That Was Then, This Is Now…Or Is It?

A townhouse comes onto the market in Carnegie Hill at a record breaking price and has several full bids in two weeks? A pre-emptive offer snags a grande dame of a Fifth Avenue apartment for 25% over ask a week after it appears? A beautifully finished eight room pre-war sells for $5M? Surely this is 2007, you are thinking.  But no! This has all happened in the past month.

Judging from the record breaking Picasso sale at Christie’s this week, people with money feel OK about spending it again. We are seeing the same thing in real estate. What I think of as the middle market of $2 million to $6 million (yes, I know how ridiculous that sounds) has been enormously active, with good inventory being purchased within weeks after it goes onto the database. While some parts of the studio and one bedroom markets still have oversupply, the number of larger apartments in the resale sector is barely keeping up with demand. Even the ultra expensive inventory, north of $10 million, is thawing as seller expectations and buyer interest become more in sync.

In the wake of the dot com bust, residential real estate, in a historic twist, uncoupled itself from the stock market to become an independently performing asset class. Then, of course, it turned INTO the dot com market, as low interest rates and a seemingly endless horizon of value increases made every cab driver a real estate investor, just as they had been day traders a decade earlier. We all know how THAT ended, both times. Now it will be interesting to see how real estate, which drove us into the recession from which we appear to be emerging, correlates to and drives Dow and S & P values going forward.

So far, at least, this market is different from where we were 4 years ago. It lacks frenzy and there is no whiff of speculation. Interest rates are low but mortgages are not easy to get. Appraisals, in a classic swing of the pendulum, are derailing deals as inexperienced appraisers from out of town, without understanding our inventory’s nuances or its trends, undervalue the product. Co-op boards are as picky as ever. As brokers, we like a balanced market. A year ago, all the cards were held on the buyer side. Now sellers have regained substantial ground. We will all watch with interest to see what happens next.