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Current Market Conditions Favor Buyers of Manhattan Condos, For Now

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By : Suzanne james    99 or more times read
Until the last few months, the Manhattan condo market had been largely immune to the plunge in real estate values that has plagued most real estate markets around the country. Luxury Upper East Side condominiums and Manhattan new condos elsewhere on the island held most of their value as the unique nature of Manhattan’s economy and real estate market insulated them from the housing bust. However, in the second quarter of 2009, that insulation melted away. Manhattan real estate professionals say that during the three months that ended on June 30, 2009, condo prices fell between 13 and 19 percent with median sales prices ranging from $795,000 to $849,000. This represents a significant shift from the first quarter of 2009 when condo values ranged from a modest two percent loss in value to respectable gains of up to six percent compared to the first quarter of 2008.

Manhattan Condo Buyer’s Market on, Right Now

The uncertainties of the current Manhattan condo market have temporarily driven many of the speculators away from investing in condos and condo development projects. Investors who bought condos at relatively low “preconstruction” prices to turn a tidy profit when the condos were ready for occupancy have largely abandoned these investments for the moment. Another favorable facet of current condo market conditions for buyers is the fact that wealthy people who bought Manhattan condos as tax shelters for their money can no longer write off losses. Under new tax guidelines, it is no longer possible for investors to write off more in expenses than what they receive for rent on their condos. Rents on Manhattan condos have plummeted in the last year and what looked like a steady stream of income for investors has become a liability.

Huge Inventory of Unsold Manhattan New Condos

The steadily increasing value of Manhattan new condos fueled a condo development frenzy over the last several years and developers were putting up new condo buildings as quickly as they could. Nevertheless, the nature of the business is that development lags behind demand, and when the economy began to flag in 2008, new condo buildings were too far along in the development process to stop construction. This has led to a glut of unsold condos that has also put downward pressure on Manhattan condo prices that could favor buyers for another year at least. The Real Estate Board of New York has said that 11,023 condo units now under construction will be ready for sale by the end of 2010.

Tough Financing Options for Manhattan Condominiums

Yet another factor driving down Manhattan condo prices is the difficulty condo buyers are having with obtaining mortgage financing. Jumbo mortgages that exceed $729,750 exceed the loan limits of conforming loans backed by Fannie Mae and Freddie Mac, and most Upper East Side condos are priced very near or over that limit. Skittish lenders are asking borrowers of jumbo loans to put steep down payments of up to thirty percent on modestly priced condos and up to fifty percent on high-end luxury Upper East Side condos. This has understandably driven condo buyers to Manhattan condos on the lower end of the price spectrum.

Condo Sales Picking Up

Naturally, when market conditions favor buyers wanting to buy a condo for their primary residence rather than an investment, more buyers enter the market. According to one Manhattan real estate professional, condo sales jumped by more than 28 percent in the second quarter of 2009 as buyers sensed the bottom of the market was near. She said that lower-priced one bedroom and studio condos dominated the market and led to the surge in sales.

"It's value-based shopping. People are coming back into the market, but nobody is going to overpay."

A Fleeting Opportunity

While the Manhattan condo market is somewhat immune to the up and down cycles of most real estate markets, the window of opportunity for buyers will not remain open for long. Unlike most major American cities, New York City’s population is growing. As more buyers take advantage of current market conditions, the availability of lower-priced Manhattan condos shrinks and prices inevitably rise. Since there is little Manhattan new condo development currently under construction due to tight credit and wary investors, the condo market is expected to tighten in the near future. When that happens, investors will once again have the upper hand, well-informed buyers will see the value of their investments appreciate and cautious buyers who waited too long will have missed a golden opportunity.
P. Davis writes about the amazing lifestyle in a Manhattan Condo or Upper East Side condominium. Her favorite, is a restored condo residences in the hub of NY.

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