Manhattan home prices plunge
Huge downturn for co-op and condo owners in pricey housing market. Number of sales ticks up as buyers with money take an opportunity.
NEW YORK (CNNMoney.com) -- The housing bust has finally clobbered super-pricey Manhattan home prices.
Reports released Thursday by four major New York brokers show that prices cratered during the three months that ended June 30.
Prices fell between 13% and 19% compared with the same quarter last year. The brokers found median prices that ranged from $795,000 to $849,000.
The decline shows a marked turn from the first quarter of 2009, when the year-over-year change in median home prices ranged from a loss of 2% to a gain of 6%.
Another change in the recent period: More people are buying.
The number of sales picked up by more than 28% in the second quarter, according to Prudential Douglas Elliman.
Driving the increase were sales of studio apartments and one-bedrooms, both of which gained market share, according to Jonathan Miller, president of appraisal company, Miller Samuel, which compiles data for Prudential Douglas Elliman.
"It's value-based shopping," said Pam Liebman, chief executive of the brokerage Corcoran Group. "People are coming back into the market, but nobody is going to overpay."
Of course, in Manhattan "value" means studio prices that go for a median of $400,000 and one-bedrooms that fetch $650,000.
Despite the bleak report, the ingredients for a recovery are already in place, according to Greg Heym, chief economist for both Halstead Property and Brown Harris Stevens. But it will be very slow coming.
"There are still risks to the economy, both national and local," Greg Heym said. "But job losses have slowed, consumer confidence is higher and the stock market returned more than 30% during the quarter."
Furthermore, the impact of the Wall Street meltdown on the New York economy has been less catastrophic than first predicted. The city has held up well, according to Heym, and now the financial system has started stabilizing.
Heym also pointed out that the foreclosure plague, so damaging to many markets, has never been a major problem in Manhattan. Co-ops have, if anything, stricter financial requirements than the lenders, requiring buyers to show their assets and come up with 20% down. That has meant that few co-op owners are in trouble with their mortgages.
And now, the national housing market may be improving with sales at steady, albeit, lower volumes and home price declines flattening out. Those are all positive signs for Manhattan. The housing market may may be at or near the bottom of the cycle, according to Heym.
"But people shouldn't think that a bottoming out means a quick rebound," he said.
How quick any recovery will be depends a lot on the availability of jumbo mortgages, those exceeding $729,750. The difficulty in obtaining such loans has hurt sales in Manhattan. It has caused the strength of the market to switch from the sales of big, expensive homes to sales of smaller, cheaper ones.
"The entry level market did not fall as far as the high end," Miller said. "The difference was a jumbo versus a conforming mortgage."
Conforming loans, the ones bought or backed by Fannie Mae and Freddie Mac, are still available at very favorable rates. But jumbos, which exceed the loan limits imposed by Fannie and Freddie, have not been.
Manhattan buyers are heavily reliant on jumbo loans because many homes are priced at well over the conforming loan limit. And it ain't easy getting such mortgages right now.
"Most banks are requiring jumbo borrowers to put at least 30% to 40% down -- some need 50%," said Miller. "Someone buying, say, a $4 million home, even with perfect credit and a raise this year, might not have the $1.2 million to $2 million to put down."
But there are a couple of positive factors prompting many entry-level buyers to get into the market, according to Bill Staniford, CEO of PropertyShark.com, which compiled Corcoran's statistics.
One is the first time homebuyers tax credit, the federal tax refund program available to anyone who hasn't owned a home during the past three years.
"People say that's making a difference," said Staniford. "And if interest rates continue to climb, that will introduce some urgency."
Once the economy recovers, the prospects for the Manhattan housing market are good. The market could quickly tighten again. There's little new building going on. As a matter of fact, not a single building permit was filed in all of February, according to Heym.
Plus, glamorous Manhattan is still drawing residents from all over. The population of New York, unlike many other old U.S. cities, is still growing.
"In a couple of years, there'll be a housing shortage again," said Heym. 
