Despite Reports of a Tightening Market, Manhattan Multifamily Feels the Pinch of Increased Interest Rates

NEW YORK CITY-While the latest statistics from the National Multi-Housing Council in Washington, DC illustrate an increased tightening of the residential market with no signs of leveling off, at least one local real estate executive sees the upward climb as about to come to a halt. Citi Habitats chairman and president, Andrew Heiberger, tells GlobeSt.com that, in his view, things can only get so tight.

Chief economist Mark Obrinsky of the NMHC shared his data through July 2000 with GlobeSt.com, figures that demonstrate the hot demand for residential real estate. Obrinsky explains that through July there were 8,156 permits issued in Westchester County, the five boroughs of New York City and Rockland County combined. The total for all of last year was 11,495; in all of 1998 there were 10,342. The number in 1997 was only 8,653.

The figures for five or more multifamily units reflect essentially the same trend, Obrinsky says. Through July there were 5,058 permits and in all of 1999 there were 6,729 permits, the highest figure in years. The Census Bureau also records absorption rates for apartments in New York versus the national average that reflect a three-month absorption rate of 85% here and 72% nationally. Over a six-month period, the absorption rate was 96% in New York and 89% nationally.

Heiberger, however, calling himself “a broker on the front line,” explains that there is a lag time between when sales are initiated and when they appear on reports, noting that statistics for sales now reflect purchases begun months ago. He says he noticed the slowing when “the Nasdaq dipped in the spring and the Fed hiked interest rates. Some people lost paper wealth–I mean a lot of money. So now they’re hesitant to buy.”

Also slowing the trend is a limited supply. Heiberger notes that a number of properties, originally slated to become residential, have instead been rehabed for commercial use to meet the needs of dot-coms, telecommunications companies and other start-ups, leaving shoppers for housing without many options.

He says that the first indicator of a slowing market is, obviously, when high-end properties begin selling more slowly, something he’s seeing now. “The overall economy is slowing, so the really pricey multifamily sales are slowing. Then the rentals will slow down.”

Heiberger dos not rule out the possibility of a recession in the near future. If that occurs, he notes, it would likely spread first through the city’s residential markets and then to the surrounding areas. He does hedge his bet, and says the slowing “could just be a glitch.”

Obrinsky acknowledges that the NMHC statistics are only through July 2000. He also says that while the numbers seem to indicate that the tightening will continue, the NMHC could not speculate on the future of New York’s, nor the nation’s, multifamily market.