Steady Market Faces Global Concerns

The Manhattan residential real estate market stands more than one full year removed from the September 11th tragedy. A once murky market has emerged with impressive and discernable signs of strength and vitality - a market that could not be easily envisioned immediately following the terrorist attacks. The residential real estate market ended year 2002 in a position of stability and relative equilibrium, despite considerable pressure from an economy struggling to loosen the grips of sluggish growth.

The first quarter of 2002 began in a lull, which was quickly combated by historically favorable interest rates; a growing displeasure for investing in the stock market; and, to some degree, patriotic sentimentality. The first quarter slowdown soon faded and the levels of activity evident in the spring were surprising to most and indeed, impressive to all. These positive market factors fueled and energized pent-up demand from buyers armed with low interest financing and an overall confidence in the soundness of investing in a Manhattan residence.

The second and third quarters were also periods of aggressive market activity. During this dynamic period, marketing time dwindled and negotiability factors decreased, evident of a state where the supply and demand factors were toppling towards the interests of the seller. Before the start of the year's final quarter, the sustainability of an exuberant residential market was questioned. Could the market continue to defy global, political, and economic influences?

By the end of the third quarter, the weight of external factors such as a looming war with Iraq; fear of additional terror attacks; stunted economic growth; rising unemployment; and budget deficits began to infiltrate buyer sentiment. A new wave of uncertainty was introduced to the market, noticeably curtailing buyer interest and extending marketing time for most property segments.

Although most year end statistics and indicators revealed that overall, year 2002 surpassed levels achieved in 2000 and 2001, the end of the year also signaled the willingness of buyers to "wait and see" how external influences will be resolved. The residential market continues to possess the fundamentals of vibrant stability - ample demand, disciplined levels of inventory, and overwhelmingly favorable financing terms. However, the immediate direction of the market will largely depend on the resolution of global and economic factors that the market can no longer ignore.

Michael Vargas
Executive Director

Drew Fautley
Executive Director

4/2003

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