The fourth-quarter market reports show that Midtown won the trifecta of negative market indicators: sharpest price decreases, most price cuts and most days on market. Why? In a word: speculation. Nobody wants those condos that were turning big profits 5 years ago.

Image Credit: Paul Worthington

Midtown Manhattan saw the sharpest price decreases, the most price cuts and the most days on market in Q4 2009

The Real Deal quotes Sofia Song, VP of research at StreetEasy: [Around 42nd Street,] “there are large, monolithic new development buildings, with a lot of investors and pied-à-terre buyers who are now desperate to sell.”

Midtown Manhattan Real Estate

According to StreetEasy’s market report, the Q4 2009 median price of a Midtown apartment fell 24.6% compared to a 10% decrease in the market as a whole. Year over year median price drops in other neighborhoods were: 19.6% on the Upper East Side, 14% Downtown, and 4.6%in Upper Manhattan. The Upper West Side was actually up 4%.

Many new developments were built on the far West and East sides with great river views and proximity to shopping and the theatre which made them attractive to foreign investors and pied-à-terre buyers, but their distance from the subways, parks or schools makes them less attractive to New Yorkers. Many of the developments were one-bedroom or studio units for just this reason.

So many of the bubble-buyers, foreign and New Yorkers, were trying to flip properties, sending the prices higher and fueling the bubble. Buyers on the current market tend to be buying to own, and most are looking in residential neighborhoods, not Midtown.

Compare Midtown to the Financial District: Both saw significant development, but you see a distinct difference in the type of buyers. FiDi attracted families because of schools and other residential amenities, while Midtown lured investors and foreign buyers. And the value of those properties now reflects the change in demand: In Q4, median price in the Financial District was $800,000- Midtown West’s was $700,000. In Q3 2008 it was $840,000 for FiDi and $890,000 for Midtown West.

StreetEasy’s report found 504 listings cut their prices in Midtown East during Q4 2009, the highest of any Manhattan neighborhood, and units there spent an average of 134 days on the market.

While speculation pushed prices in Midtown Manhattan up during the middle of the early 2000’s, there’s no need to speculate on what’s pushing them back down: high inventory and decreasing demand.