Manhattan Luxury Real Estate Q4 2008 Report Shows Falling Prices and Increasing Inventory

According to the latest report from Miller Samuel’s “Manhattan Market Overview Q4 2008″ report, prices slipped as inventory increased in the Manhattan luxury real estate market.

At the close of the prior quarter, there was significant turmoil in the financial markets and unprecedented intervention by federal government agencies. The bailout of Fannie Mae, Freddie Mac and insurance giant AIG, the investor run on the money market Reserve Primary Fund and the bankruptcy of Lehman Brothers, marked a significant change in the Manhattan housing market as well as the US housing market. The fourth quarter was characterized by a sharp decline in contract activity and a downward correction in contract price levels. Sales contract activity showed evidence of a decline in activity of 40% to 75% compared to the same period last year. Contract price levels showed an average decline of 20% from August 2008. As a result of the 45-60 day lag between contract and closing date, a decline is anticipated in both the number of sales and closing price levels in the first quarter of 2009…

The median sales price of a Manhattan luxury apartment was $4,132,516, down from $4,300,000 in the same quarter 2007. The luxury segment was the only market showing decline in all three price indictors. Price declined, days on market and listing discount increased. Previous years had shown very fast marketing times thanks to record compensation on Wall street.

One striking note in the report is the apparent disconnect between sellers and the market. This is a phenomena being seen all across the luxury market and is not solely a Manhattan issue. After years of ever increasing prices, sellers are being unrealistic in their expectations and hanging on to the old saying that “real estate values always go up.” Unfortunately at the moment, I am reminded of another old saying – “What goes up, must come down.”

Miller Samuel prepares a series of real estate market reports covering the New York region. Over the past year these reports had a distribution in both print and internet download of more than 1,300,000 copies. These reports are available for download here – Miller Samuel although, if you are of a nervous disposition or bought property in Manhattan last year, you may not find them a pleasant read.