ABO chief: Residential outlook positive for 2001.

After Sept. 11, real estate executives nervously watched the multifamily market for possible repercussions. Although panicky owners did put 2,000 units on the market in the weeks after the attacks, we were all pleased to see the market soon thereafter return to stability.

With the exception of the neighborhoods below Houston and Canal Streets, the market continues to hold steady as we head into the first quarter of 2002. The Corcoran Group reports a 42% jump in residential sales in December, over the same month a year earlier. Let's take a closer look and try to make sense of what to expect in the upcoming year.

The tone of the market has changed since Sept. 11 and buyers are basking in their new-found relative power. Overall, offers are down about 10-15% from a year ago, and buyers today tend to expect to pay less than the asking price on the resale market.

In response, The Corcoran Group reports that 3,000 sellers asked for a reduction in their asking prices in the fourth quarter of 2001, almost double the number that asked for reductions one year earlier. On average, selling prices are off about 10% since the Sept. 11 attacks. Prices for properties listed at over $2 million are off even more.

Nonetheless, brokers are being kept busy. The New York Times reported that more people are visiting open houses than a year ago. Recent open houses have been drawing up to 100 people, more than four times the prior average. Part of that increase can be accounted for by the fact that the average number of showings on each apartment has doubled, from about 40 to about 80.

The sales market's picture of relative health looks even better when compared to the residential rental market. Rents have been falling since last March, reducing by about 10% in primary neighborhoods and 15 to 20% in secondary neighborhoods. This reduction can be explained by the flood of new rental units (9,300 since 1998) on the market, versus the number of new for-sale units (just 1,795 residential condominium and cooperative apartments in the same period).

For the neighborhoods below Houston and Canal Streets, the outlook is still darker. People are moving out of the area because of the close proximity to Ground Zero, because their offices have moved or because of changes in their economic situation. A few bargain seekers are purchasing or renting homes in lower Manhattan for the right price. Fifteen people have asked for refunds on security deposits placed on luxury condominiums eight blocks from the World Trade Center site. And, in Battery Park City, a few units are reportedly listed for 15%. less than what they would have sold for before Sept. 11.

Despite the present weakness in Downtown Manhattan and the rental market, we can expect to see the market continue to bounce back. Most observers expect the economy to bounce back later this year. These improving conditions and the underlying supply shortage will work together to raise all boats in the real estate industry.