By Pamela Liebman, CEO, Corcoran

In light of the difficulties in the nation’s financial sector, the American residential real estate market was closely watched in 2007. Slowing sales and widespread home foreclosures in regions across the nation attracted media attention, but New York bucked the trend and set new records in nearly every sector. Thanks to aggressive sales in Manhattan during the first half of the year and robust sales at the high-end in the second half, the value of residential property climbed 8% higher last year to $1100 per square foot. The average sale price for an apartment in 2007 was $1.395 million, an increase of 12% over 2006 when the average sale price was $1.243million.

Much ink has spilled over the national real estate market’s slower pace in the wake of the subprime mortgage crisis. However, Manhattan’s market has remained largely insulated from the crisis and its effects thanks to such factors as: the extra layer of financial review brought to bear by co-op boards; the greater degree of all-cash deals in our marketplace; and the ongoing status of New York as a global city whose property enjoys demand from an international class of professionals and wealthy clients. In fact, foreign buyers were a major reason why our business was robust in 2007, a trend that should continue as long as the dollar is weak and New York is regarded as good value.

Having said that, we are still waiting to gauge the full impact of the crisis in the financial sector on American real estate markets. The fact remains that the weight of all this bad debt underwritten in the form of subprime mortgages is corrosive of our entire credit-based economy. In the short term, the limited access to credit will impact prospective homebuyers and cause them to postpone their decisions. Even more worrying is the potential loss of value in real estate markets since that not only reduces wealth and decreases the homeowner’s ability to borrow against his home, but also narrows the ability of financial institutions to provide additional credit, deflating the entire marketplace. While Manhattan’s market has not been plagued with foreclosures the way other cities around the country have, the fact that our city is the hub of America’s financial institutions suggests that a significant portion of our core buyer base is likely to be more reluctant to take action than it has been in recent years.

Needless to say, 2007 was a year of challenges but it also was a year of record-setting prices, exciting change and continued growth here in New York. One notable trend was the increasing sales shift in our market from co-operatives to condominiums. The appetite of the luxury buyer tended to favor condos, particularly the super-luxury properties that shattered all previous price records. The resulting activity caused condo sales to outpace co-ops in 2007 by a significant margin; approximately 55% of all apartment deals were condominium sales. While both property types experienced price increases, condos continue to appreciate at a faster rate, growing by 9% in price per square foot in 2007 compared to the more modest 3% rise for co-ops. All of this was due, in no small measure, to the spectacular rise of world-class luxury condominium properties throughout Manhattan, many of them the work of the world’s leading architects, designers, and service providers.

Another notable trend that urbanites observed was the changing character of Downtown neighborhoods once considered marginal or – in the case of the Financial District – non-residential into vibrant communities. Conversions of properties, construction of new buildings, and the introduction of traditional lifestyle service providers and cultural institutions to areas as diverse as the Bowery, Hell’s Kitchen, and the Financial District are transforming the character of those areas into prime areas for residential living.

New York is the greatest city in the world and her resilience in the face of adversity has been her biggest asset over the last decade. I continue to be impressed by the enterprise and determination of our city and firmly believe that although there will always be bumps in the road, nothing that can keep New York down for long.