The Price Problem
For New York City real estate, pricing parameters change constantly. What we think we know in July is different in August, and what we think we know in August changes again in September. This is not about seasonality. Properties appreciate (or depreciate) at different rates for different reasons. Condos behave very differently from co-ops. Mint condition overrides estate condition. Neighborhoods rise, fall, change their constituencies. Even as agents, we are often racing to keep up, because comparables don’t always tell the whole story. But here are a few useful guidelines with which to enter the minefield:
- Your co-op on Third Avenue is NOT impacted by prices of super luxury midtown condos. Over the past decade, the condo and co-op markets have diverged more and more, with the higher prices in the condo market being driven (though by no means exclusively purchased) by foreign buyers looking to park cash on the relative safety of American soil. Co-op buyers are 99% American, and since many buildings discourage pied-a-terre buyers, they also remain primarily local. And just the same way most New Yorkers don’t want to buy an $8 cappuccino, they don’t want to pay condo prices for their co-op. Property value always reflects location, condition, property type, and local value. Period.
- Condo values extend further and further from historical enclaves. Earlier this year, I was surprised when a condo listing north of 79th Street commanded over $3,000 per foot. Heretofore, it had been my experience that foreigners were not venturing to invest in the upper reaches of the East and West Sides. And this apartment, though possessed of a great view, needed a total re-do. As it turned out, we were inundated by Asian buyers who loved the view and saw the value relative to the far pricier new construction 30 blocks further south. We are seeing condo buyers choosing areas as diverse as Harlem and Williamsburg. Even for investors and foreign purchasers, this ain’t your mother’s New York City!
- Depending on where you are, you may be able to price above the most recent comps. Or not! New York real estate is increasingly local, made up of multiple micro-neighborhoods with different value trajectories. These days, prices in Harlem are still rising, as they are in south Park Slope. In the prime areas of the Upper East and West Sides, prices reached a plateau a number of months ago and in general remain at those levels. Apartments in need of total renovation, especially those which are unstaged, are the most susceptible to downward price pressure. Buyers fear them, because of the uncertainty of both time and investment required. And as time on the market racks up, that in itself becomes a liability. All the factors must be considered to arrive at an appropriate price.
- No matter where you are, less is more. Excess of ambition tends to backfire as a pricing strategy. While we all tend to view what is ours as unique and special, often it is not. Don’t hope for too much extra value from the walk-in closet or the custom range hood. While pricing is as much art as science, not aiming overly high will get you a better price in a quicker time frame.
In real estate pricing, as in so many things, the devil is in the details. How much is additional ceiling height worth? Or a higher floor? Is there a price per square foot premium for mint condition? The answers to all these questions vary with the location, property size, building quality etc. You and your real estate professional must consider multiple factors in arriving at the correct price (and “I need to get $5 million” is not a pricing factor!) Getting it right means the difference between a quick and profitable sale and something more protracted and frustrating. That’s what is best for everyone.