The Cover Story: After the building boom, the crash
Chris DeMarco has lived in East Harlem for all of her 42 years and has never seen a building boom comparable to what’s happened recently.
At the same time, as the economy slows and demand for condos and co-ops softens, she wonders whether her neighborhood will be stuck with empty or half-finished buildings.
“The condos are not selling,” said DeMarco, as she stood on East 115th Street, off First Avenue, where at least two new buildings have gone up recently. “There’s new apartments but nobody’s moving in.”
Condo sales in Harlem dropped by 76 percent in the third quarter of 2008, according to propertyshark.com, which compiles real estate data.
Long seen as one of the vanguards in the steady march of gentrification in Manhattan, neighborhoods like East Harlem could serve as canaries in the coal mine for a coming glut of condos and co-ops, especially at the higher end of the market.
“Transactions have basically stalled and inventory is on the rise,” said Bill Staniford, the CEO of propertyshark, of the Manhattan sales market. “People are not buying.”
Indeed, inventory in Manhattan in September reached its highest level in eight years, at 10,761, according to a report prepared by the Corcoran Group, while sales in the third quarter dropped to the lowest level in five years, coming in at just under 3,000.
The average price of a Manhattan apartment in the third quarter fell 11 percent to $1.48 million, according to Miller Samuel, a real-estate appraisal firm.
“There’s definitely more supply than there is demand right now,” said Gea Elika, the principal of Elika Associates, a real estate broker. “I don’t see any turnaround until at least the third quarter of next year.”
In East Harlem, the Blue Rhythm, a 15-unit condo building, has yet to sell a unit after more than two months on the market. Prices for two-bedroom apartments have been cut by as much as 23 percent, to about $619,000, while some of the one-bedrooms have been reduced by about 10 percent, to $358,000.
Most analysts attribute the drop in demand to the Wall Street meltdown, which has meant less cash in the hands of buyers, paired with the credit crisis, which has made getting a mortgage far more difficult.
What’s more, Europeans, whose real estate spending sprees masked the softening market for the past year or so, are no longer buying.
“The dollar was weak against the Euro and we had a lot of investors,” Staniford said. “That has ended. The dollar is now stronger and Europe is in a recession.”
The New York City Building Congress, a construction industry trade group, predicts the city will add 35,700 housing units through new construction this year. That’s the highest total since the mid-1960s, said Richard T. Anderson, the group’s president.
“Twelve years ago the entire city of New York built about 4,000 units per year and just the last three years it’s been about 30,000 a year,” he said.
And while most believe the excess inventory in Manhattan will eventually be absorbed, the city as a whole is emerging from a historic building boom at precisely the time the economy has taken a nosedive.
“People are worried about their jobs, forget spending $600,000 on an apartment,” said Kenny Claj, 34, an East Harlem resident and landlord who owns property in the Bronx. “There will be empty condos and empty apartments.”
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