Last week we released our Manhattan Market Overview for Prudential Douglas Elliman which outlined the fall correction and emergence of a new market. Apparently this topic continued to resonate and was worthy of a front page New York Times article. Josh Barbanel wrote a harsh, but good one: Housing Slump Hits Manhattan.

Apartment prices have once more become the talk of the town in Manhattan, but this time the talk is of uncertainty and falling numbers. While brokers say they are seeing more activity lately, especially from first-time buyers taking advantage of lower interest rates, housing analysts are predicting a prolonged slump in prices and sales that could last as long as four or five years.

Hey who was that housing analyst they referred to? I think I know him? This is my 9th time on A1 (but who’s counting?) and it’s always a thrill. My last time I thought it was 9, but it was only 8 – good grief this is shallow – ok, I’ll stop.

In Manhattan, real estate is more than a spectator sport and was the last or one of the last US housing markets to see weakness. High end is expected to feel more pain and first time buyers and sub-million dollar sales are the big story at the moment.

Jonathan J. Miller, an appraiser who prepares quarterly reports on Manhattan, said the market could continue to fall through this year and next, especially if credit remained tight for most buyers. After that, he said, it could take several more years to work through the excess inventory.

Both inventory and “shadow” inventory – the newly constructed or converted housing units ready for sale but not offered yet – probably in the neighborhood of 6k to 8k units.

The article ended with this thought:

Mr. Miller said that during the last big real estate downtown, when studio apartments were so cheap that he considered buying one on a credit card, people thought the luxury market would never come back. “Conspicuous consumption was out of vogue in 1991,” he said. “The market was back by 1997 or 1998.”

In other words, so many market participants characterize these periods as “forever” when they’re really not – housing is cyclical so get on with it.

7 Responses to “[Conspicuous Consumption is A1] Manhattan Housing Slump Hits NYT Front Page”

  1. Edd Gillespie says:


    I am curious as to why you think conspicuous consumption will return once the slump is over. I have been told over and again that this economic tsunami is almost unprecedented and certainly something different from a slump in housing. I have no doubt that keeping up with the Joneses will survive an apocalypse, but everything I read seems to indicate that lending must evolve into something more authentic than the shell game we have just witnessed.

    Changed lending will dramatically impact and is impacting the effective component of demand. The way I see it there is going to be less money for rent and the terms of rental are going to be tougher leading to what may look like lower demand on the supply curve. Once we get used to it, we will know it was quantum shift in what housing prices can be effectively demanded. Even the rich in Manhattan seem to be paying attention to the concept of affordability, and I guess I’m saying the standard of US living is definitely going to go down more than it already has. We are seeing fundamental adjustment here impacted by economic globalization, not the beginning of another waiting period like the last one.

    Since housing is so critical to life, housing prices must adjust to the income people can sustain.

    • Because economies, including housing, go in cycles. I find it interesting that people have a hard time seeing that we will ever get out of this mess and for the rest of our lives, the world economy will continue to spiral downward. Some cycles are longer than others. Lending will be based on sound reasoning in the future until there is incentive not to and then a repeat of this, perhaps not as significant, will occur again. It’s inevitable.

  2. Edd Gillespie says:

    OK, I see. And thanks for not being a cynic.

    Who could not agree that this will not spiral downward forever? But, that is not where I was coming from.

    I think it is going to level off at a noticeably lower standard of living (and cheaper houses) than we had. We are learning right now the consequences of the consumption we entertained. It is not sustainable. Maybe someday we’ll arrive where we were pre-2007, but the rest of the world will be more equal with us when it happens and it won’t be based so much on smoke and mirrors.

    Can’t deny the cycles, those are history, but this thing is the perfect storm and has more lasting significance than cycles of the repetitious sinusoidal kind across an ever higher median.

    You haven’t said we will get back to where we were any time soon and I haven’t said the sky has fallen. I do think we are predicting different outcomes somewhere between the extremes though.

    We’ll see. Actually what else can we do?

  3. The problem here is the creation of credit, which is how the consumption is afforded, has been severely damaged. The out look to make it happen again with all the new regulation will be bleak. The only way is a new moose trap that we haven’t seen yet. The fed is trying to back stop, create and be everything to everyone. It just can’t do it for ever. Once Uncle Sam’s credit rating is lowered it will all get fuzzy. IF we keep this spending and guaranteeing up with such a deficit it will happen. Other governments are already becoming leery of us. Will it come back again, yes it will but it is sure to be different. Nothing stays the same.

  4. JB in NYC says:

    In retrospect, we can all point to numerous anecdotal “tops” forewarning impending collapse of a bubble mania.

    One of my favorites will be Trump’s assertion that all units located in the top six or seven floors of new residential construction will be penthouse apartments.

  5. […] week I reflect on the media explosion over Manhattan’s housing woes (A1 NYT version) and Nightly Business Report and some of the remaining gatekeeper thinking.  While London is […]

  6. neo says:

    The housing slump will have its end. Just like what Charles Chaplin said, “Nothing is permanent is this wicked world — not even our troubles.”