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Manhattan Apartment Prices Plunge

The Associated Press

NEW YORK -- Apartment prices in the typically resilient Manhattan market plunged in the second quarter by the largest annual amount in decades, data released Thursday showed.

The median price fell between 13% and 19% from a year ago, according to four separate reports, and sales were off by half from last year's totals.

"The city did a nosedive. There was virtually no business," said Dottie Herman, president & CEO of Prudential Douglas Elliman, one of the largest real estate brokerages in New York.

Multimillion-dollar apartments were the hardest hit. Luxury buyers vanished as Wall Street bonuses and jobs dried up and so-called jumbo loans for anything over $729,750 remained almost nonexistent. That loan limit is less than the median price of a Manhattan apartment, which ranged from $760,000 to $849,000 in the reports.

"We're talking lenders requiring 30% to 40% down (payments) for jumbo mortgages. What does that do to someone buying a $4 million apartment?" said Jonathan Miller, president and chief executive of real estate appraisal and consulting firm Miller Samuel, which analyzed the numbers for Prudential.

The median sales price of a luxury apartment -- defined as the top 10% of all condo and co-op sales -- tumbled between 17 and 26%, while the number of sales were cut in half.

Sales of new condos were also hobbled because of recent changes in Fannie Mae (FNM Quote) financing, which has made it harder for buyers to get mortgages, Miller said. The government-controlled financier now requires a development to be 75% sold in New York before doling out any mortgages to potential condo buyers.

A supply glut also worked against prices. The number of homes on the sales block grew in the second quarter and the average time to sell an apartment was 129 days, up 48% from a year ago, Brown Harris Stevens reported.

In a positive sign, however, sales picked up at the end of the second quarter, Herman said, especially on the lower end of the market as first-time homebuyers entered the market lured by relatively affordable prices and a federal tax credit of $8,000.

Sixty-one percent of all sales were below $1 million -- which is considered the lower-end by New York standards -- compared with 49% a year ago, Miller said.

Sellers are beginning to adjust to the market. In the second quarter, the number of price cuts more than doubled from a year ago, with reductions averaging between 8% and 9% for condos and cooperatives, a report from StreetEasy.com showed.

"It's the beginnings of the new reality," said Pamela Liebman, CEO of the Corcoran Group, "that 2007 and 2008 were not the norm, but the peak."