Reports of Condo Market’s Demise Greatly Exaggerated
Reports of Condo Market’s Demise Greatly Exaggerated
Michael Stoler of the NY Sun recently wrote a very interesting article countering the general speculative view of the real estate bubble. Eventhough prices have dropped recently this quarter and homes and condos remain on the market longer, the average price per square foot is still much higher than it was a year ago:
Reports of Condo Market’s Demise Greatly Exaggerated
By MICHAEL STOLER
October 12, 2006
This columnist and many real estate leaders disagree with the news that the condominium marketplace is falling apart and that every condominium development is set to tank. To the naysayers: Let them speak to savvy, experienced, and talented real estate developers who are bullish and will continue to develop residential condominiums.
The average price per square foot of Manhattan apartments ($1,028) set a new record in the third quarter and was 6% higher than a year ago. The chief economist for Brown Harris Stevens, Gregory Heym, reported this fact.
And he isn’t alone. According to a report by Jonathan Miller of Miller Samuel, the author of the Douglas Elliman Manhattan Market Overview, the average sales price of a Manhattan apartment fell to $1.29 million in the third quarter from a record high in the second quarter, but the third quarter average sales price was 12.1% higher than a year ago.
“The press has been looking for a story for some time to herald the demise of the residential real estate market, and, as the saying goes, those reports have been greatly exaggerated,” the chairman of the national real estate practice of Greenberg Traurig LP, Robert Ivanhoe, said. Clearly the boom in the condominium market we were experiencing over the last few years and reached its peak about 12 months ago has cooled and the bloom is off the rose.
“One of the interesting things that I always feel when I read these residential reports is that they weight the average sales price far too heavily,” the chairman of Massey Knakal Realty Services, Robert Knakal, said. “Hypothetically, the average price may fall 25% to $1.75 million and the market may be far better. This can happen because all of the units sold were small units. The price per square foot and the volume of sales are the important factors to look at.”
Real estate columnists should beware of the hype. They are provided a lot of it from their sources but need to write the facts — and sometimes that takes having a direct knowledge of this industry. “We are living in a world of constant information, little of which is fact and most of which is spin and that affects everyone from George W. Bush to the real estate business,” a principal at Stellar Management, Robert Rosania, said. “However, even facts can be misleading. There are leading and lagging indicators, there are also indicative stats like average units sold per annum, and average time on the market.”
Rival newspapers print just about anything on the real estate market that is provocative. But sometimes they would be smart to print what experts say even if the information is less than titillating. “I think the problem with most news reports is that they tend to look at the situation from 30,000 feet, rather than drilling down into the individual markets they can potentially influence,” the vice president and regional manager at Fremont Investment & Loan, Patrick Crandall, said.