Wall Street's Woes Hit Highest End
New York
For months, as housing values were falling for midsize ranch houses in Stockton, Calif., and Las Vegas high-rises, sales of high-end properties in financial centers like London, New York and San Francisco continued to percolate along.
But that was before last week, when turmoil in the credit markets brought down Lehman Brothers Holdings and imperiled thousands of high-paying jobs. While those rare properties priced at $20 million or more are still holding up, there are signs that the crisis is exacerbating a downturn that was already plaguing properties in the $2 million to $10 million range, a market often sought by Wall Street workers.
Since last Thursday, there have been 200 price cuts on properties listed at less than $10 million on Manhattan's Upper East Side or Upper West Side -- a 17% jump from the week before. Deanna Kory, a broker with New York-based Corcoran Group who's handling nearly two-dozen properties priced between $2 million and $10 million, says her showings are down by about 40% in the last two weeks compared to the same time last year. A slew of new buildings set to open in the next year will only increase supply.
The impact is reaching beyond Manhattan. On Massachusetts's North Shore, where the average sale price of luxury homes is about $3 million, Lanse L. Robb says he's lost more than $15 million in listings and transactions in the last week. First, prospective buyers for a $4 million waterfront home canceled their showing. Then two clients spooked by the financial meltdown held off listing their houses or looking for new ones.
One buyer who was poised to put an offer on a $15.7 million. 10-acre oceanfront estate in Manchester-by-the-Sea suddenly stopped returning Mr. Robb's calls. "I still haven't heard back," says Mr. Robb, of Christie's Great Estates affiliate LandVest. "It's total silence."
In San Francisco, a buyer in the market for an $8 million to $10 million property told Mark Allan Levinson last week to hold off on the search because his stock portfolio had just taken a big hit. "People are still buying, but they're not quite as bullish," says Mr. Levinson, of Sotheby's International Realty in San Francisco.
Last Wednesday, a New York City buyer haggling over the purchase of a $1.9 million apartment used last week's turbulence to win an additional $100,000 discount. Arguing the situation had dramatically changed, the buyer contended that the market was headed for a steep decline. "He had lowballed the price to start with," says Anne Snee, a broker at Corcoran. "But given what's going on, I'm not sure that [the sellers] didn't make the right decision."
So far, the strongest part of the high-end market are the few "trophy" properties -- penthouses and other apartments with one-of-a-kind features that rarely come up for sale. "There are always people with money. Somebody's always on the other side of these crises," says David Ogilvy, a broker in Greenwich, Conn., who this year sold a $30 million house -- the second-most-expensive house ever sold in the area.
In New York on Tuesday, 50 people perused a 5,500-square-foot duplex penthouse on an in-demand Park Avenue block. Put on the market that very day, the 10-room cooperative apartment once owned by Broadway playwright and director Moss Hart and actress Kitty Carlisle boasts high ceilings, stunning city views and a $20 million pricetag.
According to Katherine Marshall, the broker whose family owns the unit, five prospective buyers have already returned to check out the apartment a second time.
Leighton Candler, a broker with Corcoran, says she has seen solid buyer interest in her top-shelf listings, which include a $46 million penthouse at 778 Park Ave. Previously owned by Manhattan socialite Brooke Astor, the apartment features 14 rooms, six terraces, five wood-burning fireplaces and city views.
Ms. Candler is also selling a $46.5 million penthouse at 1020 Fifth Ave., with a 40-foot grand salon and views of Central Park and the Metropolitan Museum of Art. It has been owned by the same family since it was built in 1925.
Just a few weeks ago, San Francisco saw one of its priciest listings ever, a 20,000-square-foot penthouse topping the St. Regis Residences. Encompassing two floors and featuring four terraces as well as a two-story waterfall, the still-unfinished unit has an asking price of $70 million.
So far, places like New York and San Francisco are still faring better than many other areas of the U.S., particularly areas of Southern California and Florida. "I think everyone is taking a hit," says Suzanne Perkins of Sotheby's in Santa Barbara, Calif., where prices have fallen 20% in the last year. "I still have buyers in the $20 million range, but they're looking for deals and they're looking for sellers who will negotiate."
In the run-up to the real-estate boom, brokers sometimes slapped headline-grabbing asking prices on highly desirable homes just to drum up interest and create buzz. Now, many of the tricks brokers are using to sell properties at the high-end are the same ones used with their more modest counterparts. The first and foremost: persuading the seller to list the home at an attractive price.
In Miami, Nelson Gonzalez of Esslingler Wooten Maxwell Realtors says he recently had to tell a client who wants to put his house on the market for $25 million to $30 million that it's really worth about half that amount. "I'm not willing to just put it on the market at the seller's pricing. I'm putting things on the market that are priced so they will sell," says Mr. Gonzalez.
Amid the financial crisis, agents say many buyers are also more reluctant to buy splashy properties for reasons other than the cost. "I don't think anybody is going to be bidding for at least the next several weeks," says Kirk Henckels of Stribling Private Brokerage. "You'd feel pretty silly walking into a cocktail party today and saying you bought an apartment today."
