Investor confidence in housing market will make this residential boom last.

While the adage "what goes up must come down" may be true in some situations, just what does it mean for today's owner of New York City real estate?

The Manhattan residential marketplace has shattered the cliches and broken the mold of performance so far this decade. When prices break record levels, it is important to examine the fundamental reasons. Why, despite terrorism, the stock market plunge, loss of jobs and war in Iraq, property values did not fall as many expected? In fact, they barely flinched.

The year 2000 was a banner one for New York City real estate sales, fueled by a growing economy, construction boom and surge in the rental and office markets. The dot.com bust and corporate scandals helped set the stock market tumbling, however, and an economic decline began in the first quarter of 2001. The country was in recession, with New York hit the hardest, and the events of 9/11 certainly didn't help.

Yet while the city's negative growth continued, as it would through third quarter 2003, an interesting phenomenon occurred. Owning real estate became the new focus of disheartened stock investors, diehard New Yorkers who wanted to put money in their homes and first-time buyers inspired by record-low interest rates, which stayed lower for longer than at any other time in history.

In essence, real estate became the 'safe' haven as more people sought security. Loads of money was lost in options, 401K plans tanked, banks had no decent rate of return and, as a result, home ownership stole the show as the most secure, tax beneficial investment.

With more people investing in their residences, the refinancing frenzy was also integral in shortening the recession, and by 2003 even the stock market bounced back, bolstering economic confidence. The difference this time was that no one was running back. Whereas it used to be hard to convince someone to pull money from stocks to buy property prior to 2000, today the tide has turned dramatically. Now home is not only where the heart is, but where the is equity as well.

Halstead's chief economist Greg Heym notes that real estate is now viewed as a "must" in any portfolio and that no indicators point to a reverse in New York City's steady upswing any time soon.

"Nothing has swayed the incentive to live in New York.

Through it all, though times were uncertain and this is the first year since 2000 we've added jobs, property values are up, crime, interest rates and inventory are down, and more people than ever before want to live in Manhattan."

Heym goes on to explain that, "Unlike the '80s, today's developers are steered by residents' wants and needs. The number of purchasers by investors today is a smaller percentage of the total, and developers are turning to the Manhattan brokerage community to not only market and sell apartments, but to also help create floorplans to suit today's homebuyer's demands."

In short, people today are willing to spend more money than ever on their homes.

Even neighborhood lines, once so strictly adhered to, greatly broadened, as people just want to live in the city. Manhattan is "the neighborhood."

So what's the worst that could happen for those buying property if, say, interest rates rise or the real estate market plateaus? They have a great place to live in for five or so years, which is historically the time it takes to once again come out on top. For those who enjoy life in Manhattan, they're already there.

DIANE RAMIREZ

PRESIDENT

HALSTEAD PROPERTY, LLC