Manhattan Real Estate: Has The Day Of Reckoning Arrived?

Posted In: Banking Crisis, Hedge Funds, Home Prices, Homeowners, Housing, Investment Banks, Mortgages, Wall Street

I’ve been tracking the Manhattan real estate market for a while now. In spite of the carnage taking place in other regions of the country, this posh area has appeared to be pretty resilient. Not anymore, according to some Manhattan insiders. Last week, Brian Ross of ABC News looked at whether or not the “Day of Reckoning” had finally arrived for the Manhattan housing market, and wrote:

Manhattan’s finest co-op apartments may have already lost a fourth of their value as a result of the financial crisis, and the worst is yet to come, says leading New York estate broker Kathy Sloane, of Brown Harris Stevens.

An owner of a five-million dollar Park Avenue apartment, only an average residence by investment banker standards, “may be lucky to achieve $3.5 million” a month from now, said Sloane, whose clients have included celebrities, the super-rich and prominent families including the Clintons.

“If someone saw a bid between $3.8 million and $4.2 million from a qualified buyer, take that bid,” said Sloane in an interview to be broadcast on 20/20 Friday night.

“You can be Lehman Brothers or you can be Merrill Lynch, meaning you can go down with the ship,” she said, “or you can say, look, there’s a huge storm about to crash and we need to get to higher ground and make a plan.”

Ross also spoke to Newsweek contributing editor and Manhattan resident Holly Peterson about how the turmoil on Wall Street is affecting local real estate conditions. Ross wrote:

Prices for some apartments in premier Park Avenue and Fifth Avenue co-operative buildings have soared well beyond $50 million in recent years, pumped up by the super-sized salaries and bonuses of investment bankers and hedge fund operators.

Now, they may not be so welcome.

“Five years ago, if you were an investment banker that meant big bucks and automatic entry. And today it is a dirty word,” said author Holly Peterson, the wife of a multi-millionaire investment banker and the daughter of multi-billionaire financier Pete Peterson.

*Well known for her send-up of Park Avenue society in the book, Manny, Peterson says co-op boards will be afraid to approve investment bankers for sales “because they know your stock is worthless.”

Across Manhattan, says Peterson, “the gilded age is over.”

“People who are worth thirty, forty, fifty millions dollars lost it all,” she said. “And now they have their apartments, and their country houses and their ski houses but they have mortgage payments on all of those. And they have no cash.”