Recession, war marked 2001 market.

Two related but distinct phenomena have dominated the residential market in the fall of 2001: Recession and war. It has been all too easy for consumers, swept up by the tragedy of Sept. 11, to believe that in its emotional and economic dislocations lie all the myriad problems with which Manhattan has had to deal: Joblessness, dwindling profits, looming deficits.

In fact, recessionary pressures were upon us as early as last spring, and while the World Trade Center bombings certainly exacerbated the gravity of the economic issues, it seems today that the recession will be neither as long nor as deep as some economists had feared. And residential property is a jewel in the crown of the Manhattan economy!

Even with interest rates at record lows, the weeks after Sept. 11 were slow for residential sales. Fear and paralysis gripped even the hardiest Manhattanites. But we are a steely lot, and little by little opportunities have been sensed and exploited.

Empty nesters, single people, and couples were the first to take advantage of the 10 to 15% drop in values, with areas like lower Park and Sutton Place selling briskly and at strong, though not record, prices. The eat-dessert-first mood has reflected itself in a run on mint condition apartments, leaving some remarkable deals available to those who will renovate. And, as families hold back, areas like Carnegie Hill and the Upper West Side, where until recently apartments have sold in a day at ever increasing prices, are experiencing a spike in available inventory and downward price pressure due to much slower absorption rates.

And what of the months ahead? The predictions of bad bonuses, of which so much has been made, will soon be behind rather than in front of us. Meanwhile, the property market has already begun to turn around, following the stock market, with multiple bids again pushing up the prices on some apartments and houses.

Interest rates have bottomed and begun to climb, and buyers, who are bottom fishing should beware lest the same thing happen to them with residential property! The bottom can only be seen in retrospect, and those who seek it are doomed to miss it most of the time. Opportunities abound today, especially for those buyers looking to move up. Their incremental dollars will buy them more apartment today than two years ago: Selling a six or seven room apartment and adding a million dollars may buy 11 or 12 rooms now rather than the 9 or 10 of 1999 or 2000.

At Ashforth Warburg, we are looking for the market to gradually pick up over the next two quarters, to consolidate over the summer, and to be moving at a fully restored (though not overheated) pace by next fall.

We predict that renovated apartments will continue to attract more interest, and that the sellers of-properties needing renovation will have to discount for both renovation and interim carrying costs to sell promptly. There has been no crash in the market, but there are excellent opportunities for flexible buyers who are ready to act. Act now; those opportunities may not still be available in two to three months.