The world wants to buy in New York City. In the second quarter of 2012, New York real estate manifested as an investment similar in security to bonds. Although buyers realize that they can no longer count on the high returns which a residential real estate purchase promised them during the boom years, bricks and mortar have once again become desirable safe havens. New Yorkers, a national constituency of buyers from all over the United States who want property in the country’s greatest city, and international buyers from everywhere seeking a safe haven for their capital, all invested in New York properties during April, May, and June. All three were extremely strong months in both the Manhattan and Brooklyn marketplaces.
A change which I noted in the first quarter but which accelerated in the past three months was the popularity of smaller properties. Appropriately priced units at $1,500,000 or less have been a hot commodity, in both the co-op and condo arenas. Clearly the combination of low interest rates, high rents, and a historically low rental vacancy rate motivated buyers from all over to jump into the market. One after another, our exclusives in this price range, all over Manhattan, have sold with competitive bidding –sometimes as many as six or eight offers on a single property.
No part of the city burned hotter last quarter than brownstone Brooklyn. Virtually every house received multiple offers, whether in Fort Greene, Park Slope (both north and south), Cobble Hill, or Carroll Gardens. Some of these offers came in as high as 25% over asking prices! And this is no longer a phenomenon of people moving to Brooklyn because it is more affordable than Manhattan (although the houses are still less expensive than in most Manhattan neighborhoods.) Brooklyn’s leafy, low rise neighborhoods have become a destination; a whole generation now eagerly crosses the bridge to the borough many of their parents could not wait to leave behind.
A similar story exists in Harlem. Predictions of a huge condo oversupply, widely proclaimed three years ago, proved as incorrect there as in other locations around the city. Most of the available inventory has been absorbed, and new product appearing on the market today sells briskly to a broad spectrum of buyers from all over the city, the country, and the world.
Numerous marquee sales lifted the price averages at the ultra-luxury end of the market. In both co-ops and condos, the wealthiest Americans and international buyers have staked a claim in Manhattan. The penthouse contract at new midtown condo One57 for more than $90,000,000 the sale of Courtney Ross’s two apartments at 740 Park for $52,000,000, and the recently much touted sale of Ted Forstmann’s Fifth Avenue penthouse for $40,000,000 are only a few examples of these transactions. The most interesting part of this marketplace is the relatively large number of buyers competing for a relatively small dossier of apartments. When one of these ultra-glamorous Central Park facing trophy listings hits the market, there are back-to-back appointments for several days as agents try to rush their customers in the door before a deal is made. The caveat, of course, especially in the co-op world, is that even at this rarefied level many buyers are price conscious, especially if the property is not EXACTLY what they want. So some great listings in top buildings linger, even as others are snatched up, if the buyers don’t perceive an appropriate level of value.
In fact, at every level of the co-op market and all but the highest in the condo market, value is critical. Properties which are priced wrong don’t sell. Sellers struggle to accept this, as each of us harbors a fantasy that our property will somehow be the one which defies the trend. “It only takes one person”, sellers intone to us over and over. Unfortunately, that one person rarely comes. It is true that a unique property can very occasionally attract that perfect buyer who has to have it. But that is a 1% of 1% occurrence. For the rest, mispricing creates multiple problems, and never more so than in the ultra value conscious months of 2012. First, since buyers and brokers search properties online, an overly ambitious price often puts it outside the price criteria for the right buyer and his/her agent. They simply don’t know it’s there. Second, the seller cannot take advantage of the pent-up demand waiting for properties like his to come on at the right price. The property lingers, creating a third problem: days on market. Every buyer knows these statistics today thanks to the multiple real estate websites out there. So even when the property reached its proper price it has the longevity strike against it.
This quarter the price problem has been particularly acute with properties in the large two and three bedroom categories. For a variety of reasons, most particularly job insecurity and the changes in the way Wall Street bonuses are paid, this group of buyers feels particularly price conscious. Many Park Avenue and Central Park West properties with overblown prices have lingered months on the market even as their more modestly priced cousins on Lexington or Broadway have been snapped up. Now more than ever, pricing sells.