From left: Jonathan Miller of Miller Samuel and Sofia Kim of Streeteasy
New residential developments in Manhattan struggled to maintain their market share from last year in the third quarter of 2009 according to market reports released today by several real estate firms.
Streeteasy.com reported that with 631 closings, new developments accounted for only 19 percent of the overall market, a 66 percent decline from third-quarter 2008, when there were 1,860.
The sizable decrease in the presence of new developments in the closings is a sign that buyer confidence has been severely hurt, said Sofia Kim, vice president of research at Streeteasy and the author of the company’s report. In the wake of the Lehman Brothers collapse last year, she explained, buyers have become unwilling to wait until construction on a project is finished before closing. “They aren’t sure if prices are going to drop even more,” she said.
Moreover, for the few recession-era buyers who are able to get mortgages, priorities have changed. “People are in the market for deals,” Kim said. “They are not in the market for starchitect-designed buildings or fancy amenities that aren’t necessary.”
Sales activity in new developments may have declined even more than the data suggests because many closings for this quarter were likely from pre-Lehman contracts, said Jonathan Miller, president and CEO of appraisal firm Miller Samuel, which prepared Prudential Douglas Elliman’s third-quarter report.
Despite the decline, the market did show some signs of improvement. There were 28 percent more new development closings in the third quarter compared to a quarter earlier, when there were 491 closings, the Streeteasy.com report shows, and the Corcoran Group’s report said sales prices in new developments increased 25 percent compared to the third quarter of last year.
Stagnant or rising new development sales prices amid a resale market of deals and steals is actually bad news, Miller said, because it puts developers at a competitive disadvantage. The Streeteasy report shows that new development units spent an average of 222 days on the market in the third quarter, 85 days longer than the overall market average and 55 percent longer than the new developments average in third-quarter 2008.
“New development pricing has not been able to adapt largely because the banks behind the developers may have balance sheet issues or may be slow to react to the market,” Miller explained.
By most accounts, though, prices appear to be flattening out. According to the Halstead Property and Brown Harris Stevens report, the average sales price for an apartment in a new development was $1,176 per square foot, a 4 percent decline over last year. Streeteasy.com reported a marginal 1.8 percent uptick, which Kim said “could have gone either way,” depending on the data sample.
For more third-quarter 2009 market report coverage, click here.