The Blue Pearl Philosophy

At Blue Pearl we love beautiful homes and derive a wonderful sense of satisfaction in providing knowledge and insights that help clients achieve ownership of their own apartment. And for those remodeling, we want to help you achieve your version of a castle that, regardless of size, is so exquisite and nourishing that you are truly happy to come through the front door and just stay put awhile – maybe for days at a time!

It is our sincere belief that architectural details, unique yet functional design elements, smart floor plans and quality finish materials…..taken together, should create a home that even without furnishings would evoke pure pleasure from its inherent beauty, efficiency and form. And when a homeowner adds their personal treasures – paintings, china, sculptings and beautiful furniture, the synergy between the architecture and furnishings should result in a home that can truly be called a work of art.

This column is dedicated to an exploration each month of something new, inspiring or practical that relates to the buying and remodeling process – and equally to creating something alluring and artistically significant to you. We believe quality, comfort and crafted details are more important than the size of an apartment. We think comfort comes as a result of personalizing a space and tailoring rooms to proportions naturally in harmony with the size of the human form itself. We’ll look then at ideas, stores or projects that in some fashion will aid the reader in achieving a functional yet eminently pleasing personal space to call home.

And we'll also write a few words regarding the more prosaic side of the purchasing process by providing a brief recap of some important, up-to-date market trends and information.

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The Blue Pearl Digest
May - June, 2008

Market Recap: We all get a little fatigued from a steady diet of sour news regarding the national housing market, and the economy in general. The numbers are for the most part bleak and seem to continue to go from bad to worse. But most readers thinking about buying here in NYC, or anywhere else for that matter, don’t want spin.

To the degree possible, most of us like relevant facts and cogent insights; we also like a measure of regional and nationwide information that gives a broader context and perspective to local happenings.

Manhattan has largely escaped the RE depression found in most other areas of the country. Can we continue to weather the storm?

Well, who knows? So far we have, but it’s natural to have some unease about where we are headed. We’ll share our thoughts on the matter as we wind our way through this month’s column, but up front let’s say that nearly everyone’s confidence in the economy (local and national) has been shaken a bit. Each of us has to deal with the reality that some decline in prices in some local market segments (entry level one and two bedrooms for example) is probably inevitable.

Let’s briefly recap then the state of affairs nationally, including some painful realities for those employed on Wall Street:

	CNN reports (on May 14) over a million homes are in foreclosure, and that 240,000 homeowners received a foreclosure filing (notice of default, auction sale or bank repossession) in April alone, up about 65% over the previous year. And as an aside: this affects the municipal tax base, increasing the possibility of curtailment of public services, utilities, etc. Some cities themselves may file for bankruptcy (Vallejo, CA for example).
	This month Los Angeles, Miami, Seattle and NYC foreclosures are all up dramatically from May 2007: up by 233% in Los Angeles, 73% in Miami, 68% in Seattle, and 50% in New York City (source Property Shark)
	According to the National Association of Realtors, the average price of homes nationally has fallen about 7.7% since January. Further the Case-Shiller national home price index published in May showed that housing prices have declined an average 14.1% over the previous 12 months. The national unsold backlog of homes is estimated by the NAR to be about 11 months supply (the highest since June of 1985).
	First week of June, oil hit within a few pennies of $140 a barrel. Every individual and every company uses petroleum in some form, so unless someone discovers an alternative quickly, prices of goods and services (including apartment building and maintenance costs) have to go up nearly across the board.
	Unemployment went from 5% in April to 5.5% in May (the biggest increase in more than 20 years according to the NY Times, June 6).
	Since July of 2007, 34,000 jobs have been lost on Wall Street, and another 20,000 are expected to go by mid-2009
	When you factor in casualties among companies that support the big Wall Street banking and investment firms, some predict as many as 100,000 jobs will be lost in NYC over the next few years (source Bloomberg, March 24.)

Well, after looking at these numbers we might say we’ve had our spinach, now let’s see if we can find at least a little Haagen Dazs to digest. With the above figures as a backdrop, let’s try and analyze how bleak things really are here by focusing on data highly relevant to the NYC Real Estate market:

Apartments currently for Sale: Is the inventory unusually high? The inventory of apartments for sale in Manhattan is right at 7500 units at the beginning of June (data from Street Easy and Miller Samuel). This is slightly below June 2006 inventory levels (roughly 7600), but up about 47% from the same period in 2007 (approximately 5100 units). According to Noah Rosenblatt at Urban Digs, the current sales backlog represents about 9 to 10 months worth of "unsold inventory" at the current sales pace of roughly 700-750 apartments per month (this is the average rate range since January ’08, though this rate is actually variable if looked at in any specific month over the period. This by the way is roughly the pace of sales in first quarter of both ‘05 and ‘06). So the bottom line today is the number of apartments for sale and the number of sales is roughly the same as two years ago; but down significantly from the volumes of 12-15 months ago when almost 3500 apartments sold in the first quarter (the first 6 months of 2007 in fact defined a period where the market caught fire again and sales and prices rose significantly). Our conclusion: the local market is not presently "flooded" with unsold inventory; the numbers are reasonably in line with several of the corresponding quarterly numbers of the past 2–3 years. And prices have held fairly steady since the beginning of the year, though many brokers indicate 5-7% discounts on asking prices are fairly common (as always the initial asking price is the crucial factor here). It is also becoming more common to negotiate discounts from developers in the form of sponsor paid closing costs, transfer taxes and legal fees on some new condo sales. If sales continue to lag or slow further, however, inventory may build over the coming months to levels that force prices down enough to allow properties to move at rates determined by the seller’s actual need to sell. Historically, many Manhattan sellers have not been in financial distress and could wait out a sluggish market period. Whether that will hold true once again is of course anyone’s guess. A seller’s willingness to not overprice his or her unit is going to be crucial to continued sales and the maintenance of a reasonably healthy demand/supply ratio.

How do foreclosures really compare in NYC, in each Borough, to national trends? The table below is from Property Shark’s monthly foreclosure report for May, 2008. You can see the actual number of foreclosures by month and Borough for the past year. Note that Manhattan has had no more than 15 foreclosures in any month over the past 12 (with an average of 10 foreclosures per month since the beginning of the year). The Manhattan foreclosure rate is on the order of 0.002% of all households (1 in 52,000). Nationally the foreclosure rate is roughly 0.2% of households (1 in 519), but in hard hit areas like Las Vegas and Miami, it is on the order of 3-4%.

Foreclosures for NYC over the past 12 months (data from Property Shark)

The big question of course raised by all of the factors discussed is: do they portend some type of dramatic price reductions in Manhattan? And should a person hold off buying?

As you might expect, a fair number of brokers, analysts and other professionals in the business don’t think so and here are their major points and basic arguments:

	If you are a potential buyer, it’s prudent and understandable to be a bit cautious or gun-shy, you naturally don’t want to overpay. But if you’ve moved to the sidelines, hoping prices fall in Manhattan to the levels found in desirable parts of Brooklyn and Queens, you are probably dreaming. This is just not likely barring a major capitulation among sellers, most probably coupled with rising interest rates and a much more severe collapse of the national economy. Blue Pearl Comment: these points are reasonable in our view.
	Prices are probably fairly close to the bottom of a broad trough right as we speak. Yes, the trough will likely deepen a few percent over the next 12 months or so, but we’re unlikely to see prices go much lower than fairly priced units today. And the exact bottom of a trough is only apparent with hindsight, so trying to time it exactly is futile. BP Comment: No one can argue that timing a market bottom precisely is essentially impossible. But the notion that we’re virtually at the bottom of the market now is of course highly debatable. Our position is prices broadly speaking will likely come down a bit over the next 6 to 12 months, but what the drop will be is anyone’s guess. Our experience today is that for less desirable units especially (typically those that are small, dark and tired with limited light, views or quality amenities) prices either have come down, or to actually sell will be required to come down on the order of 5-10% (or more) from the highs of early 2007. Pricing is complicated and varies with market inventory, buyer confidence, seller biases and preconceptions (rational or not); along with size, condition, finishes, building prestige, neighborhood and other factors. Let an experienced RE broker help you determine fair market value at any point in time; prices are a moving target, especially today. Because the Manhattan market is composed of dozens of mini-markets, it is always possible that some market niche will experience slight price increases, too.
	Inventory is a bit high, though certainly not excessively high. 7500 apartments on the market is roughly the same as two years ago, and only represents approximately 2-3% of the condos and coops in the city (the exact number of purchasable apartments is unknown and very hard to quantify precisely – many smaller units have been combined into larger homes, for example, without the updating of city records to reflect the changes – so Jonathan Miller’s estimate of (250,000 to) 300,000 is used here). It should be noted that higher inventory does mean more choices for buyers, too. BP comments: we agree, and would add our opinion that until inventory levels come close to doubling (approaching 15,000 units), it’s unlikely price reductions will be dramatic. Whether inventory will rise to this level is not predictable with any certainty; if the economy fails in a worst case scenario, inventory levels may in fact double. At this point we don’t expect this to happen, but who knows.
	Mortgage interest rates are currently very attractive (30 year fixed at about 6%), and very well could go up over the coming months due to rising food and energy costs (which are likely to fuel some degree of inflation, which means further cuts in the Federal Discount rate is less likely, perhaps even some increases will be required). Blue Pearl comments: this is an interesting point, a kind of double edge sword. For those ready and able to purchase today, locking in a low interest rate is desirable and perhaps a reason to consider buying now. But if rates go up, fewer buyers may qualify and demand may drop. Inventories may then build, forcing sales prices down at some point. In a market such as we have today, in the end each buyer must go with their own sense of things, weighing in their personal family and financial needs and circumstances.

In summary, we would say that the desire for the Manhattan lifestyle continuously creates demand for housing here. Because of the economic uncertainties, many potential buyers have understandably been taking a wait and see approach. Everyone knows the economy is in a precarious state, jobs are often not secure, lending requirements have tightened dramatically and general consumer confidence is down. So our experience and that of many brokers we know is that clients are naturally careful, watchful and a bit circumspect. And the result is a fair amount of pent up demand. This leaves the inevitable question: what to do now?

Well, we believe people should consider buying when the circumstances are right for them. For most this will usually be when they find a unit that authentically meets their needs and tastes; their finances and employment factors are solid; they comfortably meet the new mortgage requirements (often a minimum of 20-30% down, max 30% total debt to income ratio, 12 months living expenses in the bank); they will stay in their home for at least 3-4 years and at bottom they feel the apartment they love is fairly priced.

Over the long haul, Manhattan prices will go up…..the rate however is likely to be relatively flat in many market segments for a few years, though at some point the cycle of more normal (3-4%) annual increases will resume.

In other words if it is a good deal, our view is go for it if all the elements feel comfortable to you.

Latest Freddie Mac mortgage averages: 6.09% for a 30 year fixed, 5.51% for a 5/1 ARM.

The Artistic Dimension: If you’re passionate about art we believe you should become an art collector.

We at Blue Pearl love and collect art ourselves. In each of our Digest columns we feature artists who we believe are talented, inspiring and whose works in some significant measure would add a wonderful sense of grace, epic narrative, emotional engagement, beauty and enrichment to your home and lives.

This month we want to present works found in an exhibition entitled:
The Coexistence of Silence and Dynamism.

Works by the following artists are featured: Lina Kempner, Joel Conison, Roshan Houshmand, Becky Yazdan, Laurie Aron, Hariclia Michailidou, Vlatko Ceric, Patrick Maloney, Cherie Sampson, Veronica Byun, and Monique Ford.

This exhibition presents a diverse series of views exploring the worlds of abstraction and matter, form and emptiness. Each of the artists selected for this exhibition explores a sublime awareness which arises from the co-existence of opposites.

Please visit the Rhonda Schaller Studio at 547 W. 27th St., 5th Floor, in Chelsea where the work will be on view from June 5th through June 26th.

The Blue Pearl Digest
March – April, 2008

Market Recap: Most New Yorkers are forever interested in the state of the local Real Estate market – what apartments cost, where prices are headed. And for those already living here, or trying to get here, what could be more natural. The city is expensive, yet so desirable. Those that currently own want some measure of continued price appreciation, those looking to move here want to know what they can afford.

We all of course understand the allure: a world class city and financial center with jobs, diversity, energy and vibrant creativity, plus every cultural amenity known to human kind – the best of everything basically.

This demand for a unique and special lifestyle (on a tiny island of about 22 square miles) is at bottom what really keeps prices so high; we all realize that it’s the life style that people are really paying for here, whether one rents or buys.

So most of us want to stay up to date on housing costs and to the degree possible aware of indications as to where the market may be heading in the coming months.

That said let’s look at what can be gleaned from the Q1 Manhattan sales data for 2008 (just released April 1st by Miller Samuel).

First the good news: a rather surprising set of numbers emerge upon a first look at the data:

	The average apartment sold for $1.7 million, up 33% over 12 months; up 19.7% from the 4th quarter 2007.
	The average price per square foot was $1289, up 20.5% year over year; up 9% from the previous quarter.
	The median was $945k, up 13% from the prior year quarter; up 11% from the prior quarter.

Miller-Samuel points out however, that this spectacular data was skewed by two high priced developments that saw a number of exceptionally expensive apartments close during the period.

If the contributions from sales at 15 CPW and The Plaza Condominium are excluded, the average sales price drops to $1.54 million, still up 19% over the prior year quarter; the average price per square foot to $1220, up about 14% year over year; and the median drops to $925k, up about 11%.

These are still very solid numbers and certainly impressive. But we must caution too that they represent closings on contracts signed roughly 6 to 12 months earlier (depending on whether for resales or new development purchases).

As an alternative to Miller Samuel, it is interesting to look at the average sales prices for different sized apartments as put out by Brown Harris Stevens for Q1 2008:

Condos (includes data from 15 CPW and The Plaza)

Co-ops

Now there are more 1st quarter data to explore, and as we’ll see some of it gives us reason to take a breath and realize that along with the positive numbers, there are indicators that suggest the market right this minute is slowing a bit. Nothing to panic over, but any intelligent buyer must be aware of the facts today and what they may portend.

Before trying to summarize what all the numbers mean in regards to the current state of the RE market, let’s briefly review the reality in the financial markets and the general state of the global economy.

On March 13, Standard and Poor’s issued an analysis of the sub-prime mortgage debacle estimating that world-wide about $150 billion in assets have already been written off, and before the bottom is reached another $135 to $150 billion will also likely be lost (bringing the total to about $300 billion).

Many other analysts predict that even these numbers are too conservative.

It goes without saying but let’s say it anyway, that is a lot of investor wealth to simply evaporate into nothingness.

The subprime implosion is of course why Bear Stearns (the 5th largest US investment bank) had to be sold off in mid-March at $10 a share in a fire sale to Chase bank. And it’s estimated that something on the order of 5000 to 7000 Bear employees will probably lose their jobs (most of these in the fixed income trading division, equities & investment banking sectors).

Across Wall Street, it is estimated that as many as 30,000 may yet receive a pink slip before stability is restored.

All of us see these headlines almost daily now, and it affects us in several predictable ways.

If you happen to work in the financial services field, you may have some insecurities about your own job stability. Even if you don’t, the Federal Reserve Board says we are likely on the verge of a national recession. Credit requirements for mortgages are very stringent; and it is self evident that energy costs are through the roof.

All of these looming factors: potential for layoffs in the financial sectors, tight and limited credit, and in general a shrinking national economy….. inevitably affect investor confidence.

What we see at Blue Pearl as an outcome of all this is that potential buyers today are naturally a little nervous about the current state of the market. Most are a bit nervous about paying too much for an apartment, and are careful and cautious in assessing whether to buy or stay on the sidelines.

And this caution is reflected in the sales data we just looked at: inventories are rising (though they are not yet unusually high) and sales are falling. Prices are still high, but what we see with our own clients and hear from other brokers is this: units priced near last year highs are often not selling today.

Sellers who price 2-5% (or more in some cases) below the recent highs often get traffic and offers. As a buyer, you of course have to have a competent broker provide you with recent “comps” and assist you in evaluating fair market value for a particular unit today.

Everything now more than ever depends on location, size, condition, light, views and amenities of a particular apartment. And correct pricing.

Our advice is if you feel you have a stable job, you have a solid down payment (minimum of 20%, though 30% or more is better), you have a minimum of 12 months of total living expenses in savings as a rainy day reserve fund (some coops require more of course), you are going to live in your apartment for 3-5 years minimum, and you find an apartment you love at a good, fair price (one you are truly comfortable purchasing)……go ahead and buy! Fairly priced units, even bargains are out there; don’t be afraid to negotiate. Manhattan real estate will for the foreseeable future remain a good long term investment.

Latest Freddie Mac mortgage averages: 5.88% for a 30 year fixed, 5.56% for a 5/1 ARM.

The Artistic Dimension: If you’re passionate about art (and if you aren’t already), you should become an art collector.

We at Blue Pearl love and collect art ourselves. In each of our Digest columns we feature artists who we believe are talented, inspiring and whose works in some significant measure would add a wonderful sense of grace, epic narrative, emotional engagement, beauty and enrichment to your home and lives.

This month we want to present works found in an exhibition entitled: On Faith.
This show features the work of 23 emerging, contemporary artists presenting a diverse series of views on faith, morals, beliefs and aesthetics. A variety of media and viewpoints are presented; from oil to etchings, digital prints to poured resin.

Please visit the Rhonda Schaller Studio at 547 W. 27th St. in Chelsea where the work will be on view from April 17th through May 10th.

The Blue Pearl Digest
January -- February, 2008

Market Recap: Many readers understand that median price changes (half the sales are above the median price, half below) are in many ways the most relevant statistic regarding the state and direction of the market.

Let’s look at the sales data from the 4th Quarter of 2007 by first focusing on the median. Miller-Samuel’s report shows that the median price for an apartment in Manhattan was $850k last quarter, up 6.4% over 12 months, but down a hair (1.7%) from the 3rd Quarter ($864k).

If we look at the numbers by apartment type, the median for a co-op was $675k, up 3.8% from the prior year, and up 1% from the prior quarter. And the median for a condo was $1.1 million, up 6.8% year over year, but down 1.8% from last quarter.

The average price for an apartment was $1.44 million, up 17.6% over the year, and up 5.1% over the previous quarter. The average price per square foot came in at $1,180.00, an increase of 18.2% from the prior year quarter, and up 3.1% from the previous quarter.

The average price for condos was $1.75 million, for co-ops was $1.142 million.

Miller-Samuel notes that significant high-end Condo sales at 15 CPW and The Plaza greatly skewed the averages, and that’s why the median is a better indicator of overall market conditions.

The number of sales was 2518 units (1342 of these were condos), a solid number when compared with the average for the 4th quarter over the past 5 years, which was 2202 units.

The number of apartments for sale (5133) declined by 13.5% relative to 12 months earlier (though down only 1.4% from the prior quarter). The average time to sell was 131 days, a drop of 149 days year over year, but up from 123 days in the 3rd Quarter.

It’s also interesting to note that the average price per square foot in four major sectors of the city was as follows: East Side $1331, up 33%; West Side $1195, up 13%; Downtown $1138, up 13%; Uptown $759, up 33%.

What does it all mean in the context of the market today, early 2008? Well no slump yet -- it’s apparent we continue to be in a kind of parallel reality of some sort on the Island.

As the data just reviewed indicates there is a kind of stubborn resilience to the market – there were modest year over year gains, and the slow down many expected just hasn’t happened.

A deteriorating national economy naturally remains a significant concern (the national housing market remains in its worst downturn in 27 years), along with billion dollar losses in major financial companies and tighter lending requirements. Will these factors at some point impact the local market, affecting employment levels, bonuses and buyer confidence?

Well most people don’t live with their heads in the sand and are well aware that prices have remained high, yet a recession remains a real possibility too.

Price gains as seen in 2007 are certainly not guaranteed in ‘08. A slowdown or even downturn in the market is a real possibility. Many would say however that the market is likely to continue to be quite strong, with prices on average remaining relatively "flat" over the coming months.

The experience of many brokers right now remains similar to what it’s been for 3-4 months, or more. Buyers for the most part are naturally somewhat cautious and careful, but there are plenty willing to buy if an apartment is priced right. And foreign buyers continue to shop here because of the weak dollar; about 1/3 of condo sales were to overseas purchasers.

Truthfully, if a buyer is going to stay in their home for at least 3-4 years, the local market likely remains a solid investment. No guarantees of course, but most reasonable professionals in the business would support this sentiment.

So if you find a unit you love, find it to be fairly priced, make an offer – especially if you feel your own financial reserves and job feel secure, and your time line to stay put in your new home is several years at the minimum. An additional factor to consider is the reality that rents (even though in some cases dropping a tiny bit) are still so high that buying really does in many cases make the most sense.

Current Freddie Mac average 30 year rate is 5.72%. The current 5/1 arm average is 5.19%.

The Artistic Dimension: If you’re passionate about art (and if you aren’t already), you should become an art collector.

We at Blue Pearl love and collect art ourselves. In each of our Digest columns we feature artists who we believe are talented, inspiring and whose works in some significant measure would add a wonderful sense of grace, epic narrative, emotional engagement, beauty and enrichment to your home and lives.

This month we want to present works found in an exhibition entitled: Mix it Up
This exhibition presents the work of eight outstanding artists; an array of contemporary mixed media that comment on society’s mixed messages; works that use juxtaposition as a visual vocabulary along with video, found objects, wallpaper, thread, paper, dirt and clay.

Please click here to view the diverse range of talent, media and soulful creations.

Or visit the Rhonda Schaller Studio in Chelsea where the work will be on view through March 1st.

The Blue Pearl Digest
November -- December, 2007

Market Recap: We’re into the last two months of the year and buyers, sellers and brokers are all a little uncertain as to where the market is going next. It will take a little discussion but let’s look at why.

First, for perspective, let’s review recent market performance. It’s really just a fact that third quarter sales statistics looked pretty darn good, especially relative to the rest of the country. Nationally for example median September new housing prices were down about 7 ½% from the prior year, the biggest drop in 37 years. But locally it was a different story.

To recap briefly using data from Radar Logic (Miller-Samuel), the average sales price for a Manhattan apartment for the 3rd quarter of 2007 was $1.37 million, up about 6.3% over the prior year quarter. Average price per square foot was $1,144, up 9% over 12 months. The Median sales price was $864k, a 2.3% year over year increase.

If we break out prices by apartment type, we find for Condos the average price per square foot was $1,278 (up 9% over 12 months); for Coops the average was $1,021, also an increase of about 9%. Going further, NYC is really composed of many mini RE markets and for those of you that would like to get a more detailed picture of it, click here.

The number of sales in the quarter was 3,499 vs. 2113 sales in the prior year quarter, an increase of roughly 66%. The increase in sales dropped inventory levels by about 32%, with 5,204 units (coops and condos) on the market this quarter vs. 7,623 available in the third quarter of 2006.

In sum, prices last quarter remained at near record levels, the number and pace of sales was strong, average listing discounts were on the order of 2% (percent change from last list price and the contract price), and days on the market averaged about 120, down from about 150 days a year earlier.

It’s probably fair to say that all of these figures taken together support the notion that buyers and sellers on balance over much of the past 12 months have been roughly on the same wavelength.

Most sellers brought their asking prices into closer alignment with the actual state of the market. And many buyers stepped up to the plate.

This alignment of expectations with demand/supply realities resulted in strong sales volumes and modest, generally single digit price gains across all Manhattan neighborhoods. And as one would expect, those sellers who priced their homes too high and decided to hold firm, expecting double digit price increases to somehow start up again, never signed a contract.

And yet despite all of the recent positive data, we find a question or two tugging a bit in people’s minds: "what’s happening with the market now?" And "where are both the local and national economies headed?"

All of the above rosy, third quarter numbers while certainly important and impressive, reflect closings on contracts signed in the spring and early summer.

Everyone with a pulse is aware of the credit crisis (see last month’s column for a detailed explanation). And big lenders continue to write off bad sub-prime securities. On Nov. 27th Wells Fargo announced a $1.4 Billion charge primarily related to losses on home equity loans, just one of many such charge-offs reported in the past 3 - 4 months.

And also in the news here at the end of November is the announcement that through some apparently shady or at the least questionable dealings the nation’s largest mortgage lender, Countrywide, may have received in effect a tax payer bailout on the order of $50+ billion. CNBC news reported that this lender has recently taken (borrowed from tax payers) cash advances of $51 Billion from the Atlanta branch of the Federal Home Loan Bank system.

The worry is that Countrywide’s deteriorating mortgage loan portfolio, which is the collateral for these Federal loans, is currently grossly overvalued and will likely sustain tremendous losses at some point, and tax payer’s in effect will "repay" these loans to the Atlanta branch, not Countrywide.

Federal Regulators are just now starting to look into these transactions to determine whether proper due diligence was performed, and if anything illegal has taken place. As with the Savings and Loan scandal in the late 1980’s, its likely we’re in for a long investigative process to figure out what’s really going on with this bailout, who the culprits are, punish the guilty and restore health, confidence and liquidity to the mortgage banking markets.

It’s interesting to note too that Countrywide Founder and CEO Angelo Mozillo has sold roughly $140 million worth of his stock in the company over the past year, just ahead of the meltdown that’s playing out now.

And lastly, according to Implode-O-Meter 192 lenders have gone under since late 2006.

Another local concern is that no one knows for sure how large Wall Street bonuses will be at year’s end. These have traditionally been a significant source of fuel for a healthy RE market in the city. Many fear they’ll not only come in low, but a fair number of layoffs may also be likely.

So with this kind of news as a backdrop, what are brokers seeing and hearing as we enter December?

Not surprisingly many tell us, and this is also our direct experience with our own clients, that buyers are understandably becoming a bit more cautious. Asking more questions, sharpening their pencils as they analyze a prospective deal – giving careful, thoughtful consideration as to where the market may be heading, to what constitutes value and what the fair market price is today. Some brokers have noticed a drop in open house attendance, though many say the potential buyers who are actually coming through are serious and well qualified.

And most professionals in the business would call all of this added caution and scrutiny healthy. The double digit price increases of much of the past 5 years were unsustainable. And we appear now (after a bit of a resurgent buying spree last spring) to once again be entering a cooling off period where serious buyers are still buying, but prices are at best rising a few percent a year. Or perhaps over the next 12 months they’ll actually fall a few percent. Either scenario is plausible and no one knows for sure how things will play out. It just may be that right as we speak the market is (broadly speaking) tipping slightly in favor of buyers, though it is probably yet too close to call with certainty.

So even though we’ve discussed some very legitimate concerns most buyers have today, many brokers report that sales are still proceeding at a good pace as we enter the final month of the year. It is the asking price that is crucial in today’s market. As long as there is a reasonable rationale for pricing an apartment, there will likely be a buyer.

Perhaps we really will begin to see the effects of lenders tightening credit requirements in the number of closings and final sales prices that come out in the 4th quarter numbers. We should note that most apartments selling above $5 to $10 million are often all cash deals, and the credit crunch would normally have little impact on this market segment. The impact of (potentially) higher interest loans requiring higher down payments and lower debt/income ratios is going to affect first time buyers the most. Anecdotal stories indicate this is already happening among broker’s representing clients looking for entry level one or two bedroom apartments.

Right now probably the best we can say is that among most home owners and brokers, there’s still a measure of cautious optimism, with many subscribing to the belief that we’ve settled into a more “normal” cycle of the market, where annual price increases will be modest, perhaps a few percent a year for the foreseeable future.

But any intelligent person realizes too that the national economy is shaky, with some predicting a recession in much of the rest of the country. And if this happens Manhattan and Wall Street will inevitably feel the effects in terms of lower stock prices, higher lending rates, reduced spending, higher unemployment and perhaps most importantly a loss of confidence among all segments of society. We may be on the cusp of a sea change where many potential apartment buyers are going to return to a wait and see approach, unless prices are perceived as quite favorable given the economic climate, and their own personal financial situation is also regarded as stable and reasonably secure. We think it is the next 12 to 18 months that has the most uncertainty with regard to local real estate market conditions. For the long term, Manhattan real estate is likely to remain a solid investment. Much depends on your personal time line regarding how long you plan on living in an apartment once you buy it; and confidence in your own financial circumstances.

Current Freddie Mac average 30 year rate is 6.10%. The current 5/1 arm average is 5.86%.

The Artistic Dimension: Are you passionate about a mix of color, texture, form and sculptural elements in your home? Do you enjoy the emotional interaction of beautiful furniture and what hangs on your walls? If so it’s likely you are passionate about art. And if you aren’t already, should become an art collector.

We at Blue Pearl love and collect art ourselves. In each of our Digest columns we feature artists who we believe are talented, inspiring and whose works in some significant measure would add a wonderful sense of grace, epic narrative, emotional engagement, beauty and enrichment to your home and lives.

This month we want to present works found in an exhibition entitled: Small Rays of Hope and Fragments of a Larger Idea, an inspired feast of 224 collectable small art works. This exhibition celebrates the vision, inspiration and yearnings of 135 artists from 20 countries.

Please click here to view the diverse range of talent, media and soulful creations.

Or visit the Rhonda Schaller Studio in Chelsea where the work will be on view through December, 20th.

The Blue Pearl Digest
September -- October, 2007

Market Recap: Most of us are quite aware we live in a unique real estate market here in NYC, at least to this point in the new century.

But for perspective let’s spend a few paragraphs reviewing what’s happening nationally, because even if we live on a unique Island, at some point the state of the national economy will have to have some affect on local markets.

A just completed market forecast conference (sponsored by the National Association of Home Builders) included various presentations by leading economists and experts in the field. The consensus was that while the national economy will likely weather the downturn seen to this point most everywhere outside of Manhattan, there is still considerable risk of a recession in many areas of the country, especially through 2008 and into 2009.

Some economists are saying housing prices on average nationally must fall another 5% to 7% (this drop on top of the average 6% to 8% reduction already experienced over the past 12 months) before inventories can be brought into balance with demand, finally stabilizing prices as a result.

The National Association of Realtors also just reported that the current pace of home sales across the country is the slowest it’s been since 1998 and the number of homes on the market is at a 12 year high. If mortgage failures continue, the glut of unsold homes will of course increase and prices will be driven lower.

And all of this gloomy news is made even more painful by the fact that easy credit has largely dried up. Mortgages are available, but the requirements are much stricter than they’ve been for the past 6 years (thus reducing demand even further).

For additional insight into how the credit crisis has come about, and what it means, let’s take a look at comments by financial consultant George Boelcke:

Yes, there’s a big correction (taking place in the credit markets), and whenever something goes wrong, the pendulum swings too far until things get back to some kind of "revised normal" state. But before we put that into perspective, what happened in the first place to get us here?

Not that many years ago, a financial panic used to be a run on banks where people were physically taking their cash out, based on rumors or financial panic. The 21st century equivalent is securities financed by hedge funds, banks and other large institutions.

Mortgage loans are funded, packaged and immediately sold to investors.

They’ve provided returns above what other investment vehicles were yielding and investors couldn’t get enough of them. After all, we were in a low interest world and these loan portfolios were high rate returns. Besides, they were rated by bond rating agencies such as Standard & Poor and Moody’s. (Their involvement in rating these package deals is now the subject of a huge lawsuit).

Historically low interest rates were also the biggest marketing tool for mortgage brokers. Every company was selling 15 or 30-year fixed rate loans at the best rates in history. But in order to get a bigger market share, they had to become more creative in offering adjustable rate mortgages (ARM), temporary teaser rates and the likes, all arguably marketed to be "better" than the best deals available, often known as "too good to be true".

CNN’s Glenn Beck compared it to a big drinking binge, commenting that we spent the last few years in a low-interest happy hour. Lenders kept pushing the envelope, getting more and more "creative" because they continued to have a ready market for financing these portfolios at pretty low rates with almost built-in risk premium.

In 2001, the difference between a totally secure ten-year Treasury bond and a junk bond was over nine points. By 2005, that spread was down to four points, making these high-risk loans possible, and by May of 2007, it was down to 2.6 points. (It’s doubled since then).

With thousands of companies looking for business, and having easy access to cheap money, there was another huge group of people that hadn’t been targeted to any great degree. It was the approximately 20% of the population with bad credit, politely known as subprime. Realistically, there was a reason this group didn’t qualify for credit based on their past track record. But the market was really not charging much of a risk premium, so to make some big returns and huge gains in market share, higher rate mortgage loans were made available to these types of clients.

From there it was just a small step to lower down payments, to no down payment loans, to 40 and now 50-year loans and Ninja (no income, job or assets) loans that didn’t require much documentation, no verifications and many stories of fabricated incomes and assets. It became the equivalent of "don’t ask don’t tell" – somewhere between questionable or kinky and fraudulent.

All of these were combined, mixed together, packed up, and sold to investors, including more than 3,000 hedge funds who couldn’t get enough of the big returns these investments were yielding. And investors were doing the same things the mortgage loans were doing: (making) A small down payment and borrowing the rest to create some massive leverage (some loans were used to purchase these mortgage backed securities, some loans were made in the form of "lines of credit" used by large lenders to replenish their own lending reserves and fund additional mortgages, but in either case the loans were "secured" by the underlying value of the securities themselves. As the securities lost value, the owners – hedge funds, large lenders, institutional investors – were subject to margin calls, many calls so big, involving hundreds of millions or even billions of dollars, that some lenders and funds failed completely, and were put out of business).

The trouble started with the subprime mortgage market. What a surprise when a bunch of these high risk loans started to default.

It was the first reality check when investors slowly started to take a realistic look at the risks they were really holding in their investments (not just looking at the returns). It became somewhat of a view that perhaps there was way too much exposure and way too low a rate for the exposure in their portfolios.

The questioning and wake-up calls were more about psychology and a mindset of: "What else can go wrong? What else is out there and happening that we don’t know about yet? What are we actually invested in? I’m not getting enough return for the risk. Is there more trouble just around the corner? I gotta get out!"

It became a crisis when a number of hedge funds at major brokerage firms collapsed as investors wanted to cash out. That brought it to the attention of the world. Then in Europe, a huge French bank froze a $2.5 billion fund after it lost $400 million, which piled on to the uncertainties and worries, and markets hate uncertainty.

When these investors, largely through hedge funds, needed to cash out, it meant sell sell sell in order to raise cash. It started by first attempting to sell questionable or low-yield investments. But you can only sell if there’s a buyer, and nobody wanted to buy these high risk loan portfolios (mortgage backed securities). At that point, the market had pretty much dried up when investors realized that the risk they were taking on was too high for what they were being paid. But it was more like every car buyer now wanted to do an inspection before purchasing.

Deals were still being made – it just took some extra steps now. In other words, the days of no documentation, anyone with a pulse can get a loan, or no down-payments to high risk applicants, are (largely) over.

In the mortgage market, there is no lack of money and there isn’t an overall credit crunch, or problem getting funding for good quality loans.

But we are back to some kind of normal where risk equals rate. (Today) you’ll need a decent FICO score, a down payment, and actually have to prove you’ve got a job and sufficient income to make the payments. Doesn’t that seem reasonable? Wouldn’t you want that before you lend out hundreds of thousands of dollars of your own money?

But that leaves two big issues:

Subprime borrowers with no down payment loans are now in big trouble as over 17% are 60 or more days in arrears. Is it better to have owned and lost than never to have owned at all?

According to Fortune Magazine, there are still over $570 billion of adjustable rate mortgage loans which will reset between now and end of 2008. Their average increase in payments will be more than $1,000. It includes prime borrowers who will see their payments increase an average of $450, but the big hit will be the teaser rate borrowers who will see their payments almost double, increasing an average of $1,825.

So where does all of this leave us here in Manhattan. Well, even though we’re surrounded in a sense by dismal numbers from the rest of the country (and qualifying criteria for mortgages are now more stringent here too, as elsewhere), the local market is still chugging along quite nicely, and this is once again indicated by the 3rd quarter sales statistics just released by broker Brown Harris Stevens (these of course are lagging statistics, but accurate up through October 1st ; how the credit crunch will affect future sales in the city is yet to be determined, of course).

The average sales price for an apartment this quarter is up 26% over a year ago, reaching $1.3 million. The median rose 12% to $815,000.

Average condo prices rose 38% over 12 months to $1.6 million. The median went up by 20% to $1.03 million. For Coops, the average year over year sales price was up 10% to $1.056 million.

It’s perhaps more instructive to actually break the data out by apartment type, size and sales quarter. When this is done, all show single or double digit price gains over the 12 month period.
However, as can be seen in the tables below, most coops actually dropped very slightly, a percent or two, in average sales price when compared to the numbers for the 2nd quarter of 2007 (studios being the exception). For condos, it was the reverse. Most prices regardless of unit size went up from the 2nd to 3rd quarter (the exception being 2 bedrooms, which showed a miniscule drop).

Here are the actual sales numbers for Coops for the 3rd Quarter (Brown Harris Stevens):

For Condos:

New condos accounted for 30% of all sales last quarter.

As has been the case for some time now, a strong local economy, bonus money from Wall Street and foreign investors have played a significant role in keeping prices up. The market is still basically strong, stable and resilient.

Continued turbulence and rising rates in the credit markets, including possibly more failures among lenders and hedge funds, are the big unknowns right now. If mortgage money, especially funds available for jumbo loans (those over $417,000), becomes significantly harder to obtain, we may see demand drop – even here in Manhattan – and prices come down a few percent over the coming months.

The Artistic Dimension: Are you passionate about a mix of color, texture, form and sculptural elements in your home? Do you enjoy the emotional interaction of beautiful furniture and what hangs on your walls? If so it’s likely you are passionate about art. And if you aren’t already, should become an art collector.

We at Blue Pearl love and collect art ourselves. In each of our Digest columns we feature an artist we believe is talented, inspiring and whose works in some significant measure would add a wonderful sense of grace, epic narrative, emotional engagement, beauty and enrichment to your home and lives.

This month we want to present photo dramatist Aphrodite Desiree Navab. She is an Iranian American artist who creates photographs as a form of identity centered art.

Her work consists of color pigment prints which are solemn, funny, and contradictory - yet starkly luminous. The themes of coexistence and metamorphosis permeate her political and cultural critique of life. She explores the unspoken issues of being a woman in fear and in power, dealing with war and peace, the always haunted sense of awareness deeply ingrained and compelling within us since 9/11 - is conjured and dealt with, with strong humor as she uses her own body and dual cultural identities as subject matter.

Aphrodite has a PhD in Education from Columbia University and is an award winning artist with works in a number of prominent museums and permanent collections. Have a look at her inspiring photographs at the Rhonda Schaller Studio website, and visit the studio in the Chelsea gallery district to see her current main gallery exhibition.

The Blue Pearl Digest
July – August, 2007

Market Recap: During this mid-summer period, sales inevitably slow a bit. But, all in all, the market seems to be maintaining a fairly strong pace. In fact, it begins to sound like a broken record but Manhattan seems to continue to move in the opposite direction relative to the rest of the US real estate market. Here, prices have been rising slowly but steadily since January of 2007, up about 8% on average.

Good apartments in good condition that have some natural light and aren't cramped (and that are priced right) typically sell fairly quickly. Many brokers today complain of the lack of "good" inventory – they have plenty of interested buyers, but the number of desirable apartments available is limited.

Let' review briefly the second quarter data for Manhattan. The number of sales from July of 2006 to July of this year went from about 2000 apartments sold to nearly 4000 (the distribution: approximately 60% condo, 40% coops). And inventory dropped about 32% over this period. Coop inventory dropped 40 percent, condo 22% (condo inventory is replenished rapidly because of numerous new developments coming on line almost monthly). Relative to last quarter, sales are up about 13%.

The median sales figure was $895k, an increase of 1.7% over the 1st quarter.

Miller Samuel reports that the average price of an apartment in the second quarter was about $1.33 million, down about 3.8% from 12 months earlier, but up about 3.3% over last quarter.

The average paid for a condo was $1.49 million, for a coop $1.13 million. The price difference is largely due to greater demand for condos driven by the reality of easier access (i.e. essentially no board approval necessary for condos) and if required, an easier process for renovations. The lower coop average is partly skewed by the fact that more studios and 1 bedrooms sold this quarter than a year ago.

The year over year average price changes based on number of bedrooms is as follows:
studios are down 1.9% to $442k. For 2 bedrooms, there was a decline of 1.7% to $1.63 million. For 1 bedrooms, the average price increase was 2.3%, to $741k. And 3 bedrooms were up 17.6% to $4.2 million; 4-bedrooms up 36% to $9.2 million.

Average time on the market is about 117 days, down from 144 a year ago.

As long as the local economy remains strong, wall street bonuses continue to flow, foreign buyers keep purchasing (due to the weak dollar) and mortgages remain accessible…..the real estate market will likely remain healthy and stable, with modest growth a reasonable expectation for the coming months. A change in one or more of these factors, however, could flatten growth; a big change could reverse the trend fairly quickly.

The Artistic Dimension: Are you passionate about a mix of color, texture, form and sculptural elements in your home? Do you enjoy the emotional interaction of beautiful furniture and what hangs on your walls? If so it’s likely you are passionate about art. And if you aren't already, should become an art collector.

We at Blue Pearl love and collect art ourselves. In each of our Digest columns we now feature an artist we believe is talented, inspiring and whose works in some significant measure would add a wonderful sense of grace, epic narrative, emotional engagement, color, beauty and enrichment to your home and lives.

This month we want to present ceramic sculptorist Rena Peleg. Here’s what my wife says about her: "Transporting and intriguing, Peleg's work is at once fresh yet rooted in the past. Soulful earth is transformed into spheres, figures, and bones. We transition into a world larger than life, made from the essence of life – clay. Our humanity is up for review in Peleg's woven and sculpted visions. Her new works invite us to experience our history and our heroes, our past and our present, as fragments of memories hinting at an unborn future."

Rina is an Israeli native and an award winning artists in many museums and permanent collections. Have a look at her inspiring creations at Rhonda Schaller Studio.

The Blue Pearl Digest
May – June, 2007

Market Recap: As virtually everyone with a pulse knows, nationally the housing boom ended in 2005. And certainly the frantic days of almost any apartment in Manhattan, regardless of location, condition, light or views, selling in days or a few weeks ended in concert with the national trend.

But as most locals also know, NYC has largely escaped the downturn occurring most everywhere else. For 12 – 15 months after peaking in mid-2005, sales and prices stuttered, dipped or flattened a bit in many segments, but overall the market stayed relatively strong. And the data for the first quarter of 2007 (reviewed in the last Digest) showed the market surprisingly robust.

Well the trend continues. The latest numbers from Miller Samuel tell the tale from the perspective of inventory.

There were approximately 5700 coops and condos for sale in Manhattan at the end of May. This is a drop of 26% over the inventory available 12 months earlier. This decline is fairly dramatic and supports the inference of continued strong sales.

And for broader context, the current inventory number is below the 5 year average of 5900 units, and the lowest its been since August of 2005, when there were 5280 units on the market.

So once again we can sum up what's happening in simple words: the Manhattan market remains good, it's resilient.

As regular readers are aware, we try and caution, too, that there are units on the market with few redeeming features or qualities most buyers seek (they're lacking in square footage, natural light, views, luxury finishes, building amenities and/or location), and these tend to languish. If you find one in this category you can actually live with, you can probably negotiate a good deal. But if you want what most consider a "desirable" unit, prices remain high, with bidding wars fairly common for those "priced right" from the outset.

Not everything is rosy in the world of real estate of course. Nationally foreclosure rates have been rising, and locally the rate is highest in Queens. Foreclosures in Manhattan have remained close to the norms.

We also have concerns regarding rising interest rates. Last week (6/14/07) the average 30 year fixed rate from Freddie Mac was 6.74% and the 5/1 ARM was 6.37%. No one knows for certain how rates will move, but many industry experts expect rates to stay about the same for several months. The long term outlook, over the next year or so, is not the best, however. Rates will probably slowly creep up over this period. At least that's our guess.

In sum, if you're looking to buy, do your homework, work with a capable broker, and if you find an apartment you love, make the best offer you can without much delay. It is still that kind of market.

The Artistic Dimension: Are you passionate about a mix of color, texture, form and sculptural elements in your home? Do you enjoy the emotional interaction of beautiful furniture and what hangs on your walls? If so it’s likely you are passionate about art. And if you aren’t already, should become an art collector.

We at Blue Pearl love and collect art ourselves. In each of our Digest columns we now feature an artist we believe is talented, inspiring and whose works in some significant measure would add a wonderful sense of grace, epic narrative, emotional engagement, color, beauty and enrichment to your home and lives.

This month we want to present Daniela Ovtcharov. She is a realist painter, from the surrealist school of painting, utilizing grand mythic figures and imaginative scenes to create a series of beautiful worlds.

Her paintings are filled with fantasy and imagination. Her classical training in fine arts from the National Academy in Sofia, Bulgaria lends her hand a renaissance beauty and masterful technique not often seen in a contemporary modern painter.

Her work shines like a candle in a dark room, illuminating our imagination with dreamy references that you will treasure forever. You can browse her portfolio at Rhonda Schaller Studio.

The Blue Pearl Digest
March – April, 2007

Market Recap: The months of February, March and April can be summarized this way: for the most part open houses were well attended, buyers were relatively plentiful, in a surprising number of cases apartment sales were preceded by bidding wars (some fairly ferocious).

In other words the late winter and early spring months have been a period of relatively strong demand, somewhat tight supply, and impressive sales.

The NYC market continues to buck national trends and remain resilient.

Wall Street bonus money, competition for units from overseas buyers, and a generally strong local economy have all contributed to maintaining market vitality. At bottom, lots of people want a Manhattan address and life style; and it never ceases to amaze how many can, and will, pay a very high price to achieve it.

Now let's review the highlights of the 1st Quarter 2007 Sales figures for Manhattan, which came out in April (primary source Miller Samuel).

Overall sales rose 73% over the same quarter a year ago. The number of apartment's sold this quarter was nearly 3500, whereas a year earlier the number was 2000 (about 1/3 of this increase is due to mandatory reporting of coop sales).

The listing inventory fell to roughly 5900 units, down 14%, but still above the 5 year average of 5200 units.

The average sales price for all apartments (condos and coops) actually decreased over 12 months, dropping about 1%, to $1.29 million. But this was up 5.4% over the end of 2006.

The average price per square foot stands at $1070, up 6.6% for the year, and up 7.2% from last quarter.

The average price of a coop was up 3.6% over the year to $1.13 million (an increase of 8.1% over last quarter).

The average price of a condo was $1.45 million, down 1.8% over 12 months, and down 2.1% from last December. About 30% of all condos on the market are new construction.

Further, the average annual gain for 4 bedroom apartments was 25%, the average price rising to $8.96 million. Three bedrooms gained 9% to $3.6 million, Two bedrooms rose 2% to $1.52 million, One bedrooms decreased in average sales price by 1.9% to $687k. And Studios showed an annual gain of 7.5%, increasing on average to $456k.

The median price increase over the first quarter of 2006 was 1.2%, climbing to $835,000 (the median was up by 4.5% relative to the 4th quarter of 2006).

The median is of course a valuable marker: half the sales prices were above the median, half below.

The median price of coops rose to $657,000, up about 1.5% over 12 months (up 3.8% over last quarter).
The median price for condos was up 1.6%, to $990,000 (down 2.9% from last quarter).

So all the numbers clearly demonstrate that for now the market remains strong and fairly stable. Prices holding steady or rising slightly in some segments.

Traditionally demand and sales slow a bit during the summer months, and even now, as we go into May, a number of brokers tell us that the market is not quite as hot as the first 3 months of the year. Prices remain high, but a little bit of price negotiation, on the order of 1-3%, appears to be possible in many cases.

As always, what the seller sets as the initial asking price is the crucial factor, and if it is reasonable and in-line with recent past sales in the building and neighborhood, the amount of room for negotiating can be extremely small. Let your own research and your broker guide you in setting a fair, rational offering price.

And don't be surprised if the number of sales in the second quarter fall some relative to the first quarter – we are as indicated transitioning to summer. Whether prices also drop a little is anyone's guess. Our opinion is that some "good deals" will appear in the coming months, but most likely only from sellers that are forced by circumstances to sell quickly, or sell homes that for one reason or another are unattractive to most buyers.

In sum, the market seems solid and in a kind of balance, where demand and supply are roughly equal. The spring season should continue to see fairly high sales activity. Prices will likely remain roughly where they've been, but with sellers and brokers making slight adjustments up or down, depending on the specifics of a particular unit, building or neighborhood.

The Artistic Dimension: Are you passionate about a mix of color, texture, form and sculptural elements in your home? Do you enjoy the emotional interaction of beautiful furniture and what hangs on your walls? If so it’s likely you are passionate about art. And if you aren’t already, should become an art collector.

We at Blue Pearl love and collect art ourselves. In each of our Digest columns we now feature an artist we believe is talented, inspiring and whose works in some significant measure would add a wonderful sense of grace, epic narrative, emotional engagement, color, beauty and enrichment to your home and lives.

This month we want to present a talented young artist whose abstract paintings are simply extraordinary. Her mix of figurative elements and expressionist brush strokes are bright and uplifting. Her name is Monique Ford and you can browse her portfolio at
http://www.rhondaschallerchelsea.com/monique-ford-portfolio.htm.

The Blue Pearl Digest
January – February, 2007

Market Recap: Once again it’s time to review the 4th Quarter sales statistics for 2006.

As usual, four of Manhattan’s biggest brokers (Prudential Douglas Elliman, Halstead, Brown Harris Steven and Corcoran) released their figures in January, and depending on which report you read, average sales prices increased between 3.2% and 8% over the previous year’s numbers. And median prices increased between 5.1% and 11% over the same 12 month period. Several of these reports put the median price at $799k for the quarter and the average price right at $1.2 million. City wide the average cost per square foot stayed about $1000 - $1050. The data also show that sales are picking up too.

The average year over year price increase for coops was 2.7%, with the average price for the 4th quarter hitting $1.05 million. For condos, prices increased by 7.5% over the same period, with the average price reaching $1.49 million.

About half of all sales are for luxury condos and for these you still generally have to pay a premium price. This fact of course helps keep the average price for all apartment sales high.

These results go against an expectation held by many that the real estate market in NYC must eventually do what it’s been doing nearly everywhere else in the country……go down. So far, it just isn’t happening. Prices continue to defy national trends and remain high.

The good news for buyers is that price increases seem to have leveled off and are at most modest, in line with historical norms of 3-5% a year. And units that are unattractive or overpriced, will sit and languish for months, unless the seller adjusts to actual market demand. To some degree buyers can still pick and choose a bit. But if they find a unit that really is attractive or special, they shouldn’t waste time in making an offer.

Apartments in great locations, with light and views, amenities and other quality features typically don’t last long if priced fairly. There even has been a return to multiple offers on many of these kinds of units.

Miller Samuel found that the number of apartments for sale at the end of the 3rd quarter was about 7600. The number at the end of the year was roughly 5900 – a drop of 22%. And the number of sales was 2441 last quarter, an increase of 15 ½ % over the previous quarter, and a 55% increase over sales 12 months prior.

Inventory is slowly being absorbed but the reduction is offset to some degree by new condos continuing to come on the market. This fact will help keep a lid on rapid price increases. Slow but probably stable growth in the market is now the general perception of many in the business. Especially if mortgage rates stay low and the general economy remains strong. There appears to be a lot of pent up demand in Manhattan, and as long as sellers price their apartments "realistically", it seems many buyers will move forward today with an offer to purchase.

Now let’s present a set of data we’ve offered in previous columns from the Manhattan firm of Brown Harris Stevens. Some of this firm’s numbers differ from what’s been given above, but that’s because each broker has a different data base from which they crunch out the results. General trends are reasonably consistent across the sources however.

If you scroll back through the digest to each quarter of 2006, you may find an interesting comparison taking shape as one peruses the sales data over time for one, two and three bedroom apartments from the same industry source.

Here then are the numbers for 4th Quarter, 2006 (source Brown Harris Stevens):

Average sales prices for Coops

Average sales prices for Condos