Contract Signings Rise, and Deal-Watchers Exhale
By Elizabeth A. Harris
The New York Times
August 30, 2009
SPRING came late to the Manhattan real estate market this year.
After a nearly moribund stretch at the end of 2008 and the beginning of 2009, brokers are reporting that the number of signed contracts rose in June, July and the first weeks of August, traditionally a slow period.
The spring selling season usually begins sometime around March, the brokers noted. This year, however, the market didn’t begin to thaw until May, when it apparently picked up enough momentum to chase away the August doldrums.
“When the spring market starts,” said Diane Ramirez, the president of Halstead Property, “it has its life, and then people take a break. I think people took that break earlier this year.”
Prices, which dropped about 25 percent in the second quarter of the year, compared with the same period in 2008, have not followed the upward swing.
“My take-away from the uptick in activity is not that the market is turning, but that the market is not in free-fall anymore,” said Jonathan J. Miller, the president of the appraisal firm Miller Samuel. “We still have a ways to go, but this is certainly good news.”
The late activity in contract signings was also helped by tax incentives for first-time buyers, low interest rates, a release of pent-up demand and lower prices.
Dottie Herman, the president of Prudential Douglas Elliman, said that each summer month has been busier than the one before. Nonetheless, she does not expect prices to head upward anytime soon. “I don’t know if they’ve hit bottom yet,” Ms. Herman said, “but if we didn’t hit bottom, we aren’t going to plunge another 20 to 30 percent.”
Kenneth Scheff, an executive vice president of Stribling Associates, said the market was sending a confusing message to sellers. “They want to raise prices when they hear volume is up,” Mr. Scheff said. “But we’re not there yet.”
With the market at a standstill at the beginning of the year, inventory piled up. According to StreetEasy.com, a Web site that tracks listing data, inventory peaked in May, but during the summer that buildup eased a bit.
StreetEasy’s data show that in June, inventory was about 41.6 percent higher than the previous June. In July, that figure shrank to 37.6 percent. In the first three weeks of August, it was 37.2 percent higher than the same period last year.
This does not necessarily mean that inventory will continue to drop through the fall, however. More properties may be added to the rolls in September, both in new listings and by owners who pulled their apartments off the market in the last few months.
There is also a stash of inventory hovering on the sidelines: new apartments that have not been offered for sale because developers — who put units on the market in phases — fear they will push prices down further.
Mr. Miller estimates that there are 7,000 of these “shadow” units in Manhattan alone and more than 20,000 citywide.
Another key piece of the sales market is financing. While interest rates remain enticingly low, securing a loan is still not easy.
“In March, April and May,” Mr. Miller said, “it seemed every week there was a new level of complexity added to underwriting. We’re not seeing that trend continue. It’s leveled off, but it’s still very difficult.”
Those new regulations and a surge in refinancing have also created a backlog at lending institutions, extending closing times.
“Signing a contract and closing a transaction are two different things in this marketplace,” said Melissa Cohn, the president of Manhattan Mortgage. “The approval process is slower and tougher, and not every deal is going to get closed.”
Casting an eye toward fall sales also requires a look at the job market. While figures have shown signs of improvement, high unemployment is expected to stretch through next year.
The Case-Shiller home price index also provided a glimmer of hopeful economic news last week, with prices in many metropolitan areas around the country rising from May to June.
In the New York area, however, that increase was slight, and the data does not include information on condos, co-ops or new developments, which make up most of the Manhattan market.
However, brokers say that the increase in signed contracts has given them some comfort.
“I don’t think there’s anything to celebrate yet,” said Jorden Tepper, the executive director of sales at Century 21 NY Metro. “A sigh of relief is a good way to put it.”
Brokers, he added, can take a deep breath and say, “Wow, O.K., maybe I don’t have to change careers just yet.”
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