January 28, 2009, 10:58 am
Matthew Haines is the founder of PropertyShark.com. He is a guest contributor to the Developments blog with posts on the New York City market. Read his full bio.
Last quarter, sometime around September or October, the residential real estate market in New York City came to a screeching halt. Real estate brokers report that almost from one day to the next buyers simply disappeared from the market. In October and November the number of contracts signed dropped to perhaps as low as 20% of the normal volume. And brokers report that contracts that were signed had prices between 15 and 25% lower than they would have expected for the same apartments six months before.
Suddenly New York has experienced what the rest of the country started 12 to 18 months ago. While prices fell around the country for all of 2008, prices for closed sales in New York City continued to rise even through the end of Q4. (Keep in mind that Q4 closings represent contracts signed in Q2 or Q3.) It’s rare that a fad, fashion or trend starts in a place like Phoenix, sweeps the rest of the country, and only arrives in New York when the rest of the country might well be at the end of it.
Some people point to the collapse of Lehman Brothers on Monday, Sept. 15 as the day when buyers simply disappeared. But we at PropertyShark think it was the downward plunge of the stock market that began at the end of September and continued for the next two weeks.
Normally traffic on our Web site, which features a database of properties in New York City, is predictable. Traffic is strong Monday to Wednesday. Thursday is usually a little lower, and Friday is off 20-25%. Absent external influences, traffic, measured internally in terms of unique logged-on users, is remarkably consistent from week to week. The exceptions are usually easily explained. Traffic drops on holidays. President Barack Obama’s inauguration dropped traffic by a good 20%. There are also seasonal variations. In general February to May has the highest traffic.
The stock market took its first sharp downward turn on Monday, Sept. 29, when the Dow opened at about 11,100 and closed at 10,365. Over the next two weeks it went down, down, down and briefly went below 7,800 on Friday, October 10th.
The first three weeks on the traffic graph (above left) show a normal pattern. From Monday to Thursday traffic is above the reference threshold of 1.0 every day. But beginning Sept 29th, the day the stock market took its first big drop downward, traffic on PropertyShark drops off. In the next three weeks traffic is substantially lower and reaches the reference threshold just three times. From our perspective, Sept.29th is the day when New Yorkers lost their nerve, and it was the collapse of the stock market that did it.
Though January got off to a slow start, as it usually does, this week traffic is back to normal, less than 2% lower than it was in September, before the stock market crash. From our experience at PropertyShark, we see this as a sign that the real estate market will start moving again, even if prices are lower.
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