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A residential overview at mid-year.

In REW's 'Annual Review & Forecast' last January, we predicted that the first half of 1993 would be very active, I based this on unusually high post-Thanksgiving '92 and early-January activity, as well as a tripling of advertising response during what is traditionally a slow period. The first half of 1993 has lived up to expectations, and has included an extremely active spring.

Company-wide, the number of deals closed in the first two quarters of '93 is up by 30 percent over the same period last year. Let's dispense the bad news first, though: Deals in our Westchester office were down by 20 percent. We were wondering if it was just our specific office or whether business was down county-wide. Informal inquiries to several colleagues' offices in the region revealed a corresponding sales dip county-wide.

The good news is that closed sales in our four other offices are up considerably. Our Midtown office, which serves the Upper East and Upper West Sides, Midtown, Murray Hill and Turtle Bay, reports a 50 percent increase in the volume of closings over this time last year. We show a similar increase at our Downtown office, which is active in Greenwich Village, the West Village, Soho, Tribeca, Chelsea, and Gramercy Park. Brooklyn Heights has been consistantly active, and our Park Slope office has made a big comeback with closings up by 60 percent, over a bleak


The downward slide from 1988 leveled off at the end of last year, and prices have pretty much remained steady. However, we haven't seen-nor do we anticipate-any across the board price increases over the rest of '93 even though there might be the occasional blip or anomaly, depending on the specific product, buyer, or circumstance.

Interest rates, which have been unusually favorable for the past year, do not necessarily explain the recent high level of activity. This becomes evident when you contrast sales in say, Westehester, where purchases are usually 80 percent financed, with purchases in Manhattan, where a buyer will typically put down at least 50 percent cash. With less money borrowed, interest rates are not as big a favor. We believe that activity has increased beyond the impaq of lower interest rates. Possible explanations for this renewed interest in the market is pent up demand, many buyers who have been in the market for up to two years finally ready to make their move, and the fag that space, though not cheap, is clearly less expensive than it was three years ago. Buyers have perceived now as a time to take action. The key word is value. And in a city where space is a premium, today, more costs less.

There's a reverse logic to the following scenario: A slight increase in interest rates will spur our business forward. Those who have been ambivalent will get off the fence and try to snag whatever they can now. As in the mid-'80's, when real estate values kept rising and no-one could see the market's peak coming, people have been lulled into a state of comfort, thinking that interest rates will just keep decreasing, or at best stay in the low 7 percents. A slight up-jolt in the APR will stir memories of the frazzling days of 18 percent, and even the more recent 11.5 percent, which though palatable, is still high compared to today's rates.

At this time, and in most cases, buying is more sensible than renting. The paradigm I like to use is that of a two-bedroom rental. To secure a market rate rental of a two bedroom/two-bath apartment in a good Manhattan neighborhood, a tenant will need to spend about $3,000 a month. However, with $3,000 a month at 7 percent fixed for 30 years, you can borrow about $325,000. At today's more realistic prices, $325,000 will generally purchase more property than the equivalent monthly financing cost would secure as a rental.

Let me start this section by saying what's not selling. Predictably, studio ECGs have shown no life at all, while 1 bedrooms have demonstrated a weak, but barely detectable heartbeat. No anticipated signs of revival for these patients yet. However, practically everything else is moving. The biggest increase has been in the sales of apartments six rooms (two to three bedrooms) and over. Coops, especially the prewars, remain extremely popular. Reasons for this are twofold. First, in Manhattan, there are so many more coops than condos. Second, prospective owners feel that guidelines for admissions to co-ops protect the building and investment more so than in condominimiums.

Condos continue to be popular with foreign buyers and investors. In this area, so far this year, we had considerably more resale deals than new construction. This would probably have been the case even if there hadn't been a dearth of new projects. Although swanky brand new buildings have their attraction, the best values of late have been in resales, and therefore, that is what buyers have purchased.

We have had a nice run of townhouse sales, up 60 over the same period last year. Although this figure is not based on a huge number of sales, and is probably not applicable citywide, we nevertheless see it as indicative of a far stronger market for this category. Multi-family buildings (five to eight families) have shown more strength this year than in the last three and a half years.
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Title Annotation:Mid-Year Review & Forecast, Section V; mid-year evaluation of 1993 real estate market for New York, New York
Author:Marra, Peter R.
Publication:Real Estate Weekly
Article Type:Column
Date:Jun 23, 1993
Previous Article:In 1993, scattered opportunities emerge.
Next Article:RE sector leading NY out of doldrums.

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