Conflicting forces have shaped the New York real estate market during the first quarter of
2015. Inventory remains low, but many properties linger. Certain segments thrive while others struggle, and the co-op and condo markets continue to display different trajectories as their respective constituencies, domestic for co-ops and more international for condos, respond to different stimuli in the press of national and international events. In short we have devolved into an arena with so many submarkets that it is almost impossible to broadly characterize the market overall.
• The ultra luxury condominium market receives more press attention than any other
area of the real estate landscape. Records were shattered when a condominium sale, that of a duplex penthouse at 157 West 57th Street, broke through the $100 million mark
in January. But the reality is more complex than this marquee sale would suggest. 57th Street, from Second Avenue to Eighth Avenue, is now lined with super tall, super luxury condominiums in various states of completion. Not all of these buildings are selling briskly. Not only do they compete with each other, but they also face headwinds in a market in which international forces now mitigate against rather than for them. With the euro at historic lows against the dollar, with the Russian economy struggling under the dual burden of sanctions and falling oil prices, the pool of prospective purchasers for properties costing $30 million and up has diminished. One sees it in the plethora of
penthouses for sale below 23rd Street, this one for $25 million, that one for $35 million. No doubt buyers will be found, but these units are not rushing off the shelves.
• At the same time, less expensive condominiums are much in demand and not just with foreign buyers. While there are still many investors looking for properties to buy and rent in the $5 million to $10 million market, these two and three bedroom properties are also more and more popular with New Yorkers and people from around the country who do not want the inconvenience they perceive with a co-op purchase. Twenty years
ago, the only appropriate choice for well-heeled New Yorkers was seen to be a co-op in a fine prewar building or one of the handful of “new” building like Imperial House or 860,
870, 875, and 880 Fifth which were seen as prewar equivalents. That world has changed. As new condominiums offer high end finishes in kitchens and baths, spacious rooms and elegant layouts, more and more local people want to take advantage of the joint benefits of buying everything new (or relatively new, if buying a resale) and not subjecting themselves to the microscopic financial and social scrutiny of the co-op Boards.
• In the co-op world of the Upper East Side, larger units, especially those needing work (which tends to be most of them) linger on the market, often for six months, nine months, even a year or more. Proper pricing is key for these properties, whether in the stately Park and Fifth Avenue palazzos or, even more, in the grande dame apartment buildings of Sutton Place and East End Avenue. The sellers of these units are constantly asking their agents, why don’t we get more foot traffic? Why don’t people make offers? The answer is always pricing. Unless they are sure it will fall within their price range, buyers don’t want to see it. And if they do see it, they don’t want to bid low and be disappointed. They would prefer to move on. It is vital to build in a discount for the inconvenience of dealing with a co-op Board’s renovation rules when selling a tired apartment. Properly priced, these homes can sell fast. Otherwise, they linger.
• Three and four bedroom properties on the Upper West side or in Greenwich Village continue to fare better than their Upper East Side counterparts, partly because there are so many fewer of them. Central Park West is still much in demand, as is anything around Washington Square. But even here, an overly ambitious price can drive buyers away and slow activity to a standstill.
• By far the most active part of the market is that for properties asking $2 million or less.
In Manhattan, in Brooklyn, in Long Island City, these are the co-op and condo units which often still bring multiple offers and sell at prices 5% or 10% above their initial
ask. One recent Warburg listing, a large one bedroom apartment on the Upper East Side listed for $899,000, was viewed during the first Open House by 70 people and received
12 offers before selling at more then 10% over the original asking price.
It’s rare to see such disparate behavior in different market segments. The unifying themes are price and scarcity. Where properties are properly priced and inventory remains scarce, they move quickly. As inventory builds up for larger estate apartments, or 57th Street condominiums, or more generic one bedrooms on First or Second Avenue, prices fall under pressure to reduce. And until they do, these units won’t sell. It will be extremely interesting to see which prices increase, which stabilize, and which get reduced to bring about sales during the second quarter.