Everyone knows that NYC is a very expensive place.Â It wasn’t long ago, 1989-1990, when people were desperate to sell in NY and prices were very reasonable.Â We had the market crash of October 1987 and then a bit of a recession after that.Â It took about three years for the market to bottom and it spent another five years in a healthy phase before going vertical around the time I sold my last NYC property in 1995.Â (Isn’t that the way it always is?)
We’ve had some major financial market cracks but so far the NYC real estate market has held up remarkably well. Many things are still just amazingly expensive.Â The cost of doing business in NYC isn’t Dubai it’s very high compared to just about anywhere else in the region.Â
Of course it is the one-and-only NYC and the weak dollar means that plenty of foreign money finds things in NYC still "cheap" when adjusted for currency and high prices elsewhere (like London or Dubai.)Â
Still the loudest music playing in the NYC party tends to be from financial services which has been in a bad condition for the past year at least.Â First we had the evaporation of Bear Stearns and now Lehman brothers is another mighty bank that traded for $60 a few months ago and now is a single digit.Â We all know the story of leverage too well at this point.
We’ve watched it all with interest.Â We still count NY as one of our homes (albeit just north of NYC) and wonder if one day we may again set up operations inside the City.Â
Most say that low prices will "never happen" and we aren’t betting on it either.Â But we still remember buying the first NYC property in 1989 and seeing owners of lofts begging for offers that were equal to their outstanding mortgages and thinking that we would possibly offer 1/2.Â It was a painful time for property owners then.Â
Today plenty of projects have been cancelled and half-finished homes sit on the market around NYC.Â This was a result of the first round of declines and the implosion of The Bear.Â Now if we add more rounds of layoffs at Citi and a withering Lehman what will we get?
Could a long financial bloodletting continue and with a higher dollar attenuate foreign interest in NYC?Â Could the allure of even better places play a role?Â Who can say.Â The one thing that is for sure is that there’s a real lag between the fallout in the market and financial services and the change in prices for NYC area real estate.Â We seem to still be in the down leg of the financial fallout.Â Could mean the NYC real estate impact is well ahead of us.