The recent uptick in our real estate activity could just indicate pent-up demand- like the Standard & Poor’s 500 stock index surging more than 30% since its March 2009 lows- proving that yes, markets tend to have a real emotional component (not to mention the liquidity impact from gargantuan global government monetary stimulus packages that also propelled stocks indirectly). It’s just that stocks feel like they’ve come too far, too fast.

- The Big Apple’s not bullet-proof:
No one really expects Manhattan to perform like Phoenix (down 50% from its 2006 peak), Las Vegas (down 48%) or Miami (down 45%), BUT New York City isn’t immune from the impact of a national recession either. In fact Manhattan “listing inventory” through early spring increased over 30% from 2008, say local appraisers.

Another key measure, “absorption”, (the number of months’ supply) also deteriorated, and is now over 13 months, after averaging 9 months since 2000.

Now. unlike in 2007, when 30% of all Manhattan condos were bought by non-U.S. buyers, we no longer have a weak U.S. dollar to attract as much non-U.S. investment. Also capping demand: the International Monetary Fund predicts the world economy will shrink by 1.3% in 2009- ouch!! (2.5%-3% growth is healthy).

- Focus on fundamentals: prices are just stickier in Manhattan:
On the upside, Manhattan’s real estate market has a big supply/demand imbalance: Manhattan’s population is ~1.6 million yet total current listings total 12, 011 units. Only about 30% of residents own their own home, and not too surprising: the median sales price of a Manhattan condo resale last quarter was $985,000, for co-ops: $587,500.

Co-op buildings’ solid financials have also helped Manhattan avoid big price drops. The buildings’ boards can scrutinize the daylights out of a potential shareholder and set a high bar for buyers: I know two Park Avenue buildings that require applicants to have at least 10 references & 4-5 times the value of their apartments in cash after closing. Even some of our most well-connected clients can get sticker shock!!

- Bottom line:
So what’s behind the recent uptick in activity? Buyers have responded to more flexible owners/pricing & the springtime effect. Of course this market has many solid opportunities, and we’ll help our sellers & buyers gain insight & navigate in the trenches. But don’t be surprised if you see our real estate prices become more erratic with a downward bias in the short term, before we see full recovery. So let’s make the most of it ‘till we’re really out of the woods!