Buyers rejoice: Manhattan home prices finally fall

Thu Jan 8, 2009 1:05pm EST
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By Daniel Trotta

NEW YORK (Reuters) - It took war, the worst financial crisis since the Great Depression and the collapse of some of New York's famed investment banks, but Manhattan apartment prices are finally falling.

After months of looking at half-million-dollar apartments the size of a walk-in closet back home in Pennsylvania, Michael Germano noticed prices suddenly became negotiable and brokers no longer scoffed at lower offers.

"It probably started at the beginning of November, but things over the last three or four weeks have changed even more dramatically," said Germano, 30, a Smith Barney financial adviser.

"I pulled up one of the major New York brokerage firm's websites and did a search. That same search a couple weeks ago returned about three pages of listings and the other night it returned six pages, and the prices have come down noticeably over a couple of weeks," he said.

Manhattan -- a slender island of 1.6 million people sandwiched between two rivers -- has long defied real estate downturns in the rest of the United States. The New York City borough's tiny apartments and luxury townhouses remain in constant demand due to its standing as a center for international finance, culture and entertainment.

While housing prices in 20 metropolitan areas fell nearly 24 percent from their peak in May 2006 to October 2008, according to the Standard and Poor's S&P/Case-Shiller Home Price Index, Manhattan brokers kept reporting prices going up. The average Manhattan apartment costs about $1.5 million.

Brokers and buyers say the financial crisis -- most acutely symbolized in New York by the collapse of Lehman Brothers in September -- has finally shaken up Manhattan.

"I haven't seen this kind of market since the '70s," said Marilyn Harra Kaye, president of MLBKaye International Realty, a broker in Manhattan for more than 25 years. New York City lost 10 percent of its population in the 1970s when the city's finances almost collapsed.   Continued...

<p>A customer looks at listings on display outside a Brown Harris Stevens offices in New York, June 4, 2008. REUTERS/Brendan McDermid</p>