgages above $417,000) have stayed high. The spread between conforming and jumbos is more than 200 basis points, which is 10 xs above normal. However, there should be help on the horizon later in 2009. As more people refinance their conforming mortgages, banks will have increased liquidity, which they should be able to redeploy in jumbo land, which in turn should help to drive jumbo mortgage rates down. Also, as the Fed continues to buy Freddie and Fannie bonds, that too should help add liquidity to the market. So hold on all you New York jumbo mortgage holders...help should be on the way by late 2009!

By Kathleen M. Howley
Dec. 24 (Bloomberg) -- Jumbo mortgage shoppers in the most expensive U.S. housing markets such as New York and San Francisco aren’t getting much relief from lower borrowing costs.
The average 30-year fixed rate for home loans of more than $729,750 remains almost 2 percentage points above conforming rates and the spread between them may set a record this month, according to financial data firm BanxQuote.

Banks remain reluctant to lend after recording $678 billion in mortgage-related losses and writedowns in the past year and as house prices plunge. Jumbo mortgage rates may come down next year as more buyers refinance, helping banks improve liquidity, said Keith Gumbinger, vice president of mortgage-research firm HSH Associates Inc. in Pompton Plains, New Jersey.
“A guy in a low-cost market like Des Moines probably doesn’t care much about helping someone in New York buy a million-dollar apartment, but if he refinances his conventional loan, that’s exactly what he’ll be doing,” Gumbinger said. “He’ll be giving lenders the liquidity they need to rebalance their loan portfolios and compete for jumbo borrowers who typically are the best in terms of credit quality.”
The average 30-year fixed jumbo loan rate was 7.32 percent on Dec. 22, compared with 5.38 percent for a conforming loan, according to BanxQuote of White Plains, New York.

Wide Spread
The difference between them has averaged 2.13 percentage points in December, 10 times the average spread from 2000 to 2006 and above last month’s 1.95 percentage points that was the highest on record.

Jumbo borrowers New York, San Francisco, and Boston may see rates fall in 2009 because of Federal Reserve Chairman Ben Bernanke’s plan to buy at least $500 billion of agency debt, said Gumbinger.

The Fed’s mortgage-bond buying program, announced Nov. 25, also provides for the purchase of $100 billion in direct debt of Fannie Mae, Freddie Mac and the Federal Home Loan Banks.
Bernanke’s plan adds to previous government actions aimed at lower home-financing costs, including the September seizure of mortgage-finance companies Fannie Mae and Freddie Mac. As part of that takeover, the Treasury announced its own program to buy mortgage-backed securities to bolster the worst housing market in at least 70 years.

Loan Applications Rise
Mortgage applications in the U.S. jumped 48 percent last week as the lowest borrowing costs in five years promoted a surge in refinancing.

The Mortgage Bankers Association’s index of applications to buy a home or refinance a loan rose to 1,245.4, the highest since 2003, from 841.4 a week earlier. The group’s refinancing gauge rose 63 percent and purchases gained 11 percent.

While many homeowners are trying to lower their mortgage payments, buyers remain on the sidelines as prices fall.

The median U.S. home price plunged 13 percent in November from a year earlier, the largest drop on record and likely the biggest decline since the Great Depression of the 1930s, the National Association of Realtors said yesterday in a report.
Home prices are tumbling as foreclosure-related sales accounted for 45 percent of the month’s transactions, according to the Chicago-based trade group.

“The real elephant in the room is falling house prices,” Glenn Hubbard, former chairman of the Council of Economic Advisers under President George W. Bush who is now dean of the Columbia University Graduate Business School, said in an interview on Monday. “We can fix this by lowering mortgage interest rates.”
Prices Sink
Declining prices won’t be helped by the Federal Housing Finance Agency’s announcement last month that it will lower the size of so-called jumbo conforming mortgages that can be purchased by Fannie Mae and Freddie Mac. Congress authorized raising the conforming limit of $417,000 to as high as $729,750 in about 90 of the nation’s most expensive housing markets in 2008 as a temporary measure to support housing.

On Jan. 1 that cap drops to $625,500 following the formula set out by July’s Housing and Economic Recovery Act. The law, known as HERA, specified a loan limit of 115 percent of an area’s median home price, rather than the 125 percent limit approved for this year by Congress, said Andrew Leventis, an FHFA economist. The change means more buyers in high-priced areas will have to use jumbo mortgages, he said.

The Fed on Dec. 16 cut its benchmark interest rate target to a range of zero to 0.25 percent and said it will add to the announced $500 billion in mortgage bond purchases as needed.
“Over the next few quarters the Federal Reserve will purchase large quantities of agency debt and mortgage-backed securities to provide support to the mortgage and housing markets, and it stands ready to expand its purchases of agency debt and mortgage-backed securities,” the policy makers said in a statement.