Manhattan luxury housing feeling the pinch

updated 12:29 p.m. ET Jan. 6, 2009

NEW YORK - Park Avenue property owners are feeling a little poorer.

In what seemed like a New York-minute, prices of luxury homes in the area suddenly started to fall. One penthouse owner on Central Park West repeatedly slashed the asking price down to $9.9 million from an original $16.5 million — and still no takers.

"Up through the end of this summer, there were almost two markets in Manhattan, the high-end and everything else," said Jonathan Miller, president and chief executive of Miller Samuel Inc., a real estate appraisal and consulting firm.

That all changed after Sept. 7 when the government seized control of Fannie Mae and Freddie Mac, the mortgage finance giants.

"People started thinking the high-end market is just as vulnerable as the rest," Miller said.

The median sales price of a luxury apartment slipped nearly 4 percent to $4,022,000 between October and December compared with the same period a year ago, according to Prudential Douglas Elliman's quarterly report released Tuesday. The report defines the luxury market as the upper 10 percent of sales prices.

The market held up better for the merely somewhat-rich. The median price for all Manhattan apartments — $900,000 — gained almost 6 percent in the quarter, the report said. Another report from Brown Harris Stevens, also released Tuesday, showed the median sales price rose nearly 8 percent during the quarter.

But each report shows a weakening market overall. Inventory has soared and sales volume has slowed. And this is likely just the beginning.

"Most of these (fourth-quarter) sales were negotiated before Lehman Brothers collapsed. The anxiety has intensified. We'll see more of an effect in the upcoming quarters," said Gregory Heym, chief economist at Brown Harris Stevens.

The luxury market started to totter in September when the stock markets tanked and major Wall Street firms started to vanish. Wealthy homeowners have since cut their asking prices, trying to move properties before the bleeding gets worse.

"You've got a market where suddenly people don't have the wealth they had before. Those who helped to build Wall Street to the stratosphere don't know what their futures look like now," said Rick Goodwin, publisher of Ultimate Homes and its parent publication Unique Homes.

Nearly 42 percent of the 259 Manhattan homes currently listed for $10 million or more were dumped on the market since September, according to StreetEasy.com, a New York City listings web site.

Flippers at 15 Central Park West, dubbed the "Hedge Fund building," and other new condo buildings like The Plaza and Trump Park Avenue are trying to unload their investments.

Last year, 69 sellers with properties listed for $10 million or more cut their prices — 59 of them were in September or after. There were only 17 price increases last year, according to StreetEasy.com.

But the reductions could be in vain.

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