Items of Interest IS AN END IN SIGHT The decline in residential property prices appears to be slowing, according to preliminary data from First American CoreLogic, reports American Banker in Realtor magazine. A preview of its November report shows that home prices fell 9.6 percent that month, compared with 10.4 percent in October and 11.2 percent in September. "The consistent deceleration over the past two months with November indicating the same trend in price declines is encouraging because it could portend the trough in price declines," says Mark Fleming, chief economist for First American CoreLogic. Still, layoffs and the swollen supply of unsold homes remain a concern, he notes. NEW HOME SALES PLUMMET TO 17-YEAR LOW Sales of newly built single-family homes declined 2.9 percent in November to a seasonally adjusted annual rate of 407,000 units, the U.S. Commerce Department reported. It was the slowest pace since January 1991. The inventory of new homes for sale declined for the 19th consecutive month in November, to 374,000 units, from 402,000 units in October. The months' supply at the current rate fell to 11.5 from a revised 11.8 in October, which was a record high. A TAX LAW CHANGE HELPED FUEL THE HOUSING BUBBLE A tax break proposed by President Bill Clinton and approved by Congress in 1997 gave people a new incentive to plow ever more money into real estate, and they did so, according to the New York Times. The provision - part of a sprawling bill called the Taxpayer Relief Act of 1997 - exempted most home sales from capital-gains taxes. The first $500,000 in gains from any home sale was exempt from taxes for a married couple, as long as they had lived in the home for at least two of the previous five years. (For singles, the first $250,000 was exempt.) By itself, the change in the tax law did not cause the housing bubble, economists say. Several other factors - a relaxation of lending standards, a failure by regulators to intervene, a sharp decline in interest rates and a collective belief that house prices could never fall - probably played larger roles. But many economists say that the law had a noticeable impact, allowing home sales to become tax-free windfalls. A recent study of the provision by an economist at the Federal Reserve suggests that the number of homes sold was almost 17 percent higher over the last decade than it would have been without the law. Vernon L. Smith, a Nobel laureate and economics professor at George Mason University, has said the tax law change was responsible for "fueling the mother of all housing bubbles." MOST METRO AREAS HAD RECORD ANNUAL PRICE DROPS Data through October show continued broad based declines in the prices of existing single family homes across the United States, with 14 of the 20 metro areas showing record rates of annual decline and 14 now reporting declines in excess of 10 percent versus October 2007, according to the S&P/Case-Shiller Home Price Indices. "The bear market continues; home prices are back to their March, 2004 levels," said Standard & Poor's David M. Blitzer. Both composite indices and 14 of the 20 metro areas are reporting new record rates of decline. As of October 2008, the 10-City Composite is down 25.0 percent from its mid-2006 peak, and the 20-City Composite is down 23.4 percent. Phoenix remains the weakest market, reporting an annual decline of 32.7 percent, followed by Las Vegas, down 31.7 percent, and San Francisco down 31.0 percent. Miami, Los Angeles and San Diego were close behind with annual declines of 29.0 percent, 27.9 percent and 26.7 percent, respectively. In addition, all 20 metro areas, and the two composites, posted their second consecutive monthly decline. And six of the metro regions had their largest monthly decline on record - Atlanta, Charlotte, Detroit, Minneapolis, Tampa and Washington. 1.1 PERCENT MONTHLY PRICE DECLINE RECORDED IN OCTOBER U.S. home prices fell 1.1 percent on a seasonally-adjusted basis from September to October, less than the 1.2 percent decline in the prior month, according to the Federal Housing Finance Agency (FHFA). For the 12 months ending in October, U.S. prices fell 7.5 percent. The decline since the April 2007 peak was 8.8 percent. The FHFA monthly index is calculated using purchase prices of houses backing mortgages that have been sold to or guaranteed by Fannie Mae or Freddie Mac. RENTS IN THE NATION FALL 0.4 PERCENT Average rents for apartments fell by 0.4 percent in the fourth quarter, the first time rents have declined since 2003, according to a survey by research firm Reis Inc. cited by the Wall Street Journal in Realtor magazine. For all of 2008, rents rose by only 2.2 percent, down from 4.6 percent in 2007, and the apartment vacancy rate rose about 1 percent to 6.6 percent by the end of last year. Analysts concluded that demand for apartments is not only taking a hit from the increase in folks doubling up or moving in with family during periods of high unemployment as well as the shadow market created by home owners who rent out their properties when they can't sell them. Over the long haul, some analysts believe that landlords will benefit from the reduced levels of new apartment construction. Fewer than 100,000 units were built last year, the lowest figure in 15 years. BUYERS ARE SLASHING BIDS, MAKING MULTIPLE OFFERS Potential buyers are now putting very low offers - often 20-40 percent less than the asking price - on multiple properties at the same time, observes the latest Real Deal monthly magazine. Increasingly desperate to unload their property, sellers are countering offers they once would have considered insulting. And as lowball offers become the norm, this back-and-forth seems to be accelerating the downward slide in prices. The strategy creates a dilemma for brokers, who are trained to prevent buyers from making wildly unrealistic offers. Up until very recently, an offer of 20 percent - or more - below the asking price was considered unrealistic. Meantime, more and more brokers are encouraging sellers to consider offers at percentages that would previously have been considered ludicrously low. AND THAT'S NOT ALL BUYERS ARE DOING In the last few months, they have asked sellers to create contracts that include everything from lower-than-usual deposits to mortgage contingency clauses and extremely specific closing time frames, says the Real Deal. One of the most common requests made by buyers is for a mortgage contingency clause. Virtually nonexistent a few months ago, such a contingency (sometimes known as a financing contingency) stipulates that if the buyer can't get home financing within a certain amount of time, the deal is off, with all or some of the deposit returned. Whether the deal is mortgage contingent, sellers are giving buyers much more time to assess their financing options - instead of 7-10 days to sign the contract, now often 35-40 days, the monthly magazine says. Most contracts without a mortgage contingency clause, for example, stipulate that the seller may keep the buyer's deposit if the deal does not close. Now that the financing climate has changed drastically, many buyers are backing out of their contracts after finding that they can't get a mortgage or can no longer afford the purchase. More lawsuits are popping up as buyers try to get their deposits back or delay the seller from pocketing the money. 4TH QUARTER SALES AND SUPPLY FIGURES SHOW MARKET FLUX There was a sharp decline in contract activity and a downward correction in contract price level, according to the Miller Samuel appraisal firm. Sales contract activity showed evidence of a decline STREETEASY ALSO CHRONICLES 4th QUARTER MARKET STATS Based chiefly on approximately 2,900 sales recorded for the quarter, the Streeteasy report found that median prices decreased slightly by 0.1 percent to $849,000, including new development prices for contracts signed one or two years earlier. The condo resale median sale prices dropped by 9.5 percent to $950,000 since the prior quarter but were 5.6 percent higher than last year. Average sales prices increased by 2.6 percent, to $1.61 million, over the prior last quarter and 22.6 percent more than a year earlier. The co-op resale median fell by 5.2 percent since the last quarter and by 2.4 percent since last year. On average, co-op resale prices increased by 1.4 percent to $1.06 million since last quarter and by 4.4 percent since last year. New developments averaged increases of 24.8 percent since the previous quarter to $1.795 million but went up by only 0.4 percent since 2007. The median sales price grew by 24 percent since last quarter and by 18 percent since last year. Raw data show that a drop in the number of new development closings, coupled with fewer closings in the low-end of the market, drove average and median prices upward. The number of closings has decreased by 34 percent from the 4,300 closings of the prior quarter to approximately 2,900. Consequently, the inventory of available units in Manhattan continued to climb, staying above 9,000 and peaking above 10,000 in the first two weeks of December. During the fourth quarter, there were more than 1,900 price cuts in available listings for condos, a 34.1 percent increase since last quarter but more than two and a half times the number of cuts since last year. For a PDF version of the whole report, click here. TENANTS AND LANDLORDS, TAKE NOTE Are you confused about the law on rent-regulated apartments? For the details, click here. VACANCIES IN RENTAL APARTMENTS COULD REACH 28-YEAR HIGH In 2009, the vacancy rate in market-rate rental apartments will rise to its highest level in at least 28 years as mounting job losses drive renters from the city, a new report from commercial real estate services firm Marcus & Millichap predicts, according to the Real Deal. The vacancy rate will reach 4.7 percent, topping the previous record of 4 percent in the fourth quarter of 2003, the firm determined in its 2009 National Apartment Report. The rate of rental vacancies has been rising since reaching a recent low of 2.1 percent in 2007. The report puts the 2008 vacancy rate at 3.4 percent. The data is based on a survey of one-, two-, three- and four-bedroom apartments in Manhattan, Brooklyn, Queens and the Bronx. The report's authors said that there would be fewer vacancies in more established residential areas such as the Upper East and West sides and Greenwich Village. But areas that are more on the fringes, where an increasing number of units are being built, will fare worse. "Supply concerns will mount in Long Island City, Midtown West, the Financial District and southeastern Harlem, where deliveries will be elevated and the threat of shadow rentals persists," Edward Jordan, regional manager of the Manhattan office of Marcus & Millichap, said. (A shadow market exists when homeowners turn to renting out their units because they cannot sell them.) Despite the rise in the rate of vacancies, prices in large, market-rate buildings will rise, albeit a small 2.1 percent, to $3,006 per month, according to the projection, from an average of $2,944 this year. The increasing vacancy rate will be pushed up by construction; the number of apartment units constructed will rise to 2,500 next year from 1,997 in 2008, according to the report. IN NEW YORK ESPECIALLY, RENTS ARE FALLING Job losses took a heavy toll on the nation's landlords last quarter, as rents fell across the country and vacancies jumped higher, says the Wall Street Journal. New York City took the biggest hit, according to numbers from research firm Reis Inc. Rent growth declined by 1.9 percent in New York, even though the city still has the nation's tightest rental market, with vacancies at just 2.3 percent. In the fourth quarter, three-quarters of multifamily buildings in the city exhibited negative rent growth, a big uptick from the past three quarters, when just 37 percent of properties saw negative rent growth, according to Victor Calanog, director of research at Reis. The Big Apple stands out among the cities that saw the biggest rent drops because it hasn't been inundated by a glut of foreclosed homes or condos that have been converted to rentals. BUYERS IN NEW DEVELOPMENTS TURN TO PREFERRED LENDERS Some developers are increasingly relying on their preferred lenders and mortgage brokers to help their buyers navigate the complex world of mortgages and increase their chances of closing deals, says the Real Deal. Qualified buyers are benefiting from an array of new options specifically tailored to help them get loans as developers and brokers work to make purchases in their buildings easier to finance. Lenders or mortgage brokers working specifically with a project not only has an incentive to help buyers get mortgages, they are also more likely to be successful since they're already familiar with the development's strengths and weaknesses, said Melissa Cohn, president of Manhattan Mortgage. "You have to work harder to find a bank that will approve a building, since the banks have tightened their guidelines," she said. "In this day and age, it's more important to go with someone who knows the building." THE APTHORP CONVERSION IS IN TROUBLE The partners in a tony apartment building on the Upper West Side are warring in court and seeking to agree on an arbitrator. The condominium-conversion Apthorp project is in danger of defaulting, and only one unit has sold in the six months since the $1 billion project was announced, according to court documents and interviews with people familiar with the project. The Wall Street Journal reports that Israeli diamond merchant Lev Leviev filed an emergency injunction to wrest control of the development from its current managing partner and 50 percent owner, Maurice Mann, owner of New York property firm Mann Realty. Legal papers filed by a unit of Leviev's Israel-based company charge Mann, whose attorney declined comment, has "run amok as manager" of the project, spending operations money on his personal legal fees and allowing employees to live in vacant apartments. The Apthorp's troubles appear to be a combination of the collapsing market and internal strife. In March 2007, the partners paid $426 million for the residence. With 163 units, it was built in 1908, and former residents have included Conan O'Brien, Cyndi Lauper and Rosie O'Donnell. At the time, some of the units were renting for more than $20,000 a month, but the new owners began offering condos at nearly $3,000 a square foot, placing the building's sell-out value at approximately $1 billion. Now, the condos are being offered at an average price of roughly $2,150 per square foot, according to StreetEasy.com. LAYOFFS ARE RAMPANT AMONG ARCHITECTS In response to the construction slowdown, New York architectural firms are shedding staff, trimming expenses and switching from residential projects to lower-risk work on institutional and governmental projects with secure funding. While industry groups said no hard numbers for recent layoffs exist, local sources and contributors to the blog on the ARE Forum, an online resource for the architecture profession, identified by name more than 10 firms that reportedly have let people go in recent weeks. Skidmore Owings & Merrill reportedly laid off about 50 people, according to one industry observer who didn't want to be identified. And in November, Frank Gehry, the Atlantic Yards architect, laid off over two dozen staffers after Forest City Ratner halted his work on the $4 billion Atlantic Yards project. DARKENED THEATER TO BECOME CLOTHING STORE Fans of the old Metro Theater on Broadway at 99th Street may hate to hear that the former cinema with its landmarked Art Deco façade is about to start a new life as a hip clothing store, reports the New York Post. The Metro's owners just signed Urban Outfitters, which is net leasing all 15,000 square feet on 3.5 levels. The 20-year lease will bring a major national brand to an Upper West Side stretch starved for decent shopping options. The deal is worth $1 million a year to start, with 12 percent increases every five years. However, the building remains for sale, at $11.5 million. BATTERY PARK RESIDENTS FIND RELIEF, OTHERS CRY ELITISM A New York agency reached a deal with condominium owners to ease big fee increases that were looming for three towers in lower Manhattan's Battery Park City, says the Wall Street Journal. But that prompted some criticism that the government was helping the haves at the expense of the have-nots. Ground rents for the buildings, which are on government-leased land, were set to rise sharply over the next four years as part of the original terms struck with developers. In April, for example, condo owners at the 182-unit Regatta would have seen average monthly ground rents increase to $2,160 from $840 currently. The Battery Park City Authority (BPCA) agreed to cap ground rent increases at 25 percent and spread that increase, which will average some $200 per month, over the next 15 years. The deal will lead to $56.1 million less revenue over 15 years. Charles Urstadt, BPCA vice chairman, cited the loss of affordable-housing money. "You're robbing the low-income housing Peter to pay the high-income Paul," he said. NYC FORECLOSURES FELL IN THE FALL A quarterly report by Property Shark shows an optimistic, if misleading, decrease in foreclosures in New York City in the fourth quarter, according to the Real Deal. Foreclosures in the fourth quarter of 2008 showed a steep 32 percent drop from the previous quarter, though they were up 25 percent compared with last year. There were 764 homes in some stage of foreclosure last quarter versus to 611 in the final quarter of 2007. "Even though we experienced a sharp decrease in the fourth quarter, I don't think we're out of the woods," said PropertyShark CEO Bill Staniford. He predicts an uptick in foreclosure filings in the first quarter of 2009, saying that the fourth quarter typically shows a decline in actions because of a large number of bank holidays. APPARENTLY, MANY FOLKS WANT TO SEE RUSSIA FROM HOME A survey of more than 2,000 U.S. adults by Harris found that U.S. adults would most like to be neighbors of Sarah Palin (14 percent), followed closely by Oprah Winfrey (13 percent). But only 2 percent would like to be neighbors of David and Victoria "Posh" Beckham in the coming year. It seems age and gender play a prominent role in neighbor preferences. Among adult men, the governor of Alaska is the most desired neighbor (17 percent), while 17 percent of adult women preferred Winfrey over Palin (12 percent). Among 18-34 year old men, Michael Phelps tops the list (17 percent in contrast to 9 percent of 18-34 year old women). Women 45-54 years old want to rub mansion by 21 percent compared with only 6 percent of their male counterparts. Britney Spears was voted the worst celebrity neighbor in 2008, according to one in five (19 percent) U.S. adults. Rosie O'Donnell was a close second with 18 percent, followed by Joe the Plumber (8 percent), Lindsay Lohan (7 percent) and Adam "Pacman" Jones (6 percent). AMERICANS ARE SETTLING DOWN So concludes Pew Research Center, which found that only 13 percent of the U.S. population changed residences between 2006 and 2007, the lowest share since the Census Bureau began to publish statistics on this topic in the late 1940s. Its new national survey showed that more than six-in-ten adults (63 percent) have moved to a new community at least once in their lives, while 37 percent have never left their hometowns. Most adults (57 percent) have not lived outside their current home state in the U.S., yet 15 percent have lived in four or more states. The Midwest is the most rooted region: 46 percent of adult residents there say they have spent their entire life in one community. The least rooted is the West, where only 30 percent of adult residents have stayed in their hometown. The most frequently cited major reason that movers give for choosing their current community is job or business opportunities (44 percent). Somewhat smaller shares of movers say they relocated to where they now live because their new community is a good place to raise children (36 percent) or because they have family ties there (35 percent). Four-in-ten Americans say they are very likely or somewhat likely to move within five years. A Census Bureau survey indicates that the number of people who moved between 2006 and 2007, 38.6 million, was the lowest since 1982-83. That earlier period included part of a 16-month recession that ended in November 1982. The annual migration rate, which held at 20 percent through the mid-1960s, has drifted downward since then before hitting its low last year. Analysts say migration has declined because the U.S. population is getting older and most moves are made when people are young. Another brake on moving is the rise of two-career couples. RATES DROP TO RECORD LOW The 30-year fixed-rate mortgage (FRM) averaged 5.01 percent for the week, down from last week's 5.10 percent, says Freddie Mac. Last year at this time, it was 5.87 percent. The 30-year FRM has not been lower since Freddie Mac started the Primary Mortgage Market Survey in 1971. As for the 15-year FRM, the rate of 4.62 percent has not been lower since June of 2003. It, too, was down from last week, when it averaged 4.83 percent, and from last year, when it was 5.43 percent. Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 5.49 percent this week, which was below 5.57 percent the previous week and 5.63 percent the prior year. One-year Treasury-indexed ARMs were 4.95 percent, up from last week's 4.85 percent but lower than the 5.37 percent rate a year ago. "Interest rates for 30-year fixed-rate mortgages fell for the tenth week to a fourth consecutive record low due in part to the Federal Reserve's recent purchases of mortgage-backed securities issued by Freddie Mac, Fannie Mae and Ginnie Mae," said Frank Nothaft, Freddie Mac vice president and chief economist. "Since the end of October 2008, these rates have declined by almost one and a half percentage points, or payment savings of about $184 a month for a $200,000 loan - an additional $11 dollars from last week." FANNIE MAE TIGHTENS LENDING RULES ON CONDOS Fannie is telling lenders that the number of delinquent mortgages it owns or guaranteed that are secured by condos in Florida is at an all-time high and that the company, therefore, is requiring higher loan-to-value ratios for condos, according to the American Banker in Realtor magazine. It also increased the minimum share of condos that must be owner occupied in a new or newly converted building to 70 percent from 51 percent. Fannie tightened criteria across the country as well. No more than 15 percent of the units can be 30 days or more past due on association payments. A WHARTON PROFESSOR OFFERS SOUND MORTGAGE ADVICE The core principle is that repaying a mortgage is an investment, notes Jack Guttentag, professor of finance emeritus at the University of Pennsylvania business school, in the Washington Post. The HISPANICS BECAME UNINTENDED VICTIMS OF HIGH RATES Between 2000 and 2007, as the Hispanic population increased, Hispanic homeownership grew even faster; it grew by 47 percent, to 6.1 million from 4.1 million. Over that same period, homeownership nationally grew by only 8 percent. In 2005 alone, mortgages to Hispanics jumped by 29 percent, with expensive nonprime mortgages soaring 169 percent, according to the Federal Financial Institutions Examination Council. An examination of that borrowing spree by The Wall Street Journal reveals that it wasn't simply the mortgage market at work: It was fueled by a campaign by low-income housing groups, Hispanic lawmakers, a congressional Hispanic housing initiative, and mortgage lenders and brokers, who all were pushing to increase homeownership among Latinos. LOAN VOLUME DIPS The Mortgage Bankers Association (MBA) said application volume fell 8.2 percent on a seasonally adjusted basis for the holiday-shortened week ending Jan. 2 from one week earlier. On an unadjusted basis, the decrease was 8.9 percent, but it was up 28.3 percent from one year earlier. Refinancings dropped 12.3 percent over the previous week, and purchases increased 7.3 percent seasonally adjusted. The refinance share of mortgage activity slipped to 79.8 percent of total applications from 82.9 percent the previous week, and the adjustable-rate mortgage (ARM) share edged up to 0.9 percent from 0.8 percent. UNSURPRISINGLY, FORECLOSURE SALES HAVE TRIPLED Foreclosure sales in the 25 largest U.S. metropolitan areas almost tripled in the first 10 months of last year as rising unemployment and falling home values made it tougher for homeowners to sell or refinance their mortgages, Bloomberg reports. Motivated sales, which include foreclosure auctions and banks selling homes taken over for non-payment, increased 193 percent from January to October 2008 from a year earlier, New York-based real estate data company Radar Logic said in a report. Conventional sales rose 6 percent in that period. U.S. foreclosure filings increased 71 percent in the third quarter from a year earlier to the highest on record, according to RealtyTrac, a provider of default data. Investors are betting that home prices will continue to decline nationally through 2010, Radar Logic said. Prices will stabilize in Los Angeles and Phoenix in 2010, while values will fall further in Miami and New York, the data company speculated. HARVARD ECONOMIST TERMS NEW YORK A RESILIENT CITY New York's housing prices are doing remarkably well relative to elsewhere in America, notes Harvard economist Edward L. Glaeser in his New York Times blog, which is excerpted here without quotation marks. Only during the 1970s did the city suffer major population decline. However, New York managed to come roaring back, while other cities just continued to fall. The secret of New York's post-1970 reinvention was that smart people, who knew each other and learned from each, innovated in ways that made billions in financial services. New York still has an amazing concentration of talent. That talent is more effective because all those smart people are connected because of the city's extreme population density levels. Those people who are continuing to pay high prices for Manhattan real estate are implicitly betting that New York's human capital will continue to come up with new ways of reinventing the city. I won't be surprised if Manhattan prices do drop in the next few years, but I also strongly believe that the future of New York City continues to be bright. Dense cities thrive by enabling us to connect with each other, which then promotes learning and innovation. The current downturn will only increase the returns to being smart, and you get smart by hanging around smart people. As long as New York continues to attract and connect those people, the city will continue to thrive. Find Prof. Glaeser's blog here. ECONOMIC SLUMP DAMPENS PENDING HOME SALES A forward-looking indicator based on contracts signed in November declined in the face of job losses and an eroding economy, according to the National Association of Realtors (NAR). The Pending Home Sales Index a fell 4 percent from October to the lowest level since 2001; it was 5.3 percent below one year earlier. NAR Chief Economist Lawrence Yun said that mounting job losses and very weak consumer confidence deterred home buyers from signing contracts in November. "December's housing market activity could be comparably lower due to ongoing problems in the economy, so a real estate-focused stimulus plan is urgently needed," he contended. DON'T BE SURPRISED IF MORTGAGE CRISIS SPREADS Housing and mortgage problems pushed the nation into a recession that could now amplify, draw out and expand the reach of the housing declines, says Business Week. In New York City, for example, the real estate market was bolstered by residents who were still earning sky-high Wall Street bonuses and by a weak dollar that attracted overseas bargain hunters. Now that the dollar INMAN PANEL PREDICTS NO DRAMATIC TURNAROUND IN 2009 The ongoing credit crunch and misfiring economy leave little reason to expect a dramatic turnaround in housing in 2009, a panel of industry experts said at the Inman Real Estate Connect conference. Some panelists said measures being undertaken or weighed by lawmakers and policymakers - such as tax breaks or subsidized interest rates for homebuyers or "cram-downs" of bankrupt borrowers' mortgage principal - may even do more harm than good. "Credit is where this starts and ends," said Barry Ritholtz, director of equity research for Fusion IQ. Although home prices got far out of whack with incomes during the, they have come about 55 percent of the way back to normal, Ritholtz said. But "if people understand the deal, and will be there for five to 10 years" they can justify pulling the trigger and making a home purchase, he added. Fear and trust are undermining consumer confidence, observed Carter Murdoch, senior vice president of marketing and compliance for Bank of America. IT MUST BE ONE CHIC APARTMENT Sheikh Abdul Aziz al-Thani, of Qatar, has listed his three-bedroom apartment at Trump Park Avenue for $14 million, says the Wall Street Journal. Al-Thani paid $6.1 million for the 3,300-square-foot condo in 2005, according to property records. On the fourth floor with east and southern exposures and full city views, the apartment has marble bathrooms, herringbone wood floors, walk-in closets and 11-foot ceilings. It is rented through June for $30,000 a month, and the building has maid service, valet service, a health club and closed-circuit security monitors. SALE OF LUCA LUCA SEEMINGLY MEANT MONEY, MONEY, MONEY Luca Orlandi, the founder and designer of Luca Luca, a fashion house with retail stores across the country, sold the business last May to a boutique investment firm, says the New York Times. The price was not disclosed, but at the end of October, Orlandi, who is from an Italian family with interests in textiles, signed a contract to buy a town house at 12 East 76th St. off Fifth Avenue. He closed the week before Christmas for $12.35 million. The five-story brick building needs work. It had been owned by the same family since 1954 and is divided into a ground-floor doctor's office and two apartments. Still, the sale price was below the $13.5 million asking price; it works out to about $1,900 per square foot, while other town houses in the East 70s off the park sold for $2,600 a square foot or more in the last year or so. A-LIST COUPLE COLLECTS TWICE THEIR COST IN TWO YEARS Investment advisor Carl Spielvogel and his wife Barbaralee Diamonstein-Spielvogel sold their cooperative apartment at 720 Park Ave., at the corner of 70th Street, for $36.63 million, nearly twice what they paid for it two years ago, reports the Real Deal. The sale of the seventh-floor unit closed Dec. 18, and the buyer was identified as Jill Kraus, wife of Peter Kraus, a former executive vice president at Merrill Lynch who reportedly received a $25 million bonus after working at the firm for three months this year. The sellers, who are top Democratic fundraisers, bought the apartment in June 2006 for $20 million, property records show. Just before buying the seventh-floor unit, the Spielvogels sold their 17th-floor apartment in the building for $18.7 million, in May 2006, according to records. A PROPERTY FIT FOR A QUEEN IS NOW ON THE MARKET A manor house that's about half a millennium old and believed to be the former hunting lodge of Anne of Brittany, queen to two French kings, has gone on the market for $595,000 in the French region of Normandy, says the Wall Street Journal. The 2,700-square-foot, three-story house is in Montreuil-l'Argillé, 50 miles west of Paris, and has four bedrooms, three bathrooms, five fireplaces and original floors of brick and tile, with some wood floors on the upper levels. There's also a 5,300-sf walled garden. The property's owner, an insurance broker, restored the roof and interior ceilings in 2003. He also converted the attic into a livable space and added a bathroom to it. Montreuil's Web site mentions the link to the French queen (1477-1514), who married Charles VIII and Louis XII. The manor, called Le Baillage, was also at one time used as a court. AND THIS ONE IS NO LONGER FIT FOR A KING in Manalapan, about 10 miles south of Palm Beach, boxing's Don King has just listed his oceanfront estate for $27.5 million, says the Wall Street Journal. "I need to downsize," said King, 77, who added that walking from house to house has become inconvenient. "I'm going to move to wherever I can find a nice little cozy $10-to-5-million house." Made up of two adjacent properties, the gated, nearly three-acre compound has been the site of many parties. As part of the property, the Mediterranean-style main house has seven bedrooms, nine bathrooms and a three-car garage. Visitors enter an open-air courtyard with a bridge over a goldfish pond. The guest house, which King used for large parties, has four bedrooms, nine bathrooms, a large living room and an ice-cream parlor. Both houses have pools. The beach, roughly 15 feet down, is accessed via a retractable staircase. King and his wife Henrietta paid a total of $14.3 million for the two properties in 1999. King said that he has no debt and isn't in financial straits. "I started at sub-zero," he added. "Anything I get is going to be better than where I was." The promoter also owns an 80-acre ranch training camp in his native Cleveland, a second training camp about 65 miles north of Palm Beach in Fort Pierce, Fla., and two homes in Las Vegas. And that's a lot of walking between houses! PERHAPS THEY'LL LIGHT UP THE EAST VILLAGE Susan Rothenberg, a painter, and Bruce Nauman - who works in neon, video and performance art as well as sculpture, drawing and printmaking - bought a town house on a 45-foot-deep lot on East Second Street in the East Village, surrounded on two sides by the New York City Marble Cemetery, a landmark that dates back to 1831, reports the Times. They went into contract on Nov. 11 and closed a week later for $3.3 million. DOMENICO VACCA SEEKS 45 PERCENT 'PROFIT' IN 11 MONTHS The fashion designer, who bought and renovated a New York City condominium last February and then relisted it, has now reduced the price to $8.9 million - 45 percent more than he paid. In February, Vacca and his wife Julie paid $6.15 million for the unit, in the Museum Tower, and first offered the apartment for $9.5 million last summer. With park and city views, the 3,250-sf unit has three bedrooms, three travertine-marble bathrooms and a large dressing room. The apartment also can be rented for $35,000 a month with a one-year minimum lease. DID HE OR DIDN'T HE? ONLY HIS BROKER KNOWS FOR SURE Yankee slugger Hideki Matsui has paid $10.5 million for a penthouse at the Heritage, one of the high-rises in Trump Place development on Riverside Boulevard, says the Observer, quoting sources. Real estate records show that he still owns a 52nd-floor apartment at Trump World Tower across town, which he bought for $3,157,900 in 2005. The ballplayer's sellers are Deborah and Rocco Landesman, the Broadway tycoon. The couple's penthouse hadn't been on the market when it was sold late last year, but, according to old floor plans, the 2,675-sf condo has three bedrooms (though the third is also listed as a library). Sales deeds for the penthouse and a $25,000 storage space were filed in city records under an anonymous corporation name, Nana Capital. Matsui's agent would not comment, and his real estate broker denied that he made the purchase. WELCOME TO PURGATORY With nearly one in six homes worth less than the mortgage owed on it, divorce lawyers and financial advisers around the country say the logistics of divorce have been turned around. "We used to fight about who gets to keep the house," Gary Nickelson, president of the American Academy of Matrimonial Lawyers, told the New York Times. "Now we fight about who gets stuck with the dead cow." Some divorce lawyers say that business has slowed or that clients are deciding to stay together because there are no assets left to help them start over. "There's an old joke," said attorney Randall M. Kessler. "Why is a divorce so expensive? Because it's worth it. Now it better really be worth it." After the recent boom-and-bust cycle, more couples own houses that neither spouse can afford to maintain or sell for what they owe. For couples already under stress, the family home has become a toxic asset. "It's much harder to move on with their lives," said Alton L. Abramowitz, a partner in the New York firm Mayerson Stutman Abramowitz Royer. BUY ONE, GET ONE FREE When five houses in Ireland's Lough Fern Heights development on the northwest coast in County Donegal failed to sell, developer PJ Doherty Construction tried an unusual incentive, according to the Real Deal. In early September, the company began offering those who bought one of the Lough Fern Heights houses a free, 410-sf apartment in another one of its developments, Privacy Beach Resort on the coast of the Black Sea, outside of Varna, Bulgaria. Three of the five units in Ireland were still available as of early December, the International Herald Tribune reported. A STORM IS GATHERING OVER PROPERTY TAXES Support for property-tax rollbacks is building from Arizona to New York, fueled by angry homeowners in some locales who are seeing rising tax bills despite plunging home prices, says the Wall Street Journal. Legislatures in New York, Georgia, Oklahoma and Wyoming are considering taking up proposals to curb property taxes in their 2009 sessions. In recent months, citizen groups in Montana, Nevada and Arizona have organized to get property-tax-relief measures on state ballots. Florida voters last year amended the state's constitution to increase a number of property-tax exemptions, lowering their assessments. New York City boosted property taxes by 7 percent effective Jan. 1, and other towns in the state are also sending out higher bills, even as Gov. Paterson and some legislative leaders are supporting a recent report that recommended a 4 percent statewide cap in property-tax increases. "Disbelief" is how 55-year-old John Kane, a financial adviser, describes his reaction to the assessed value of his home in Hampton, N.H., which soared 5.5 percent to $850,200 recently. His annual taxes jumped 30 percent, to nearly $14,000. "We see empty houses, for-sale signs," Kane said. "And they value our houses like this?" FOREWARNED, THEY SHOULDN'T HAVE PURCHASED Many people have bought second and third homes in golf developments for the high-end courses designed by well-known professional golfers, the tight-knit community and the plush clubhouses, notes the New York Times. But now a number of owners across the country are finding closed clubhouses and courses, lost membership fees and a direct hit to their home values as developers file for bankruptcy and can no longer maintain their courses. Of course, the same problems that have pummeled the real estate business generally have hurt the market in golf communities, leaving many developers unable to meet payments on their loans. The collapse last September of Lehman Brothers, a major investor in real estate deals and a backer of many golf communities, reduced the pool of buyers. In California alone, Lehman sank $2.5 billion into projects with the SunCal Companies, a community developer with many of them now in bankruptcy proceedings. And institutional investors that would have bought an ailing golf course when the economy was good are no longer interested. No, the Sky is Not Falling If the sky isn't falling, surely the times they are a-changin'. Prices have been going down, sales have fallen and inventory is climbing. But this truth is self-evident: If sellers in Manhattan were not now a year or two behind in their expectations, buyers doubtless would be clamoring to make offers. Many buyers are looking for the bottom of the market, yet they'll inevitably face bidding wars that can only increase prices once there is widespread perception of a rising trend line. Fully a year ago, this newsletter noted that Manhattan was no island with respect to the real estate market. The market already was declining nationally, but readers were warned that the then-robust Manhattan market had nowhere to go but down. See the warning here. A glance (in "The Big Apple" above and repeated below) at some of the market statistics just for the fourth quarter demonstrates how the market has changed. The numbers are contaminated by the amount of apartments in new developments that went under contract as many as two years ago, when prices were heading for their peak, and changed hands only during the quarter. By the end of the first quarter, now in its infancy, the figures are certain to confirm falling prices during and after the last three months of 2008. In its new report, the Miller Samuel appraisal firm accounts for only about a third of the contracts signed after September. The firm's respected CEO Jonathan Miller estimates that the number of signed contracts, which show current activity and which are not counted in the quarterly reports, has declined anywhere between 35 and 75 percent from the same period last year. In his view, today's prices ought to be 20-25 percent lower than they were in August for equivalent properties; on the whole, co-ops should be even lower, perhaps 35 percent. Although the numbers from quarter to prior quarter are interesting, an examination of longer periods can be especially informative. The median sales price in the fourth quarter was $900,000, a 5.9 percent increase over the same time last year (including resales and new development). Still, the median price of a resale property was down 3.6 percent, to $732,500. The average sales price of a Manhattan apartment was $1,485,102, up 3.1 percent year over year; this gain was caused by an increase in closings of new development properties. The average price per square foot reached $1,183, which is 0.3 percent higher than the previous year. The number of sales declined 9.4 percent, to 2,282, and the number of resales plunged 24.8 percent to 1,408 apartments. Listing inventory increased 39.3 percent to 9,081 units, and the average days on market swelled to 159 days, 28 days longer than the 131 days of the prior year quarter. The listing discount - the difference between the most recent offering price and the actual contract price - increased to 7.3 percent from 2.7 percent. The report, activity in Washington and residential construction this year in New York City collectively imply that:
This much we know from Miller Samuel and Miller's observations about the firm's report: The first quarter reports are bound to show continued growth in supply, diminished sales, longer time on the market and a sharp price decline (though it remains to be seen whether the bottom will be reached by then). But don't expect foreclosure activity to make the kind of dent that it has had in states such as Nevada, Florida and California (where some 60 percent of sales have been foreclosures and prices have dropped around 40 percent as a result). Sellers generally have failed to recognize the new reality even as buyers have embraced it. At the same time, properties that are priced on the market are finding buyers with relative ease. Unquestionably, the preponderance of sellers must adjust their expectations. What they wish for and what they can get for their properties represents a chasm that buyers are, understandably, unwilling to negotiate. The Fairy Godmother is no broker of real estate. Sellers cannot will a market to improve on their schedule, and those who purchased their properties more than a few years ago have to accept that their "profit" will be more modest, if still considerable, than they had hoped. Nor can those buyers who seek to establish a new bottom normally manage to do so single-handedly with insultingly low lowball offers, however successful they sometimes are. Neither seller alone nor buyer alone can shape the market. The market is the decider in chief. It alone - the market's totality - can prevent the sky from falling, and so will it do so in 2009 in a city of limited land and unlimited aspirations. Below is sampling of properties listed by various brokers and visited since the last newsletter: Upper West Side
East Side
SoHo Lofts
Some of Manhattan's Latest Listings Please click here to view available properties. (To view all photos, tours, floor plans and maps, please use Internet Explorer.) Click Here to Sign Up For Your Free Issue of Realty Digest!
©
2008 Service You Can Trust |
||
in activity of 40-70 percent compared with the same period last year. Contract price levels showed an average decline of 20 percent from August 2008. As a result of the 45-60 day lag between contract and closing date, a decline is anticipated in both the number of sales and closing price levels in the first quarter of 2009. The median sales price was $900,000, a 5.9 percent increase over the same time last year (including resales and new development). Still, the median price of a resale property was down 3.6 percent, to $732,500. The average sales price of a Manhattan apartment was $1,485,102, up 3.1 percent year over year; this gain was caused by an increase in closings of new development properties. The average price per square foot reached $1,183, which is 0.3 percent higher than the previous year. The number of sales declined 9.4 percent to 2,282, and the number of re-sales plunged 24.8 percent to 1,408 apartments. Listing inventory increased 39.3 percent to 9,081 units, and the average days on market swelled to 159 days, 28 days longer than the 131 days of the prior year quarter. The listing discount - the difference between the most recent offering price and the actual contract price - increased to 7.3 percent from a discount of 2.7 percent.
yield on mortgage repayment is the mortgage interest rate. In general, borrowers should repay their mortgage when their mortgage rate is higher than the return on alternative investments of comparable risk. Borrowers also can compare the mortgage rate with returns on assets that do carry risk. To justify selecting such assets, they should carry a return above the mortgage rate large enough to justify the greater risk. Many seniors are faced with deciding whether to liquidate financial assets to repay the entire mortgage loan balance. To help deal with this problem, Guttentag developed a spreadsheet that allows a borrower to enter any scenario for future interest rates and compare his or her wealth in every future month in the two cases: where the borrower liquidates assets to repay the mortgage at the outset and where the mortgage and the assets are retained. Find the Web site 
has strengthened, the economic woes have spread to potential New York home buyers across the globe, and thousands of New York financial professionals are collecting severance. Manhattan apartment prices, as a result, have dropped as much as 20 percent since the summer, said Jonathan Miller, president and chief executive officer of real estate appraisal firm Miller Samuel. HousingPredictor.com is projecting a 19.4 percent decline in Manhattan home prices in 2009. And Moody's Economy.com is predicting that condo prices in New York City, Northern New Jersey, and Westchester County will fall 29 percent by the fourth quarter of next year. But the speculative Las Vegas, Arizona, California, and Florida markets, which have already seen annual home-price declines of up to 30 percent, could see slightly smaller declines simply because values have already fallen so much, according to Mike Colpitts, editor of HousingPredictor.com. Another wave of foreclosures could be triggered next year as a flood of Alt-A and option adjustable-rate mortgages, which were given to people with decent credit, begin to recast. Still a few places are poised for a potential recovery. The housing market in and around Washington, D.C. could begin to recover, largely because the nation's capital has so many recession-proof government and defense contracting jobs, said Economy.com.
