N.Y. Apartment Prices Dip as Brokers Blame Wall Street Woes

Investment banker Alan Krouk, who was about to trade up to a 1,200-square-foot, $650,000 Upper East Side apartment in September, pulled out of the transaction at the last minute. Today he's still in living in his 700-square-foot, one-bedroom unit, waiting for what he expects will be a significant drop in Manhattan apartment prices because of a weakening stock market. ``There is a lag effect between the real estate and the stock markets,'' said Krouk, 31, who works in corporate debt origination at an international banking company. ``Real estate hasn't fully felt the effects of the stock market yet, but it will. That's when I'll buy.''After a buying binge that drove up Manhattan apartment prices an average of 26 percent in each of the past four years, apartment brokers say Wall Street bankers like Krouk turned cautious late last year, and sales negotiations have been tougher ever since. ``We don't have the frenzy of the past. It's taking longer to get deals done,'' said Sharon Baum, at the Corcoran Group, the city's second-largest residential brokerage. ``Investment bankers are increasingly asking us if the (apartment) market has peaked.'' Even after investment banks started handing out a record $13.3 billion in bonuses in December and January, Manhattan condominium prices fell 4 percent to $201,000 per room in February, while cooperative apartment prices fell 18 percent to $126,000 per room, brokerage firms said.

Bearish Sentiment

Real estate brokers blame the new attitude on a 60 percent slide in the Nasdaq Composite Index in the past 12 months, declining fees from initial public offering and merger underwriting business and job cuts at Wall Street firms like Bear Stearns Cos. and Morgan Stanley Dean Witter & Co.

``The old adage that as Wall Street goes, so goes real estate (in Manhattan) still holds true,'' said Kirk Henckels, senior vice president of property brokerage firm Stribling & Associates. ``In a negotiation today, prices are just as likely to be nudged down as be nudged up. Before (this year), prices always nudged up,'' he said. ``Buyers are being more discriminating today'' because they sense the apartment market won't continue to rise as fast as in the past, said Patricia Burnham, head of PS Burnham Inc., which last year marketed a Park Avenue townhome once owned by the Rockefeller family. The frenzy of last year's market can be seen at 515 Park Avenue, where a new duplex unit was bought for $13 million in January, only to be resold for $17 million nine months later. At 1 Central Park West, a buyer bought an apartment for $11.5 million and resold it three months later for $13.5 million.

Sale Cancelled

Last month, Burnham said she lost a multi-million dollar sale when the buyer, a senior executive at Salomon Smith Barney, unexpectedly got his bonus in stock instead of cash.``No one is buying properties today expecting to see the appreciation of past years,'' said Peter Kelleher, a broker at Douglas Elliman broker. Brokers say low mortgage rates and low supply will prevent apartment prices from collapsing. As of last week, the average rate on a 30-year mortgage stood at 6.97 percent, down from 8.24 percent a year ago, according to Freddie Mac, the second-biggest buyer of mortgage loans. About 4,000 apartments are listed for sale in Manhattan today, down from about 10,000 in the late 1980s, according to data from Douglas Elliman, the city's largest residential brokerage. ``There's a level of confidence that if the market slides, prices will go back up,'' said Baum, in part, because of the limited supply.

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