No good buys

Illustration: Neil Webb

For the past few months, Rick and Amy Atlas, both 35, have been scouring the Upper West and East Sides for a prewar apartment to buy. But they’re not in any rush. A year ago, they would have had to pounce on a place or risk losing it. Now Rick, a real-estate investor, and Amy, an attorney who is opening an event-planning company specializing in high-end dessert tables, think the economy is in their favor. “We’ve watched the asking prices drop pretty steadily,” says Rick, noting they’ve seen certain units discounted 10 to 15 percent. “It’s refreshing to have the time. It was a pressure cooker before.”

Is Rick overly optimistic? Spot-on? A little of both, actually. Around the country, the softening real-estate situation is being widely labeled a “buyer’s market.” But in New York, that’s not generally the case—at least not yet. Instead, brokers and observers say the city is in a neutral or “in-between” market, which means that neither buyers nor sellers have the upper hand.Still, some are predicting that parts of the city could be headed in the buyer’s direction. “Everybody’s in a wait-and-hold pattern in many ways,” says Edward Bissen, sales director for GMAC Real Estate, adding that many people are postponing major housing decisions for now, if they can.

As Bissen and other brokers and analysts explain, a number of forces— including the Bear Stearns fire sale to JPMorgan, Wall Street layoffs and foreign investments stimulated by a cheap dollar—are affecting local real-estate circumstances, in ways both good and bad. The weakness of the dollar may account for one of the more unusual aspects of the current situation—while prices are dropping, the amount of luxury development continues to rise.

But overall, New York has held up better than other parts of the country. Whereas the characteristics of a classic buyer’s market are distressed selling and drastically falling prices, we’ve yet to experience either of those here. The median sale price of a Manhattan apartment climbed 13.2 percent to $945,276 since the first quarter of last year, according to a report Miller Samuel Real Estate Appraisers & Consultants prepared for Prudential Douglas Elliman. But that same report shows that Manhattan sales have fallen (by how much is a matter of dispute among real-estate insiders), and that’s a dip that has given qualified buyers some leverage.

“There’s no question that sellers are more willing to negotiate now than they were 12 months ago,” says Dan Fasulo, managing director of research for Real Capital Analytics. “I think everyone is getting a little more realistic about where the market truly is.”

Though buyers might have more bargaining power, they’re facing other hurdles. Interest rates are low—a 30-year fixed mortgage is hovering around 6 percent—but banks are tightening their restrictions, requiring borrowers to have better credit, as well as more secure incomes. They also have to fork over larger down payments. “If you can’t get a mortgage, it’s neither a buyer’s or a seller’s market, it’s just a crummy market,” says Chris Mayer, director of the Paul Milstein Center for Real Estate at Columbia Business School. But if you are qualified for a loan and have the cash, from a long-term perspective, this could be a good time to buy, according to Eric Tyson, coauthor of Home Buying for Dummies. “Americans flock to retailers when things are on sale,” Tyson says. “We should have the same mentality with assets like real estate. People get fearful when prices are down and there’s so much pessimism and negativity,” he adds. “It might be better to look at it as an opportunity.”

Illustration: Neil Webb

That’s how some people saw the stock market crash of 1987; Bissen recalls that apartment prices fell by as much as 40 percent. Of course, prices soared back into the stratosphere over the next decade. Some of those sellers who waited it out saw their properties triple in value. Today, prices are still sky-high, but brokers note that there are certain neighborhoods with better deals. Since last year, the median sale price of co-ops and condos in Brooklyn declined 2 percent to $549,000, according to the Corcoran Group. More dramatically, Bissen says some apartments in Dumbo that went for $700,000 a year and a half ago have dropped to $500,000. Farther out from Manhattan, prices are cheaper—in Briarwood, Queens, a two-bedroom co-op can be had for $250,000, says GMAC broker Clement Nahmias. Manhattan, as mentioned earlier, remains largely out-of bounds for bargain hunters.

That said, buyers do have some less-expensive options in less-central neighborhoods, such as Washington Heights and the far East and West Sides of town. Citi Habitats vice president Robin Schneiderman points to the easternmost part of the Upper East Side, where a co-op in need of some renovations might go for $650,000. Last summer, Caryn Koster and her husband closed on a 1,000-square-foot apartment on 76th Street near First Avenue. The couple renovated the kitchen and moved into the apartment in October. Since then, its value has dropped—Koster won’t say by how much, but she’s not worried. She is confident that the economy will rebound. “The only way we’d get stuck is if the market doesn’t pick up,” says Koster, 27, a project manager who plans to live in the apartment for the next three to five years.

Therein, however, lies the rub: Nobody knows for sure when things will bottom out, or for how long. Still, the need for housing in the city remains strong—and absent some complete catastrophe, it’s likely to stay that way. “It’s always good to be a seller in New York,” Fasulo says. “There’s just that much demand.”

Still, Mayer predicts more distress in the next year or two: In the long run, prices and rents rise faster here, but he adds that it’s a myth that New York is immune to a downturn. “People have been a little too rosy about New York,” he says. “There’s a lot more nerves now, as there should be.”