Manhattan residential real estate has performed better than the broader U.S. real estate market and comparable major cities such as San Francisco and Los Angeles. For potential buyers, now is the time to shop. We are in an uncertain period where the Dow is at 10,000 without justifying fundamentals. Unemployment is at 10%, the dollar is weak and inflation is coming. Relative to the stock market and comparable major cities, Manhattan has performed well. I'll explain why, and I'll tell you why it will continue to do so for the next decade.
While cities like Los Angeles and San Francisco have seen their real estate prices decline more than 40% from their bubble highs, prices in Manhattan have taken a significantly smaller hit. Miller Samuel reports that the peak price per square foot was $996 in the third quarter of 2009, vs. $1,289 in the first quarter of 2008. That represents a decline of only 23%. Third-quarter 2009 data show prices declined at a lower rate while transaction volume surged 46%, a sign that the Manhattan market is starting to find its bottom. I expect it to decline another 10% with an eventual U-shaped recovery. But the duration and the magnitude of the decline have been less than for comparable major cities. Wall Street firms are expected to pay a record $140 billion in bonuses this year because of the resurgent stock market, an easing in credit markets, an increase in dealmaking and government programs, according to The Wall Street Journal. This is despite the recession and despite an unemployment rate of 10.3% in New York City. Regardless of whether these bankers deserve their lavish bonuses, one thing's certain: Their payday will boost Manhattan real estate prices.