New York home prices seen plunging as crisis bites

By Helen Chernikoff - Analysis

NEW YORK (Reuters) - The economic crisis is finally crashing New York's real estate party, forcing the city's residents to start sharing the rest of the country's pain.

And with so much of the city's financial well-being and its citizens' psyche invested in both Wall Street and the prices of its homes, the decline is triggering fears of a return to the dark days of the 1970s and 1980s. At its worst that triggers images of trash piling up on the streets and a higher crime rate.

In a few pockets of the city, prices have already fallen as much as 30 percent from their highs, according to some brokers, and the declines will spread to other areas by January as job losses mount and as bankers come to terms with vanishing, or at least diminishing, bonus checks because of the financial mayhem of the past year.

"There's going to be even more supply, people are going to have to drop their prices even more," said Elaine Clayman, a broker at the high-end realty group Brown Harris Stevens, which has operations in the Hamptons and Palm Beach as well as New York.

She is already advising sellers of Manhattan apartments to slash their asking prices by 10 percent to 15 percent compared with prices on similar properties, and will not work with sellers who overprice. "It's just going to be a bad relationship. I don't need that."

It is the end of a chapter in the storied annals of Manhattan real estate. Until about three months ago, the real estate industry was issuing calming noises and pointing to figures that showed the average price of an apartment in Manhattan was still climbing.

OASIS NO MORE

"New York was an oasis," said Bob Toll, chief executive of Toll Brothers Inc, the largest U.S. luxury builder, which has projects in Manhattan and Brooklyn. "New York had its own separate market."

Now, Toll is saying layoffs in the financial sector, 16,000 from securities companies in October alone, means that New York has lost some of the advantage it had.

"In another market, this apartment would be gone," said broker Maureen Smith as she walked up the sunny stairs of a $799,000-priced one-bedroom duplex in an Upper West Side high-rise. Two years ago, Lynna Gott, Smith's partner, sold a similar unit in the building for $860,000.

Smith was there last Sunday afternoon to show the apartment, but traffic is thin, Gott said. "It's a slow season," Smith said. "But it's also the market."

Inventory is piling up because of the falling numbers of sales, and the move by some people in financial distress to put their homes on the market. A strong dollar is also damping foreign demand.

Manhattan's October listings were up 37.3 percent compared with last year, said Jonathan Miller, president and CEO of appraisal firm Miller Samuel.

While the median price of a Manhattan apartment, $928,263 in the third quarter, still rose 7.4 percent compared with a year earlier.

That might not hold true in the fourth quarter, Miller said. Today's typical apartment is often worth less than it was a year ago.