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
January -- February, 2009

Market Recap:   Real estate prices are driven by supply and demand.  These are driven by desire, need, resources, credit and most importantly consumer and investor confidence.  There is not much confidence today and broadly speaking this is because none of us have lived through a period of such worldwide destruction of wealth and capital as we’re currently experiencing.

Over the last year we can get a good idea of the wealth destruction in the US alone if we analyze as follows:  declines of roughly 50% in the stockmarket, 35% in housing, 35-40% in commercial real estate – give a total loss of approximately $20 trillion (from a peak of $50 trillion a year earlier).

And worldwide the total loss of wealth in all sectors is estimated to be close to $70 trillion.

The combined appreciation of stocks, bonds, hedge funds, exotic financial products and real estate over the past decade was essentially wiped out over the last 12 months.

So it’s evident from the headlines, a little research, and what we see and know from our own experience that individual and collective wealth has evaporated, businesses are failing, the financial system is largely bankrupt, especially if banks and corporations had to be honest about how many worthless assets they hold, and no one’s job is secure.

Some may believe they are financially secure and some perhaps are, but there’s a lot of uncertainty among most people regarding their future …. and one look at the collapsing landscape and such sentiments are totally understandable. 

But denial is a powerful force and there is still plenty of it on the planet.

I believe we just can’t get our minds around the scope of the financial problems we face.  The depth of the crisis really is beyond anyone’s comprehension, including our government leaders.  When Warren Buffett says no one knows the scope of the problem and how long it will take to fix things I think we better listen up.

The root problems as I see it are laid out in some detail below, but we can summarize the whole situation this way:  decades of easy credit and irresponsible lending fueled speculation in stocks, real estate and exotic investment products supposedly collateralized by real estate or other secure income streams.  Sensible debt/income and price/earnings ratios, as well as underwriting and risk management principles went out the window.

Banks, corporations, hedge funds, insurance companies and individuals all played the game because for years too much easy money in the form of credit, fees and asset appreciation was there for the taking.  A real estate and debt bubble grew and we learn once again that all bubbles are unsustainable and the results of the inevitable collapse are piling up around us as we speak.  The worst is yet to come, unfortunately.  Let’s get a sense of why this is so.

1) Unemployment and business failures:   according to the American Bankruptcy Institute business failures are up 61% as of the 3rd quarter of 2008 (4th quarter not yet available).  This is conservatively expected to double or triple in 2009.

2) Many economists conservatively estimate unemployment will rise to 10% or 12%, with the true figure closer to 15-20% if one counts all those that no longer collect unemployment, want to move from part-time to full-time work, or have just given up and quit looking.  It’s also expected that nationally layoffs will average 250,000 (and maybe even 500,000) per month….every month throughout 2009.

Clearly the lost income, purchasing power and confidence of those formerly employed will further the self-reinforcing downward spiral, with even more business bankruptcies to come in 2010.

3) The banking system is bankrupt:  The top 10 banks in the nation own about 70% of all financial assets.  According to Roubini of New York University, these major banks have $3.6 Billion of worthless assets on their books (subject to upward revision of course).

TARP and other government guarantees (such as, to give just one example, the formerly hidden guarantee to cover $306 Billion of bad assets of Citigroup on top of the $45 billion TARP money Citi has received so far) have covered about half of what needs to be written off their books.

That still leaves at least 1 ½ trillion dollars in toxic assets….and as mentioned before, this number is still not the final one, it will be more.  The banking system is basically insolvent (we acknowledge there are a few smaller banks here and there that are financially ok as they never made subprime loans or risky leveraged investments) and the approach is to shift the consequences of bad business and banking and lending decisions by the largest institutions to the backs of the tax payer.

Normal market forces are not deciding the fate of Citigroup, Bank of America, Wells Fargo, Bear Sterns, Merrill Lynch, AIG, Fannie Mae, GM, Chrysler and so forth.

The people that precipitated the problems are getting the bailouts, and the rest of us pay for it.  And the same CEO’s and managers that made and oversaw the blunders for the most part remain in charge, still getting exorbitant salaries and (smaller) bonuses.

 4) At some point, lots of average people are really going to get mad, I would think.

5) Per the NY Times on 2/4/09, the total bailout funds either dispensed to date or waiting to be dispensed, as well as all of the toxic debts and worthless assets the government (which means you and me) has guaranteed to cover…..is right at $10 trillion dollars.  This is the largest bailout in history, greater than the sum of all previous bailouts, wars and major national endeavors combined.

6) Jim Bianco, of Bianco Research crunched inflation adjusted numbers (in late Nov. 2008) of other big bailouts and programs of the past for context:

	Marshall Plan: Cost: $12.7 billion, Inflation Adjusted Cost: $115.3 billion
	Louisiana Purchase: Cost: $15 million, Inflation Adjusted Cost: $217 billion
	Race to the Moon: Cost: $36.4 billion, Inflation Adjusted Cost: $237 billion
	S&L Crisis of the late 1980’s: Cost: $153 billion, Inflation Adjusted Cost: $256 billion
	Korean War: Cost: $54 billion, Inflation Adjusted Cost: $454 billion
	The New Deal: Cost: $32 billion (Est), Inflation Adjusted Cost: $500 billion (Est)
	Invasion of Iraq as of Nov 08: Cost: $551 billion, Inflation Adjusted Cost: $597 billion
	Vietnam War: Cost: $111 billion, Inflation Adjusted Cost: $698 billion
	NASA: Cost: $416.7 billion, Inflation Adjusted Cost: $851.2 billion

TOTAL of the above:  $3.92 trillion

7) The only single American event in history that even comes close to matching the cost of the credit crisis is World War II: Original Cost: $288 billion, Inflation Adjusted Cost: $3.6 trillion

8)  TOTAL of past wars, major programs and bailouts:  $3.92 trillion + $3.6 trillion  = $7.52 trillion

9) What then in more detail has the government spent or committed to spend?  From the NY Times article we get the answer:  $8.8 trillion has been guaranteed so far (and we’ve currently spent about $2 trillion of this).  Here are the broad numbers:

	$4.6 Trillion ($1 Trillion spent) – in direct investments in financial institutions, purchase of corporate debt, and mortgage backed securities by Fannie Mae and Freddie Mac.
	$2.4 Trillion ($0.67 Trillion spent) – in lending to banks
	$1.8 Trillion ($0.25 Trillion spent) – insuring debt issued by financial institutions and guaranteeing poorly performing assets held by banks and Fannie Mae and Freddie Mac

10)  And these totals do not include the $787 billion stimulus package just passed, so the total of all commitments to date is right at $9.6 trillion.

What does it all mean?  Well no one knows except we’re in one hell of a mess, and the most probable scenario is 2-3 years of serious depression and deflation, and 5-10 years of slow recovery, the country (and world) moving in and out of recessions as the whole economic system slowly rebuilds itself on solid business, lending and investing principles.   Full blown nationalizing of the zombie banks is also likely to be inevitable at some point.  And all the printing of fiat money to fund the bailout programs must inevitably lead to inflation at some point too, but that seems years away.

It is true that a portion of the bailout funds and guarantees being made today may yet be recovered as a result of loan paybacks and future sales of acquired assets, and in some measure reimburse partially the current costs to the country’s taxpayers, but it is equally if not more probable that the total estimates of bad debt are considerably lower than the reality, and much is still hidden as tier 3 accounting assets, default swaps and hard to untangle valuations of structured investment vehicles.

In sum, we are not going through "just another recession" that we will fix or work our way out of in 12 to 18 months, as we have in the recent past.  And on top of everything discussed so far, we haven’t even mentioned the pre-existing $11 trillion national debt, and the $37 trillion of unfunded Social Security and Medicare obligations that we also have to pay for, in addition to all the bail out and stimulation costs.

What we are going through individually, and as a nation and global community is unprecedented and will require unprecedented changes in the way we live and do business.

With all of the above for context, let’s shift gears now and start looking at local Manhattan real estate. A month ago the big brokers released their 4th quarter sales reports.   The numbers are always interesting and educational, but their meaning or relevance in regard to where sales prices are at right now is subjective and of course open to wide interpretation.  The data reflect contracts signed and the market as it was 4-6 months ago, and in some cases a year ago; they don’t reflect current market conditions.  My personal view is they have to be discounted significantly to reflect present moment buyer sentiment in a rapidly deteriorating economy.

So for a reminder of how good we’ve had it in the recent past (from Miller-Samuel):

Overall 4th quarter 2008 numbers:

	Average sales price:  $1.49 million, up 3.1% over 12 months, up 0.3% over the prior quarter.
	Median price:  $900k, up 5.9% over 12 months, down 3% over the prior quarter.
	Number of sales:  2282, down 9.4% over 12 months, down 14% over the prior quarter.
	Apartments for sale:  9081, up 39% over 12 months, up 3% over the prior quarter.
	Days on market:  159, up 21% over 12 months, up 19% over the prior quarter.

Co-ops:

	Average sales price for Co-ops:  $1.2 million, up 6% for the year, down 5% from prior quarter.
	Median price for Coops:  $675k, no change over the year, down 2% from prior quarter.
	Average price per square foot:  $1059 (vs. $1055 a year ago).
	Average studio:  $383k,  1-bedroom:  $645k,  2-bedroom:  $1.45 million, 3-bedroom:  $4.65 million

Condos:

	Average sales price for Condos:  $1.69 million, down 3.4% for the year, down 7% from prior quarter.
	Median price for Condos:  $1.12 million, up 1.8% for the year, down 8% from prior quarter.
	Average price per square foot:  $1277 (vs. $1310 a year ago).
	Average studio:  $525k,  1-bedroom:  $766k,  2-bedroom:  $1.67 million, 3-bedroom:  $4 million

The above results are for sales that closed in the 4th quarter.

What is most relevant for us today is what Miller Samuel says about contract activity in the quarter (closing of which we won’t see until at least 1st quarter of 2009 or later).

The quarter was characterized by a sharp decline in contract activity with an estimated 40-70% decrease in signings relative to a year ago.  And the average decline in contract prices relative to August 08 was roughly 20%.  Also inventory was up 40% year over year.  These numbers are hugely significant and corroborate what we’ve been saying on the Digest for a number of months now.

Our own experience and those of brokers we survey strongly indicate that prices today are down on average 15-20-25% from peaks of 2007.  New developments continue to stubbornly cling to high prices, but some are now willing to come down 10-15% when price reductions and closing cost incentives are added up.  More reductions are inevitable, but the timeline is uncertain.  Our guess is that over the next 6-12-18 months, prices will actually fall 35-45% below peaks.  Pockets of distress here and there today are actually resulting in a few contract signings at 40% off recent highs, but this is still relatively rare.  It won’t be over time however.

If you need and want to buy and feel your financial situation is sound and supportive of a buy decision, then be patient and search for a place you truly love…and of course buy only at a good and fair price.  Only you can ultimately determine what that price is, but in our view it should be discounted well below peaks to reflect current market and economic realities.  You might want to price in a “risk discount” for the likelihood of further price depreciation as well.  Let a good broker guide you, too.

And with the changing financial and employment landscape having a profound effect on many of us, you may even want to consider renting or continuing to rent for the foreseeable future.  It’s likely to make the most economic sense for a number of readers.

I think we’re actually entering what could be called a renter’s era and I believe new paradigms for renting are or will be arising that will make this route more attractive and affordable for many.  We’re going to be posting more on this topic in the near future, so stay tuned.

Current Freddie-Mac rates (2nd week of February):  5.16% for a 30 year fixed rate, and 5.23% for a 5/1 ARM.

The Artistic Dimension:   With growing economic challenges and harder times on the horizon, many of us will find it necessary to scale back a bit in the way we live.   We may find ourselves staying home more:  shopping and eating out less, trimming vacations and cutting the entertainment budget.  Of course to maintain our sanity we have to partake of life’s pleasures to the degree we can, but some reduction will probably be in order.

And as these kinds of changes and adjustments come into our lives, it’s worth remembering that if we surround ourselves in some measure with beauty, we have added a simple and wonderful element that helps us stay poised and tranquil within ourselves.  Whether at home or in the office, art soothes the soul and can lift our spirits.  The soulful work displayed at the Rhonda Schaller Studio by artists from around the world is worth taking a look at.

And all readers of the Blue Pearl Digest will receive a 40% recession discount!

Please visit the website of Rhonda Schaller Studio for inspiring on-line exhibitions and a large portfolio of exceptional, diverse and original artwork for home or office.

The Blue Pearl Digest
November – December, 2008

Market Recap:  The litany of bad economic news seems unrelenting.  And I certainly don’t enjoy saying it because my general nature is to be optimistic, but realistically I can’t help but feel there is even greater doom and gloom for the world on the near horizon.  A year ago I was like most of you, not at all expecting the sudden, catastrophic failures in our banking institutions and economic system that we’ve witnessed in the last few months.

Therefore it’s time for a blunt reality check regarding the city’s and nation’s economy and prospects over the coming few years.  This month’s edition won’t be for everyone but sometimes you have to say what you believe needs saying.  It doesn’t do any of us any good to be Pollyannaish and bury our heads while we clearly continue to enter such chaotic and potentially risky times as are evident today.  I’m predicting at least two to three years of depressed RE prices in NYC, and a long slow recovery after that.

Let’s begin with a review of the general state of the economy and some of the major concerns I see in front of us.

You can find estimates today that indicate Wall Street and supporting businesses have already lost more than 50,000 jobs over the past year or so, and on October 15th the NY State Comptroller released an estimate that at least 175,000 additional private sector jobs will be lost in NYC over the next two years (through 2010) and that included in this total will be an additional 35,000 wall street jobs, and at least 10,000 jobs in banking, insurance and real estate.  Unfortunately, these estimates in my view are probably too conservative.

For reference, the city lost about 350,000 jobs during the recession of 1990 – 1992,
and about 225,000 jobs from the affects of 9/11 and the dot com bust.  I think we’re heading for numbers that will be considerably worse than these.

As of Dec. 5th, national unemployment was at 6.7% officially (the highest since 1993), but if you add in those that have given up and quit looking for work, or are no longer collecting unemployment benefits, the real figure is closer to 10-11%.  Total US job losses for the year are now at 1.9 million.  It’s not out of the realm of possibility for unemployment to officially reach 10-12%, maybe even 15% by 2010 (with unofficial numbers even higher).

I’m not wishing that any of these additional dire predictions come true, but just trying to be honest about the possibilities.  I’d like to be wrong but obviously I just don’t have a good feeling about what’s coming.

At this writing we also find that General Motors and the other Detroit players are about to go under, but may yet be saved by some type of bridge loan or other form of taxpayer assistance.  Right now they want $34 billion from the government, though a Moody analyst estimates they’ll really have to receive $100 - 125 billion to stave off bankruptcy longer term.  We’ll have to wait and see what happens.

I don’t want the auto industry (or NYC businesses for that matter) to go down with the attendant massive unemployment, and loss of income and quality of life for so many, but how much money do we pour into failed business models to keep these companies afloat.  Especially when the odds of repayment to the taxpayers are probably quite low.

Still it’s a tough call with regard to the auto industry, especially since we’ve started bailing out at much greater expense the various Wall Street banking and insurance firms that to a large degree recklessly created the liquidity and derivative crises we’re now in (with the accompanying equity devaluations in the world’s stock markets).  There is something nauseating about using tax payer money to help prop up the very institutions that created the house of cards to begin with, and yet most working people don’t have a window to line up at for even a minute share of the bailout funds they may need to survive the recession we’re officially in.

Seems like many of our choices today (or at least the governments choices) boil down to the lesser of two evils, deciding what unpalatable option will be in the best interest of the country as a whole (run up enormous additional debt to bail out "the too big to fail" institutions, or not print the trillions needed and fall further into a deflationary cycle and severe national depression).

Unfortunately, even all the bailout guarantees and efforts to restore liquidity the government has made so far doesn’t guarantee avoidance of a much deeper nationwide, even worldwide financial meltdown.  A major reason for this is simply too much debt in all of its forms (governmental, business, individual); but one form is especially worrisome: the hundreds of trillions of dollars in unregulated and opaque derivatives that are interlocking across industries, and that cross hedge the leveraged risks and potential debt obligations of nearly every bank, corporation and hedge fund around the world.

Derivatives are a kind of side bet – banks and corporations make among themselves – that an underlying asset, a bond for example, or index of some sort will or could move up or down in value; but in many cases the bet itself is made with borrowed money and if the underlying asset goes in the wrong direction there is often insufficient collateral to meet the obligation if a trigger point is reached.

Supposedly most of these instruments are a kind of transference or insurance against risk (one party pays a premium, the other accepts the premium payment and assumes any risk of loss of value of the underlying asset), but when there are few or no assets set aside and actually available to cover the bets if they come due, especially if hundreds come due at once as is possible in a recession, systemic financial failure occurs in the form of bets failing in a cascading effect.  This effect, which included but wasn’t limited to the loss in value of mortgage backed securities, obliterated Wall Street’s five biggest investment banks almost overnight, mainly over a few weeks in September/October of this year.

One economist noted that broadly speaking the whole situation we’re describing can be boiled down to the following analogy:  two people on the street decide to take a big risk, they’ll flip a coin for a trillion dollars.  If you win the toss, you of course just laugh along with your buddy because it doesn’t matter, the money was never there in the first place.  But in the world of real derivatives, the obligation to pay is real if the coin comes up tails, but unfortunately just as in our little coin flipping analogy the money to pay in many cases was never there in the first place either.  The potential consequences are real bankruptcies and disaster for individuals that lose their jobs.

This entire tenuous derivative structure as Warren Buffet has pointed out is a potential colossal disaster waiting to detonate in a much larger fashion than we’ve seen to date, with the failures of AIG, Lehman, Bear Stern, Merrill Lynch, Citigroup and so forth likely to be just the tip of the iceberg.

And amidst all of our handwringing and head shaking about circumstances out there in the world, we can’t forget either that real flesh and blood, everyday humans are affected by the collapsing world around us, and that for many of us the highest priority is going to be holding on to our jobs, savings, businesses and homes, and taking care of our children through all of this.  I hope like heck we avoid the worst case scenario, but clearly I just can’t shake the feeling that much rougher times lie ahead for all of us.

So with all of the above said, here’s my take on what’s happening in the Manhattan real estate market as we speak, based on my experience and on surveys of brokers I trust to be honest about the state of affairs as they really are today:

Note:  if you happen to be more bullish about the near term prospects for the economy and a local recovery of the RE market, then of course disregard my bearish and gloomy stance and move forward with a purchase or investment based on your perceptions of the situation;  clearly I don’t see evidence that supports this point of view at all, I see just the opposite.

Current Freddie-Mac rates (1st week of December):  5.53% for a 30 year fixed rate, and 5.77% for a 5/1 ARM.

The Artistic Dimension:   With growing economic challenges and harder times on the horizon, many of us will find it necessary to scale back a bit in the way we live.   We may find ourselves just staying home more than we currently do: eating out less, shopping less, trimming vacations, and attending fewer concerts and Broadway shows.  Of course to maintain our sanity we have to partake of these to the degree we can, but some reduction will probably be in order.

And as these kinds of changes and adjustments come into our lives, it’s worth remembering that if we surround ourselves in some measure with beauty, we have added a simple and wonderful element that helps us stay poised and tranquil within ourselves.  Whether at home or in the office, Art soothes the soul and can lift our spirits.  The soulful work displayed at the Rhonda Schaller Studio by artists from around the world is worth taking a look at.

And all readers of the Blue Pearl Digest will receive a 40% recession discount!

Please visit the website of Rhonda Schaller Studio for inspiring on-line exhibitions and a large portfolio of exceptional, diverse and original artwork for home or office. 

The Blue Pearl Digest
September – October, 2008

Market Recap:  Let’s skip the platitudes and engaging in "brave face" pronouncements.  There is a fair amount of fear today among consumers in general and potential apartment buyers in particular.  And we all know it’s perfectly understandable.

And here we’re not talking about the super wealthy, but members of the NYC upper middle class – quite successful, high income people that make up the bulk of the market for apartments in the $500k to $3 million range (though some wealthier segments who buy in the $4 to $10 million range are also showing a renewed interest in discussing insecurities on the therapist’s couch).

A sampling of brokers in the business confirm the obvious:  regardless of the seeming positives of the "official" 3rd Quarter sales statistics for Manhattan (explored briefly below), sales are slowing, buyers are cautious, inventories are rising, wall street bankers and other professionals are backing out of deals and prices are coming down, though by how much depends on the particulars relating to inventory, apartment size, condition, amenities, views and building prestige and location.

In our experience we find most buyers in Manhattan to be highly intelligent, savvy and to have a fair amount of product knowledge.  And of course the days of buyers riding an emotion fueled wave of frenzied buying are clearly long gone.

It’s evident to most now that the real estate bubble that has collapsed in most other parts of the country was fueled by the classic factors:  easy and plentiful credit, imprudent leveraging, irrational exuberance, a belief that prices are only going to keep going up and a measure of greed in many cases.

Locally on our little island, low cost jumbo loans, limited inventories, a strong regional economy, the desire for the city’s amenities and life style, coupled with strong foreign demand have all helped sustain growth and price increases far beyond the rest of the nation.

Most of these factors of course are starting to head - dramatically in some
cases - in the opposite direction today, and many segments of our market are beginning to stall.  The danger is some form of free fall in prices.  We don’t know that will happen, but many fear some version of it.

So prudence and a strong desire to not overpay are the norm now.  Many sellers still are in denial, but it is a buyer’s market.

If you’re thinking of selling and actually are in circumstances that require it, remember a cliché that happens to be true:  price overcomes all objections.

A knowledgeable agent who’s ahead of the curve will offer especially valuable counsel on pricing and marketing strategies today, with none more important than pricing where consumer confidence levels actually are at a given moment (a forever moving target of course).

Some other relevant factors:  buyers, assuming they qualify with regard to debt, income and credit score now often are required by lenders to come up with anywhere from 25% to 50% down, even for condos (the sales price is a big factor here); and this shrinks the buying pool even further.

According to StreetEasy and UrbanDigs, inventories are up about 20% over a month and a half ago.  They were at roughly 7000 units in August, and in early October are right at 8300.

These levels are not yet in our judgment high enough to indicate the likelihood of dramatic price drops, but if they creep over 10,000 or even higher, the supply-demand dynamic may reach a tipping point.

If one factors in job loss or job security concerns, tight credit and fears of a possible full blown depression, significant price drops, perhaps on the order of 20% to 25% below 2007 highs, become more probable in some cases.

We don’t know that this will happen, and we are talking now more of outliers not necessarily market averages, but it is a valid concern any buyer has to weigh as part of their process of making a purchase decision.  To be clear then, we do not predict at this time that market averages will plummet 20% - 25%, but certain units in the mix will (some even more).  Data for closings in the 1st and 2nd quarters of 2009 will really tell the story of late 2008, of course, and exactly what will happen remains only a (reasonable, hopefully educated) guess.

The higher percentage price reductions just mentioned are most likely to involve re-sales, especially those units with few redeeming features.  Developers of new condo projects are often the last to cut prices, but today many are doing just that in the form of significant closing cost incentives and prepayment of maintenance, parking and other perks.

Prices are inevitably going to fall even in the new construction sector at some point.  A few cuts in list prices of new stock have already occurred and more are coming. 

Everything everywhere is negotiable to some degree; most anything overpriced will not draw serious buyers to even take a look, especially as inventory continues to rise and buyers have greater choices.

Strangely though there comes a point where high priced units actually play a role in selling their fairly priced competition.  The question is what role do you want to play in the market, facilitator or participant.

For some buyers and sellers life circumstances dictate that a change of residence is in order and they are going to make one pretty much no matter what the state of the economy.

Perhaps the kids have left home, or they’ve got a growing family and they simply need another bedroom or two.  And their financial situation is such that they can go ahead and sell if that’s the necessity, or buy now if required.

And if they can get a fair price in either case, we think they should go ahead and do it.

The key in most every case however is going to be the seller setting the correct "value price" of his/her property.  And we believe that generally this will mean that a "risk discount" will have to be built into the final accepted sales price that accounts for the very real risk of further price depreciation over the next 6-12-18 months.  Buyers know we’re not at the trough yet, and if you expect them to buy today, some acknowledgment and acceptance of the risk has to be factored into the sales price.

Fair minded sellers willing to discount for such risk will find a fair minded buyer in today’s market.  Pricing and some patience are key.  This is Manhattan, so there are always exceptions and every deal does have to be evaluated on the specifics, but for the most part we think this is the reality over the coming year or so.

Now here below is a quick summary of the 3rd Quarter (September 30th, 2008) sales figures for Manhattan, courtesy of Miller-Samuel and Douglas Elliman.  As we’ve explained many times before, the data reflects sales for contracts signed from 3 to 12 (or more) months ago, and thus so lags the real time realities, that one can’t just take the numbers as reflective of what will produce a meeting of the minds on a sale today.  Prices are coming down in most market segments.  With that as a caveat here we go:

Overall:

	Average sales price:  $1.48 million, up 8% over 12 months, down 11% over the prior quarter.
	Median price:  $928k, up 7% over 12 months, down 9% over the prior quarter.
	Number of sales:  2654, down 24% over 12 months, down 14% over the prior quarter.
	Apartments for sale:  6900, up 31% over 12 months, up 11% over the prior quarter.
	Days on market:  135, up 9% over 12 months, down 1% over the prior quarter.

Coops:

	Average sales price for Coops:  $1.16 million, up 4% for the year, down 9% from prior quarter.
	Median price for Coops:  $688k, up 3% over the year, down 9% from prior quarter.
	Average price per square foot:  $1056 (vs $1021 a year ago).
	Average studio:  $400k,  1-bedroom:  $630k,  2-bedroom:  $1.35 million, 3-bedroom:  $3.5 million

Condos:

	Average sales price for Condos:  $1.81 million, up 10% for the year, down 7% from prior quarter.
	Median price for Condos:  $1.22 million, up 9% for the year, down 4% from prior quarter.
	Average price per square foot:  $1334 (vs $1278 a year ago).
	Average studio:  $595k,  1-bedroom:  $850k,  2-bedroom:  $1.6 million, 3-bedroom:  $4 million

The key points are:  for 2008, inventory is up, sales are down.  And the skew resulting in overstatement of averages from a few unusually high priced, high end developments is beginning to work its way out of the system.

Do people still want to live in Manhattan….of course.

But uncertainty driven by bleak economic realities, contracting credit and plain old fear has taken a toll, and average prices will inevitably come down over the coming months.

It’s the amount of price reduction that remains unknown.  Buy if all the relevant factors – price, financing, apartment features, federal bailout measures and family needs and finances – align and make sense to you.

Current Freddie-Mac rates (2nd week of October):  5.94% for a 30 year fixed rate, and 5.90% for a 5/1 ARM.

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.

Please visit the website of Rhonda Schaller Studio for inspiring on-line exhibitions and a large portfolio of exceptional, diverse and original artwork for home or office. 

The Blue Pearl Digest
July – August, 2008

Market Recap: The news on the economic front continues to be dreary. The odor of loss, layoffs and rising foreclosures continues to permeate the air.

If you happen to be in a reasonably stable situation regarding job, income and liquid assets………great. The winds of change are blowing in the Real Estate market, even here in NYC. You might find an apartment with the right amenities, location and layout fairly priced today. You might just go ahead and buy it.

In fact desirable units with something a bit special about their architecture, features or views are still getting a fair amount of traffic as we speak. The key as you might expect is their asking price. Sellers have to be realistic and recognize people are just not going to overpay, especially on apartments in the various entry level categories (studios, one and two bedrooms), which in Manhattan means up to $2 - $2 ½ million dollars, give or take.

If you are pessimistic about the next year or so (perfectly understandable of course), you likely will want to rent or stay where you are, remaining on the sidelines until the economic tide starts flowing in a more favorable direction.

More on what you might do if you are looking to purchase in the near term can be found further below, but first……

A Quick recap of the toxic mess we're in:

From Bloomberg: Banks' losses from the U.S. subprime crisis and the ensuing credit crunch crossed the $500 billion mark as write downs spread to more asset types. The International Monetary Fund estimated banks' losses will ultimately reach $1 trillion for all companies worldwide (and some economists predict it will be closer to $2 trillion).

From CNN: The August Case/Schiller report showed that home prices were a record 15.4% lower in the second quarter of 2008 than in the year prior. In addition, the report showed that residential housing prices in its 20-major-cities index fell 15.9% and in its 10-city index, prices fell 17%.

From NY Times: The National Association of Realtors said that nationally July sales of previously owned homes rose 3.1 percent over those in June. But at least a third of those sales came from foreclosed homes, or properties sold by their owner at a loss.

From The Deal: There have been up to 83,000 layoffs on Wall Street in the first six months of the year, click the link for a closer look.

Several sources (CNBC and Reuters) also indicate total 2009 Wall Street bonuses will be reduced by roughly $8 to $10 billion relative to last year. A fair segment of the local real estate market has been fueled by these funds over the past 5-6 years, and the impact of the reduction on 2009 sales is likely to be significant.

Sales Recap for Manhattan, 2nd Quarter (thru June 30), 2008
Let’s switch gears now and have a look at the second quarter sales numbers in our local Manhattan market and then what they actually mean in the context of the sour economic climate (data from Miller Samuel and Prudential Douglas Elliman).

Overall:

	Average sales price: $1.67 million, up 25% over 12 months, down 3.1% over the prior quarter.
	Median price: $1.025 million, up 14.5% over 12 months, up 8.4% over the prior quarter.
	Number of sales: 3100, down 22% over 12 months, up 35% over the prior quarter.
	Apartments for sale: 6900, up 31% over 12 months, up 11% over the prior quarter.
	Days on market: 135, up 15% over 12 months, down 8% over the prior quarter.

Coops:

	Average sales price for Coops: $1.28 million, up 11% for the year, down 8% from prior quarter.
	Median price for Coops: $755k, up 9% over the year, up 1% from prior quarter.
	Average price per square foot: $1146 (vs $983 a year ago).
	Average studio: $436k, 1-bedroom: $760k, 2-bedroom: $1.6 million, 3-bedroom: $4.5 million

Condos:

	Average sales price for Condos: $1.94 million, up 33% for the year, down 2.3% from prior quarter.
	Median price for Condos: $1.27 million, up 22% for the year, up 9% from prior quarter.
	Average price per square foot: $1442 (vs $1178 a year ago).
	Average studio: $634k, 1-bedroom: $950k, 2-bedroom: $2.2 million, 3-bedroom: $4.6 million

Note for context: the condo averages were driven in part by a concentration of closings in several luxury condo developments (The Plaza and 15 CPW, for example). The net affect is to overstate the gains in the overall condo market. If the sales of these luxury developments are removed the numbers still show year over year gains in the double digits (the average condo sales price drops to $1.6 million—still up 16% over the year, the median to $1.236 million, up 19% for the year). Also, the sales of apartments in 2007 were the highest of any year over the past twenty years – so lower sales activity in 2008 is somewhat expected.

Also, the luxury market which includes apartments in the top 10% of sales, is in a kind of parallel reality. Here the average price per square foot was about $2300, average price was $6.4 million, and median price was $5 million (and these figures are without the skew caused by data from 15 CPW or The Plaza). These numbers are up nearly 40% from 2nd quarter 2007.

The crucial question is always the same: As good as the second quarter news seems to be, what do these statistics mean today?

First, we have to recognize that many of the sales in the data just reviewed reflect contracts signed 3 to 12 months ago, and in some cases contracts signed 2 years ago (new construction). The rosy numbers obviously lag the market of the present moment. Prices are high and sellers have done well …….. but because the numbers have such a time lag built in, the data is misleading as to what buyers will pay today.

We all know everything boils down to supply and demand…….and this changes constantly. Exact numbers at any point in time are hard to obtain, but according to StreetEasy and Urban Digs, there are about 7% fewer apartments for sale in August than were available in June (approximately 7000 vs 7500).

But even with this slight reduction, inventory is still high relative to the past 4-5 years where the average inventory was around 5500. And further people don’t live in a vacuum. Demand is not as high as it’s been because who among us can read the regular ration of gloom and doom and not have their psyche affected.

Many potential buyers are rightfully uncertain about the economy, the RE market and their own financial security, and simply aren’t going to buy at this time; or if they do it will only be when they perceive value at a fair price.

If you’re considering buying today, find a good broker to provide comparable sales numbers and help in determining where that moving price point actually is. Every deal has to be evaluated on its own merits.

With the exception of the high end luxury market (which starts at roughly $5 million), brokers in the field today find most everything to be negotiable. Nearly all buyers expect to negotiate something off the price, and many sellers are beginning to at least grudgingly accept the reality.

Here are a few thoughts that might help you if you’re contemplating a purchase in the near term. It’s our experience that most buyers today are initially offering something on the order of 5% to 20% below asking. Clearly the crucial factors are the initial asking price and how desirable the apartment is.

There are exceptions, a few units are so unique or favorably priced they still garner multiple offers. And others so overpriced they basically get no foot traffic. And these units will simply languish until their owners come down significantly in price or pull them off the market.

I think the bottom line is that sellers who still price at or near the highs of 2007 are for the most part not going to sell. And a lot of apartments are still at last year’s price points. The market has changed and barring something quite unique to the circumstances many seller’s are probably going to have to come down on the order of 10% to 15% to sell today. Buyers are now in the driver’s seat.

Current Freddie-Mac rates (2nd week of August): 6.52% for a 30 year fixed rate, and 6.02% for a 5/1 ARM.

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.

Please visit the website of Rhonda Schaller Studio for inspiring on-line exhibitions and a large portfolio of exceptional, diverse and original artwork for home or office.

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

We’ll sum up by saying it looks like the market really has settled into the classic "soft landing" scenario. No dramatic price reductions appear on the horizon, only stable to slowly rising prices for the foreseeable future.

If you’re in the hunt, yet have been waiting cautiously on the sidelines too for fear of a huge collapse in prices, and find an apartment that truly is just right for you, and it’s fairly priced based on your own research and broker’s input, our advice is go for it!

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. We are going to start featuring artists that we believe are 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 an 83 year old artist we love, Johanna Gillman. Born and raised in NYC, she’s lived here her entire life and continues to this day to create extraordinary works in her studio near the Hudson River.

Her work is exhilarating, dynamical, colorful and captivating. Truly unique and a delight to experience. Take a look at
www.rhondaschallerchelsea.com/gallery-artists.htm.

The Blue Pearl Digest
November – December, 2006

Market Recap: We’ll engage in a bit of potpourri in this edition of the Digest.

First some news from the Real Estate Board of New York (REBNY) that potentially has huge positive significance for those looking to buy an apartment in Manhattan. They are planning to open portals to the public through which a potential buyer can obtain information on nearly any listing in the Manhattan (and Brooklyn) market.

In announcing their intent, they have set off a firestorm of protests among some of their broker members. But we believe the odds are high that some version of public access to all listings is coming, though it still may be many months away.

First some background information. The REBNY is a private trade group – and broker membership is not mandatory. But on a practical level, paying a fee and joining this group is the only way for brokers to access (beyond there own in-house offerings) available inventory across the city through a shared proprietary database. In other words to become aware of the active exclusive listings currently offered by all of the other member brokers.

As of today 317 brokers belong to the REBNY. The board’s RLS (Real Estate Listing Service), available only to members, is the largest of its kind in the city; and its shared listing database comes closest to providing what might be called a “version” of the MLS (multiple listing service) found in all other parts of the country. Except, unlike other cities, in its current form it is a completely closed database.

Only member brokers have access to its 12,000 to 14,000 daily listings. And they don’t in turn have portals through which you as a potential buyer can gain information on your own, through some type of web access, on all of the various apartments for sale in the city.

Individual brokers certainly let you look at their in-house listings. But not, from one convenient access point, all of the listings currently on the market.

On any given day, the New York Times classifieds are only going to carry a fraction of the listings in the board’s shared database. That’s why as of now if you want a complete list of apartments for sale in your price range, you pretty much have to work with a broker to get it.

As a quick aside, readers may be interested to know that there is a smaller organization called "MLS of Manhattan", separate from the REBNY – but it is composed of only 40 brokers and has a much smaller pool of shared listings. They do however share with the public the listings they have.

So even though details have to be worked out and some fierce wrangling and hand wringing will take place among the diverse membership of the REBNY, in the end we believe some form of open access to all listings will result and significantly benefit consumers. Buyers will be savvier, have better product knowledge, and perhaps in many cases better purchase and sales decisions will result.

One final note: in our opinion, even with the added openness and information such proposed access will provide, the Manhattan market will remain challenging and complex, and in the end most buyers and sellers will, at some point, still want to work with an experienced professional broker.

Now, let’s say a few words about the current Manhattan residential market. In a nutshell, it continues in the opinion of many to defy expectations.

While national news headlines proclaim home prices are shrinking, with price drops as high as 15% to 25% in some parts of the country, the NYC market has remained fairly stubborn.

Prices have dropped a bit in some segments and locations, but for the most part the market is holding its own. The average price per square foot for an apartment was $1050 in the 3rd quarter of this year. The very latest numbers for just the month of October (from Miller Samuels) show prices were flat, as most professionals in the field would have guessed. And inventory is basically unchanged over the past 5 months.

Roughly speaking, many brokers say that final sales prices today (as distinguished from initial asking prices) on average have fallen to about the sales prices typically seen in the spring and early summer of 2005.

But as always there are exceptions, and averages can be misleading because they are affected by the number of large vs. small apartments sold in a given quarter, as well as the number of exceptional or "trophy" sales in the same time period. These factors of course vary from period to period, and this is why averages have to be looked at carefully.

A broker will help you figure out exactly what apartments have sold for in a building you are interested in over the past 6 - 12 - 18 months, and help you determine a realistic purchase offer.

If the seller has priced the unit "realistically" to begin with, there may still be room for negotiations, but many brokers continue to tell us not to expect a discount greater than 3-5% in most cases. For emphasis, we’ll restate: the discount is so dependent on the "reasonableness" of the initial asking price, and let us add, the motivation of the seller.

And the discount percentages we’ve given are just a guide, they are not assured; every deal must be evaluated on the merits. Of course, location, views, light, amenities, square footage and apartment condition are all huge factors in determining the fair market value today.

With high inventories and slower sales relative to the past year or two, it is largely a buyers market right now – but it’s important to also acknowledge that the power buyers have is limited, too.

The reality seems to be that many owners in Manhattan may very well like to sell if they could get close to their ideal price, but in fact they don’t have to sell.

And it seems that many like testing the waters, and if they don’t get an offer to their liking they ignore it, and wait. Or they eventually pull their unit off the market, deciding to wait for demand to pick back up.

And so the stalemate between buyers and sellers continues.

Even in this cooled off market, fairly priced or unusually attractive apartments often sell fairly quickly (within 3-4 weeks), some even generate bidding wars, though generally the bids are not higher than the asking price, unless it has been set unusually low to stimulate such action as a selling strategy.

The units today that just don’t have much going for them, those that are "cookie cutter" and have plenty of competition among the available listings, or are: "view challenged", dark, dingy, cramped, noisy or needing serious renovations – are the one’s that can be a real challenge to sell in today’s market. Most likely the owner is going to have to set a very attractive price, or make some cosmetic repairs, or both, to generate sales interest.

In the end, ask your broker for realistic guidance in determining what to offer on a unit you’re drawn to. If you make a "low ball" offer without some solid rational reasons however, many sellers will be truly insulted and in many cases they’ll cross you off the list of someone they might sell to.

Our best advice: play the game thoughtfully and intelligently, have a defensible rationale for what you offer, and yet listen to your "gut" too – remember you’ve got to like and hopefully love living in any apartment you ultimately buy.

Don’t settle for a "good" deal on paper, when a little voice inside says "there’s something about this place that bothers me"......wait for one where the opposite feeling bubbles up inside, one that says: “I’m really comfortable here.......let’s go for it”!

The Artistic Dimension: The focus at Interieurs is on home furnishings reflecting a fusion of modern and antique sensibilities. On simple, natural, elegant shapes and forms; natural materials: steel, wood, silk, linen, leather. And on subtle colors. The products are handmade furniture, lamps, sofas, chairs and accessories. The designs are refined and of the highest quality. We think what they offer is simply exquisite. And yes we have bought several pieces from their Tribeca store. Visit them at 151 Franklin Street – in our view you won’t be disappointed.

The Blue Pearl Digest
October 2006

Market Recap: This month the sales figures for the 3rd quarter in Manhattan came out and now we have some statistically significant data to absorb and evaluate.

The basic gist of all the numbers is: the market hasn’t crashed. One can certainly say it’s cooled off, yet it remains stronger than many expected.

It seems for now the worst we can say is that overall the market has experienced a “soft landing”, instead of the “over the cliff” scenario some have been waiting for.

Serious dips in some market segments may yet occur, of course. But the current batch of data indicates only slight to modest declines relative to the second quarter of this year, and when we compare prices to a year ago (3rd quarter 2005), we find one of our respected sources (Douglas Elliman) showing prices on average about 12% higher.

As we get into the details, we’ll see that the statistics from different industry sources offer different results. Depending on your view of things, you’ll probably find numbers that support your take on the direction the market is "really" heading. Reaching a broad consensus on the future, however, is just not possible at present – at least in our opinion.

One note: the numbers given below differ from source to source because they are sampling different sets of sales data. Some of the data overlaps, some doesn’t. Some is publicly available sales information, some is proprietary at the time it is counted in the analysis. Different numbers crunched inevitably give conflicting results. So take your pick from what follows. We’ll start by looking at the broad strokes.

Miller-Samuel (the source of the Elliman market analysis) reports that the average sales price across the island fell 7% from the 2nd to 3rd quarter -- from $1.39 million to $1.29 million. And the median fell from $875k to $845k, a drop of 4%. However, year-over-year figures show that the average price increased by 12%, and the median went up nearly 13%.

The average price per square foot dropped 3% from the prior quarter to $1050. The comparable figure from 2005 was $984 however, so the latest number is up 6.7% over the year.

The number of sales increased by 9.3% over 2nd quarter figures (from 1934 to 2113 units), and was up 5.8% relative to a year ago. Current inventory appears to have stabilized at about 7600 units, which is up about 32% over the prior year quarter.

The average time on the market is now 150 days, up from 133 twelve months ago.
The average price per square foot for condos was up 6% over the prior year quarter to $1171. Total inventory for condos was 3943 units, up 70% over a year ago. Most of the gain a result of new developments coming on line.

The average price per square foot from the 2nd to 3rd quarters for coops fell from $995 to $935. But the latest number is still 5.4% higher than the prior year amount of $887.

Coop inventory levels were up about 7% over a 12-month period, from 3441 to 3680 units, though this represents a drop of 10% from the prior quarter total of 4105 units.

In contrast to the Miller Samuel numbers, the Corcoran Group found mean prices in the 3rd quarter declining by only 1% (to $1.236 million), relative to 2nd quarter numbers. And the median value rose about 10% (to $849k). Corcoran’s number also showed that over 12 months the mean price increased by 3% and the median by 13%.

Corcoran reported sales of 2996 apartments, an increase of 7% over the previous quarter, but down 17% from the same period a year ago.

One explanation for the significant increase in the median: when prices are too high in a certain apartment category (such as two bedrooms), many buyers are forced to consider “making do” with smaller homes. This can increase the demand for one bedrooms and junior 4’s. The net affect is smaller homes become more expensive and this boosts the median price (which is a measure of sales distribution – half sell above and half below this value).

Miller-Samuel data also indicate on average sales prices have been about 4% lower than the final asking price.

NYC is, like all RE markets, composed of a series of "micro-markets". Home prices vary widely with apartment type (Coop or Condo), size, location and amenities. A great third-party source of data comparing sales figures over the past 4 quarters is the Brown Harris Stevens market report. If you’re looking to buy, we encourage you to take a look at the numbers that relate to the area of the city you’re considering. For a brief overview:

Average sales prices for Coops (Brown Harris Stevens):

Average sales prices for Condos

In sum, there is still uncertainty about the market’s direction. Interest rates may resume their upward march, and the national economy has many concerned.

But right here in Manhattan it’s probably not unfair to say that if mortgage rates remain relatively low and the economy reasonably strong, then the condo and coop market will remain fairly stable, at least for the next few quarters.

Long term, however, it’s still anybody’s guess. Inventories remain high, and many buyers seem willing to wait on the sidelines for a clearer indication of where prices are heading.

If we had to make a guess, however, our sense is that a decline in average sales prices of 15-20%, as was common in the early 1990’s, is unlikely. It is probable that some sellers who have to sell today will be forced to lower their expectations and prices to some degree. But the latest data show prices aren’t falling that much, at least on average (with some market segments actually rising), and that the long-term outlook for the Manhattan market appears favorable.

The Artistic Dimension: This month we want to recommend a visit to the display windows of Housing Works Thrift Shops. The website will give you the store addresses; they’re sprinkled around Manhattan.

You’ll want to actually visit a store near you to peer through the display windows, and see the goods in person. The eclectic mix of articles is for sale by silent auction. We’ve found a consistently amazing selection of pre-owned clothes, jewelry, art, lamps, china, dressers, tables, chairs and home furnishings of every kind. What you’ll find here is almost invariably unique, fascinating and generally of good quality (you can also go inside and shop for merchandise that is not part of the auction offerings).

When you see something you’re drawn to, go online and bid on the item(s).

We like this store for many reasons, but the two most important ones are: the items for sale have been donated, and the proceeds go to benefit poor and homeless men, women and children living with HIV/AIDs.

The Blue Pearl Digest
September 2006

Market Recap: The number in absolute terms may be small, but when the National Association of Realtors releases figures showing a slight drop in the median price of a home, people everywhere take note. Even here in NYC. From August of 2005 to August of 2006, median prices fell 1.7 percent nationally.

This is the first time in over 11 years that, nationwide, prices have dipped over a one year period. And this inevitably affects consumer psychology. People are naturally wondering, what’s going to happen in Manhattan?

We are well aware of the factors that make Manhattan RE somewhat of a different market relative to other cities. But even on a small island of 22 square miles, where the economy remains healthy and millions will pay a housing premium for the sake of an amenities-filled life style – basic laws of economics ultimately have to assert themselves to one degree or another.

With inventories up about 60% over a year ago and the average time to sell now approaching 5 months, buyers realize the market has shifted in their favor. Over July and August alone, fueled by new condo construction, inventory increased about 6% (data from Miller Samuel).

Additionally recent data from Halstead Properties shows that the median sales price for an apartment dropped 6.4% from June to July, going from $799k to $748k. And over the same two-month period, average sales prices dropped from $1.3 million to $1.15 million. Interestingly, however, the median price per square foot for post-war condos was $1034 in June and $1061 in July.

Month to month numbers don’t mean a lot and certainly don’t tell us where the market is going long term. But they are in sync with the feeling in the air that at best the market has settled into a period of relative quiescence, with price dips in some market segments a fact right now. Whether the "dips" will become "slashes" no one knows. It continues to be a time of uncertainty for both sellers and buyers.

When a market is in transition, pricing is the toughest issue to wrestle with.

Many sellers continue to hold out for top dollar, and this often seems to perpetuate a kind of disconnect between the two sides involved.

Realism reflects the ability to assess and fairly appraise a situation. Many sellers it seems are struggling with this assessment process.

Informal broker surveys indicate price reductions on the order of 3-6% are fairly common. Some are on the order of 10%. Everything depends on the initial asking price, of course (and this ideally should reflect a realistic assessment of the inventory of other apartments of similar size and condition, located in the same neighborhood and offering comparable building amenities).

And it’s obvious the financial condition and motivation of the seller is a huge factor. There are thousands of new condo units yet scheduled to come on the market this year. Some developers are now offering discounts, at least in the form of "free" upgrades in finishes, or reductions in closing costs. Most of the new developments appear, finally, to be open to price negotiations of one form or another.

We should note, though, that apartments in premium locations, such as Central Park West, Gramercy Park or 5th Avenue tend to stay high in price relative to other neighborhoods, and sell at a premium.

There remain two factors that may yet weigh in favor of buying today if you find a special place you truly love. Rents are about 15% higher than last year (averaging about $4000 a month), and interest rates are still at historically low levels. Last week the Freddie Mac fixed 30-year average was 6.40%. The 5/1 Arm was at 6.08%.

Let your broker help you figure out a fair price if you find that special apartment that your heart says is truly the right one for you.

The Artistic Dimension: This month we want to recommend a visit to a furniture and home accessory store in Tribeca. Its called Xiaoping Design. Their showroom is at 73 Hudson Street, just west of West Broadway along Worth Street.

Their furniture is not just beautiful, it’s unique. The form and elegance of the pieces really have to be experienced in person to be appreciated. We think the designs are an exquisite fusion of Eastern and Western aesthetics. The lines are simple, clean, refined and timeless. Colors are fabulous: natural, ivory, espresso, black, apricot, olive green and red.

Their silk lampshades are handmade by Chinese artisans. All their furniture is made in their own factories in China. We have several pieces in both our home and our Chelsea gallery. Beds, tables, chairs and bookcases are often sized to fit perfectly in the typical "space limited" Manhattan apartment. This store is definitely worth a look. Great values can be found during their frequent sales.

The Blue Pearl Digest
August 2006

Market Recap: Not much new to say with regard to the market this month. Things are pretty much as they’ve been for some time now. Inventories and sales prices remain generally high. August is historically a slow month for sales.

Prices may be "settling" or "correcting" a bit, but it appears for now there isn’t going to be a dramatic collapse in property values.

It is anyone’s guess of course as to where the market will end up. Nationally mortgage rates and inflation are up over last year, and these contribute to declining home sales.

We believe the following factors will likely help the Manhattan market avoid a train wreck that may occur in other locations.

The average ($180k) and median income ($51k) in Manhattan remains much higher than in most other cities. The local economy continues to be fairly strong. The cost to buy an apartment here is obviously steep, but many have the means.

The city will always be a magnet for new people: business, finance, technology, intellectual capital and creativity converge here like nowhere else. Many people simply want to partake of the opportunities, lifestyle and cultural energy. And they need housing.

Rental vacancies are nearly non-existent at present (99.6% of all rentals are taken). As rents continue to rise (one bedrooms in full service buildings are typically $3000 per month, two bedrooms $4500 and up), buying will make the most financial sense for many.

In sum, we believe the market will continue to experience corrections, yet relative price stability for the foreseeable future.

If you find an apartment you love and the numbers pencil out for your situation, our advice is buy it. A broker will assist in determining its fair value today.

Finally a quick look at the current loan rates from Freddie Mac – note that the numbers have come down a bit from last month. The 30-year traditional fixed rate mortgage is 6.52%. The average for 5/1 ARM’s is at 6.18%, and for a 1 year arm the average rate is currently 5.65%.

The Artistic Dimension: This month we want to highlight several stores in SoHo. We strolled the neighborhood recently and here are several of our favorites.

For something unique, stylish and functional, try the MoMA Design Store at the corner of Spring and Crosby Streets. Most of the furniture, lighting and other home accessories offered really can be described as "good designs".

Some of the items are fairly expensive (such as the Finnish Aalto birch table, circa 1929, at $2200, and the matching webbed chairs in the $600-$700 range); some quite affordable (such as the Muji storage/hangar systems for a few hundred dollars).

Also check out Green Street – from Houston to Canal. Yes, many of the stores here are high end, but there are treasures to be found if you look.

In our view going into Moss at the corner of Green Street and Houston has to be one of those joyful indulgences not to be missed.

It’s true that Moss has prices on one of a kind furniture ensembles that are really only affordable if you already live on Park Avenue – such as the Jackpot Field (three-part work of sofa, table and vase) by Dutch designer Hella Jongerius.

But it must be emphasized that these creations are one-of-a-kind works of art that are inspiring and soul satisfying just to look at. So what if you can’t afford them. Just enjoy the view…….as you make your way back to chairs, china, crystal, lighting and other home furnishings that are also exquisite, yet far more affordable. Don’t miss this store if in the neighborhood – Michael Vince Snyder, director of special client services, will be glad to help you find what you need.

One last store to check out: Dialogica, at 59 Green Street. Expensive, but the furniture is handcrafted and of high quality. We find the designs, shapes, fabrics, colors and textures to be truly beautiful and unique, some extraordinary. Worth a look!

The Blue Pearl Digest
July 2006

Market Recap: Once again it’s time to look at 2nd quarter sales figures for Manhattan. As always there is a lot to sort out. Before reviewing the numbers, let’s state the bottom line. Even with apartment inventories remaining high and the number of sales down, relative to a year ago, prices are holding fairly constant, even increasing a bit in certain market segments.

The market certainly can’t be termed “hot”, the boom ended last year. We might call it a more “balanced” market, and one generally tilting in favor of buyers. But paradoxically, even as the market cools, prices remain high. It continues to be a hard market to analyze, and hard to predict where it’s going.

We’ll look at numbers from several sources.

First off, let’s get a broad overview from appraisal firm Miller-Samuel.The average price across Manhattan was $1.39 million, up 6.6% from the previous quarter.

The average price per square foot was at $1083, compared with $1004 three months earlier. And if we go back to the 2nd quarter of 2005, the average was $970.

The median sales price rose to $880,000 in the 2nd quarter, up about 7% from the January through March time frame.

Over the past 12 months, the average price per square foot for coops rose 14.5%, from $869 to $995. The average for condos rose 5.5%, from $1089 a year ago, to $1149 this quarter.

For apartments priced in the top 10% of sales (the luxury segment), average price per square foot exceeded $1800. The median price rose to $4 million, with the average sales price hitting $5 million.

Miller Samuel estimates the average negotiated discount off asking prices was 3.5% (compared with 1.6% off a year ago). This discount of course depends on the unit, its features and how accurately priced it was to start with.

Also, the number of apartments sold was 1934, down 3.5% from last quarter (when 2005 units sold), and down 15% from a year ago (when 2271 sold).

Time on market is now at 144 days, 42 days longer than the 2nd quarter of 2005, but roughly the same as last quarter.

There were approximately 7640 apartments on the market in the current quarter, up (10.7%) from 6904 units in the first quarter of 2006, and up (54%) from 4965 units a year ago. And the number of condos available today is about 94% higher than the inventory a year ago.

Now for further perspective let’s view some numbers released by Brown Harris Stevens. Their figures roughly jibe with Miller-Samuel’s, but there are differences, too. Here’s an overview: the average coop price for the quarter was $1.258 million, up 7% from a year ago. The median coop price is up 13% to $707,500. Breaking the data out by apartment size, coop studios were up 11%, one bedrooms up by 14% and 2 bedrooms were up by 23%.

For condos, the average price this quarter was at $1.17 million, down about 17% from a year ago (when the average was $1.42 million). The data indicates the drop was largely due to a significant increase in the number of studio and 1-bedroom units sold in the comparative periods. It’s interesting to note that the Brown Harris Stevens data shows that the average price per square foot, currently at $1061, over the year fell only about 2%, with the average actually rising for studios, one and three bedroom condos.

Below are some actual numbers to peruse.

Average sales prices for Coops (Brown Harris Stevens):

Average Sales Prices for Condos

We’ll conclude by saying what is probably obvious to most – we’re in the early stages of a buyer’s market. Buyers in many cases are choosing to take their time. But we should add that the market is still complex, and varies with location, price range and unit size. Check out the referenced web sites yourself to get the statistics for the particular neighborhood you’re interested in. And consult with a good broker before submitting your offer.

Finally, mortgage rates are about a percentage point higher over last year. The current average 30-year fixed-rate loan from Freddie Mac is 6.79%. The average for 5/1 ARM’s is at 6.39%, and for a 1 year arm the average rate is currently 5.83%.

The Artistic Dimension: This month we encourage you to walk through ABC Carpet and Home at 19th Street and Broadway in the Flatiron district. If this store won’t lift your spirits and fill you with joy, we don’t know what would. Great products for any corner of your home, from rugs, carpets and furniture, to drapes and fabrics, to bed and bath. We always leave inspired with new decorating ideas. And usually something for our apartment. They have a great outlet in the Bronx, too (1055 Bronx River Avenue). The Bronx store is their clearance center and frequently has some real treasures at greatly reduced prices.

The Blue Pearl Digest
June 2006

Market Recap: Mortgage rates continue their slow ascent. The average 30 year fixed rate mortgage from Freddie-Mac has crept up to 6.67% during the first week of June. The average 5-year fixed ARM is at 6.26%. And the average 1-year ARM is 5.68%.

The appraisal firm Miller-Samuel reported on June 4th that the overall inventory of apartments for sale in Manhattan is up 67% over a year ago (from May 2005 through May of 2006). Condo inventories alone are up approximately 87% over this period, coop inventory is up 53%. And the average time on the market is approaching 150 days.

These factors plus a sense of uncertainty about what the touchstone in value really is, contribute to a kind of continued stalemate between many buyers and sellers.

It’s just a fact in real estate anywhere, when homes are priced to fairly reflect both supply and demand – they sell. Our sense is that a number of apartment owners (though not all of course) are presently inclined to price their units above the actual market. And with the way the market has been superheated for the past 5 years, this is simple human nature. Internal adjustments to perceived value are the hardest to make.

We keep saying it ‘cause its true – you’ve got to get expert advice, especially today, whether buying or selling. Find a good broker and weigh their input carefully. Our sense is that if sales don’t increase noticeably this spring and early summer, some price adjustments even if slight are pretty much inevitable this fall.

The Artistic Dimension: This month we invite a look at the National Kitchen and Bath Association (NKBA – www.nkba.org) website for design ideas. This site is loaded with remodeling ideas, guidance, planning tips and inspiration.

For immediate gratification, have a look at the photos of national award winning kitchen and bath designs. If you’re like us, you can spend hours on these pages enjoying the fusion of colors, materials, design elements and space innovations. So much here is simple and natural, yet beautiful, elegant and refined……and in the end simply a joy to behold. Enjoy!

For kitchens:
http://www.nkba.org/xconsumers/
ShowRDWinners.asp?category=Kitchen+Designs

For baths:
http://www.nkba.org/xconsumers/
ShowRDWinners.asp?category=Bathroom+Designs

The Blue Pearl Digest
May 2006

Market Recap: The average 30 year fixed rate mortgage from Freddie-Mac was at 6.58% in the second week of May. This is a rise of approximately 0.15% from the previous month.

Further, the average 5 year fixed ARM in mid-May was at 6.22%. And the average 1-year ARM was right at 5.62%.

Such additional national factors as rising energy costs and general inflation concerns affect buyer and seller psychology. Rates are still good for buyers, but applications for home equity loans are down – indicating most homeowners are aware that home prices have leveled. And that being able to use their homes as an ATM card whose available balance inexorably pushes upward is of course not a reality any more.

A perusal of online real estate news sources and broker sites indicate the NYC market continues to be relatively flat. Prices are fairly stable overall – though a realistic assessment is that the scales have tipped and today it’s more of a buyers market. Sellers are often still asking for “peak” prices for their apartments, and buyers are often willing to pay what the average price was about a year ago. Small price drops are fairly common now.

In some neighborhoods and price ranges (especially in the $400k to $900k price range – the entry range in Manhattan), demand can be moderately strong. Properties move if well priced. Figuring out exactly what “well-priced” is, is of course the challenge. And this is complicated by the fact that inventories, which are high relative to a year ago, continue to increase. Prices above $1.5 - $2.0 Million appear more volatile. Having a good broker to guide you is going to be key for most buyers and sellers.

The Artistic Dimension: This month we highlight a favorite author, Sarah Susanka. She’s an architect whose first book was “The Not So Big House” . She has also written “Creating the Not So Big House”. We don’t get a cut if you buy her books, we mention them here just because we like them.

Her books are a wonderful source of insight, inspiration and design ideas. We simply love her philosophy: the size of a home is not of great importance. What matters is proportion, comfort and quality: cozy, textured, layered spaces that allow people to live in rooms (and nooks) that physically and visually connect, yet maintain just the right sense of separation.

She believes by the way that the heart of a home is where you cook and the family eats. And the kitchen/dining area should (even if physically small) have a big heart by design!

When you entertain or throw a party, where do people most comfortably and naturally congregate? Where else but the kitchen, and the most informal living or dining spaces. She has great ideas for making smaller spaces “work”.

Most formal dining rooms and living rooms in practice function as if museum spaces, where a nice painting or sculpture may be viewed, but not where people gather naturally. So most people don’t really need them! And thank goodness……because in New York, most can’t afford them either.

Many of her projects and illustrations are for living spaces larger than typical in Manhattan, but the ideas can of course be scaled down to fit NYC proportions. This month we draw your attention specifically to her chapter: "Grace, Elegance and Storage – in 650 sq. ft.". It is found in her most recent book "Inside the Not So Big House". Check it out at her website (www.notsobighouse.com), or the public library.

The Blue Pearl Digest
April 2006

Market Recap: It’s the first week of April and that means the latest quarterly sales figures for the Manhattan real estate market are released. Major brokers Brown Harris Stevens, Corcoran Halstead and Douglas Elliman (using data from Miller Samuel) all release their take on the numbers.

As one would expect, the reports issued from each of these sources show the same general market trends for the period in question (January through March).

The average price per square foot for all apartments (Coops and Condos) was $1000 for the quarter (up 12% from first quarter of 2005). The Average Sales Price across the board was $1,258,000, the median was $740,000. A year ago those numbers were $1,169,000 and $695,000 respectively. These numbers give a general sense of things over the prior year, but of themselves have little practical value for a specific homebuyer today. Remember too that the number of sales of 3 and 4 bedroom units (perhaps higher this past quarter as a result of Wall Street bonuses flowing through the system), plus the number of ultra high end, "trophy" apartments sold in a given quarter can skew the averages significantly.

We encourage you to visit the sites mentioned and look closely at the numbers for the size of unit (and neighborhood) that interests you. For perspective, consider the following:

Average Sales Prices for Condos (Brown Harris Stevens)

Average Sales Prices for Coops

We think a close look at all the numbers in the various reports leads to one reasonable generalization today: to a large degree the market at present is just treading water. It hasn’t burst and it isn’t rising at the unsustainable rates of the recent past. As we are fond of saying, the market is fluid and prices are always adjusting to the various factors that continuously push prices one way or the other: demand, interest rates, inflation, general health of the economy and buyer confidence. Overall, the market is fairly flat. Some sectors seem to be rising slightly (especially studio and one-bedrooms, and large 3-4 bedroom units), other’s perhaps holding fairly steady.

Some locations it seems will probably forever command a premium price in NYC. An apartment along either side of Central Park comes to mind. And today the neighborhoods from Chelsea and Gramercy Park south through Tribeca and beyond are highly prized – and prices, at present at least, continue to reflect buyer preferences in the matter.

Mining the data further, there are several other important factors to mention. The number of apartments sold during the 1st quarter a year ago was approximately 2000 (data from Miller Samuel). During the first quarter of this year the number sold is approximately the same.

However, the number of apartments for sale today is about 60% higher than a year ago. At present there are roughly 7000 apartments for sale, and about 3000 of them are condos. And in addition hundreds of new condos are in the pipeline and will be coming on the market in the months ahead.

Further, a year ago it took on average 44 days to sell an apartment. Today it takes 138 days. And the average “discount” off of asking prices last year was 1.3%. Today it is 2.8%.

All of this would seem to suggest that if sellers must sell, at some point prices on average will have to drop a bit. How things play out remains to be seen, of course.

Owners who aren’t under pressure or in a rush to sell may hold tight on their asking price or pull their units off the market if they can’t get what they feel they deserve. Others of course will have to sell and at a price a buyer will pay. It appears we are at a sea change in the New York City real estate market. Prices are probably not going to be dramatically slashed. But they may not quite hold at current levels either. The coming months will be interesting, to say the least.

Footnote: according to Freddie Mac, the average 30 year fixed rate mortgage is now at 6.43%, up from 6.35% last week.

The Artistic Dimension: Check out a web site we’ve personally found to offer high quality, environmentally friendly, organic fabrics, furnishings and paints: www.annasova.com. We are completely satisfied with the home products we’ve ordered. Take a look.

The Blue Pearl Digest
March 2006

Market Recap:  Reuters recently (March 9th) summarized these statistics from a report released by the Real Estate Board of New York (REBNY):

	Median Prices of Condos in Manhattan rose 20% to $770,000 in 2005.
	Median Coop prices rose 6% to $649,000.
	Prices south of 42nd Street rose 27% from 2004 to $849,000.
	Prices in northern Manhattan condos had the highest increases, rising 46% to a median of $364,609.
	West Side Coops rose 19% to a median of $722,000.  The average sales price in the West Side neighborhood climbed to $1,087,950.
	The median price per square foot for Condos citywide rose 25% to $951.
	A spokesman for the REBNY said these numbers indicate the market continues to flourish, demonstrating a continued strong desire among homebuyers for a NYC lifestyle.

Our take on the numbers:  like most statistics, they're interesting and useful in context.  They reconfirm in broad strokes what sales data show happened over the past year or so.  But, it should be pointed out that it was price increases that largely occurred in the first half of 2005 that drove the increases in the REBNY statistics.

Unfortunately these numbers don't tell a buyer or seller what is actually happening today.  It seems we continue to be in a period where no one knows for sure what direction the market will go.  Some might say we are waiting to see if it is buyers or sellers who will blink first.

Buyers of course would like prices to go down (or at least have a better idea of whether they are going to stabilize somewhere near last year’s highs).  And sellers of course would like prices to hold at current levels or even creep up a bit.  At this point it seems to be anyone’s guess as to which way the actual market will go.  Time will tell of course.  Our sense:  there is going to be a slight dip in prices in some buildings, price ranges or neighborhoods.  Other locations or developments because of amenities and other desirable features will probably hold their prices for the foreseeable future.  Overall, we think the market is moving broadly into a more "normal" period where annual growth rates will be flat for a few years or at best average 3-5%.

A final note:  the average 30 year fixed rate mortgage last week was 6.37% (still very reasonable by historic standards, but continuing to climb slowly).

The Artistic Dimension:  We think a great store worth visiting is Country Home and Comfort at 43 W 22nd Street in Manhattan (212-675-2705).  They have an eclectic mix of new cabinets, dressers, hutches, beds and interesting furnishings from sources in China, Europe, Africa, South America and the US….as well as assorted antiques from France, Morocco, Argentina and other locations.  They import from all over the world.

They've been in business for 12 years, 6 years at the 22nd street location.  One of their main offerings is their own in-house line of furniture manufactured in Hangzhou.  The China facility was originally setup decades ago by old-line European furniture makers, who continue to run and manage the operation to this day.  The manufacturing equipment, methods and designs are European.  We think the prices are reasonable by today's standards and reflect good value for your dollar.  The quality is good to excellent.   Definitely worth a look.  When you visit ask for Moonyneen or Dennis for expert assistance.

The Blue Pearl Digest
January - February 2006

Market Recap: December 2005 sales figures indicate the market has slowed relative to the 3rd Quarter of last year in each of the three major segments: Condos, Coops and Luxury Apartments ($2.0 million and up). Total sales are down approximately 20-22% over this period. And average price increases are up on the order of 1-2 %. This data clearly supports the perception among many in the public that the overheated market has cooled and prices are generally rising at a much more “normal” rate, in line with long term averages of
4-6% a year.

Recent data also show apartments taking longer to sell – approximately 135 days on average currently (as compared to 90 days a year ago). And there is evidence that some owners selling in the high end range (above $2.0 million) and needing to move their properties quickly are feeling pressure to lower prices – sometimes by 5%, but in some cases by 10-20%. Much depends on where the unit was priced to begin with, of course.

As of now developers of new condominiums are resisting price drops. Time will tell if demand will sustain current asking prices. It is important to note that new condo inventory is being added at about the same rate as re-sales. At some point, this suggests appreciation has to flatten out.

One telling number today is the relatively high inventory of apartments for sale. The total number of apartments currently listed is about 60% greater than what it was a year ago. Simple economics of supply and demand are favoring buyers in certain market segments.

Market demand remains fairly strong in the studio, one and small 2 bedroom markets – those priced especially in the $400k - $900k range. Prices in this range appear to have remained fairly stable over the past 3-4 months, some nudging up a bit, others dropping slightly.

Real estate markets are fluid like any other segment of the business world. Generally what is considered a fair price is what buyer and seller mutually agree on. Today, with prices generally leveling or undergoing at best modest increases (and in some segments declining slightly), it’s clear that an accurate assessment of the value of a particular unit is especially critical. Most of you will need some expert help. Find a broker you trust for pricing advice.

For those of you wishing to peruse detailed sales statistics, check out the market report section at Prudential Douglas Elliman (www.elliman.com).

And finally, Freddie Mac reports average 30 year fixed mortgage rates at 6.12% for the fourth week of January 2006. And rates appear to be inching up slowly from investor concerns regarding rising inflation.

The Artistic Dimension: This month we want to explore several websites we believe will be new to most of you. They offer some truly special products that can contribute to the beauty and spirit of any home. We also like their offerings because in nearly all cases they are natural, one of a kind, hand made and earth friendly.

Before taking you to the sites, we have to first talk about an organization in Kyrgyzstan (north of Afghanistan in the former Soviet Union) called Altyn Kol. We stumbled upon them as we were trying to find a few 3’ x 5’ throw rugs to purchase for our own home.

This organization – a type of women’s cooperative – was formed by over 200 women in the spring of 1998. Their purpose was two-fold: preserve the art of making felt wool carpets in the traditional Kyrgyz manner (each one unique in color and design, and hand sewn) and offer them for sale outside of Kyrgyzstan as a way of providing income during difficult economic times.

Their beautifully crafted carpets (called Shrydaks) and other products are available at several websites and through several Ebay sellers. In all cases, the wares are identified as coming from Altyn Kol. After receiving our first wool rug, we ordered 5 more of varying sizes. We couldn’t be more pleased. The quality is superb and there is something special about the texture of the wool. We love to walk on them barefoot. And our very particular cat gives them a strong thumbs up – he sleeps for hours on his favorite.

We actually purchased from several sites. We think the place to start is at a Swedish site that assisted the women in setting up the cooperative at its inception. Its URL is:
http://www.helvetas.kg/lp_altkol_en.shtml

From this page you can click on "Altyn Kol Feltcraft Gallery" and see images of a number of their products. You can also get information and place orders directly by email at altyn_kol@mail.ru.

For those of you interested in purchasing Altyn Kol products from other sites (we have purchased ourselves from these sites and were completely satisfied) try: http://www.importu.com. This, by the way, is an interesting site for a great variety of home furnishings and other hand crafted items from all parts of the world.

We also suggest going to the Ebay.com home page, and doing an advanced search using Seller ID "Sultansbazaar". Some of their products are from the cooperative. In addition, they have other excellent furnishings as well.

We hope you enjoy exploring and find a treasure or two for that special place you call home!

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