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Second Half of 2008 May Present a Gloomy Market
Analysts are growing concerned over the potential of a significant deteriation
of the New York City real estate market in the second half of 2008.
So far, the city's market has been far and away the most successful at avoiding
the damage that the national real estate climate has done to most other markets. Signs
of the New York apartment market's mortality, however, began to appear at the
end of 2007.
Even so, most of the drawback in demand has effected negotiation times and
other aspects of the selling process more than it has actual prices.
Ironically, this could actually feed into the problem. Some sellers
in the New York apartments market have started to look at the almost-invulnerability
of the market and drawn conclusions steeped in economic hubris. Some
analysts have noticed this and have grown particularly worried that, while
demand softens in the middle of the year, the supply side will be unwilling
to lower prices appropriately.
It is doubtful this will be a particularly big factor in the slowdown of the
market, but it certainly won't help.
To be sure, a downturn has grown in probability in the past several months. For
example, one analyst, quote by Reuters, said that the market is "definitely
going to see weakness."
Average prices in the New York apartment market have seen substantial increases
recently, due in large part to the introduction of several major luxury condominium
buildings to the market.
Thus, the numbers from last quarter largely soothed any potential bearish
attitude in the market. The market knew full well that it was largely
being held up by the luxury market. Nonetheless, the psychological impact
of new numbers being released that showed starkly reduced growth in value was
avoided.
That being said, the median price still increased a solid 6.2% last quarter. (Median
values are not much effected by the introduction to the market of super-valuable
luxury condos.) So, it is unlikely that the market will see drastic reductions
in prices by any means.
What all of this means for the market in the second half of the year is difficult
to say. It should be clear by that point if the economy has entered a
full-blown recession or not. While it's hard to pierce the protective
veneer of the NYC real estate market with national numbers, the word "recession" always
strongly weighs on everyone's minds.
If the national news is bad enough, the NYC
apartments market could start
to see a declining overall value by the start of the second half of the year.
