NEW YORK NOW AND THEN
NOW :
Those of us who consider ourselves real New Yorkers (you know who you are) are possessed of a certainty that this city is like no other. We are convinced that it is a place of superlatives – the biggest, the brightest, and the best – to sum up, it's in a class of its own. So when the housing news from elsewhere is negative are we surprised to learn that New York is apparently the exception? When foreclosures and the sub prime mortgage crisis appear unable to cross the Hudson , are we puzzled? Well, no, not really (well, ok maybe a bit). But as the first quarter of 2007 sales data become available what has been industry buzz has been translated into actual numbers and they are incontrovertible.
There are few among us who tire of hearing and reporting good real estate news (except perhaps the headline writers at the New York Times : see April 11, 2007 front page headline, “A Word of Advice During a Housing Slump: Rent”), but if you are one of them – stop reading here.
So with apologies if I repeat myself, I am pleased once again to pass on the news that as the peak spring season begins its exit and summer readies its entry, the housing market in New York City remains extremely strong. According to a recently released five-borough report, the Real Estate Board of New York (REBNY) finds that the average price of an apartment (condos and coops) in the city rose 23 percent compared to 20 percent in the same period of 2006. In Manhattan , the average price of an apartment reached $1,107,000, in Brooklyn it hit $441,000, and in Queens , $257,000. The average price per square foot in the city went up seven percent for coops, for condos the increase was 19 percent. In Manhattan , the average price per square foot went to $1,013, a rise of three percent compared to the same period last year.
In addition, median prices were up, indicating that it was not just the top of the market that was performing well. Speaking of the top of the market, albeit it is only rumor, The Plaza may soon be able to boast of the top price ever paid for an apartment in Manhattan --$56 million!
Defying the national trend, the real estate picture in New York City continues to be rosy. (But don't confuse the city with New York State ; unfortunately the rest of the state looks more like the rest of the country.) In Manhattan , there is a déjà vu feel at the moment with multiple bids making a return appearance and open houses full to brimming. Even though new development product is continuing to be absorbed, it is still the Pre-war stock that draws the most interest – especially if the price is right and renovations have brought it into the 21 st century. But there is less of it available and prices will begin to reflect the lack of supply. As rents continue to rise in response to a shrinking vacancy rate, and mortgage rates remain low, new buyers continue to enter the market, begging the question – will summer be the traditional slow season for real estate? Or will these first-time buyers redefine the selling season as they contemplate giving their money to a landlord or investing in their future? Stay tuned.
As you digest the ongoing strength of the New York City real estate scene, I thought you might be interested in learning something about two prized historic domiciles that have stood the test of time. They are wonderful examples of the way we were long ago but not so far away. They are both in areas of Manhattan that went from desirable to damnable and are once again ascendant; they are worth a visit with or without out-of-town summer guests.
THEN:
The Merchant's House Museum is a rescued treasure just off the formerly hardscrabble now about-to-be-chic Bowery. The house was built in 1832, when the wealthy were deserting crowded lower Manhattan for the rarified realm of uptown (which then extended to 14 th Street), as the city was transforming from Colonial port to flourishing metropolis. It was bought in 1835 by affluent importer, Seabury Tredwell, whose immediate family lived in it continuously for nearly one hundred years, until the eldest daughter, Gertrude, died in 1932 at age 93. It is a Greek-Revival gem and the city's only surviving 19 th century single-family residence, the exterior and interior of which have been preserved in tact. Within the beautifully maintained walls are the original furnishings, personal possessions, and even Gertrude's clothing and accessories. Visit and you are free to wonder on your own and peek into the life – and even the closets – of a 19 th century New York family of means.
(Merchant's House Museum , 29 East Fourth Street , New York , N.Y. (212) 7771089. Open Thursday to Monday noon to 5pm .)
At the other end of Manhattan looking a bit like Tara in “Gone with the Wind,” is the 8,500 square foot Morris-Jumel Mansion . Yes, Washington really did sleep here but it is the subsequent lady of the house whose history is worth speaking about – or maybe whispering might better suit the subject matter. The mansion, built in 1765 by British Colonel Roger Morris as a rural summer retreat (originally on 130 acres), is the oldest remaining residential structure in Manhattan . The Morris family fled when the Revolutionary War broke out and, being strategically situated on Manhattan 's highest land point, it became Washington 's headquarters in the fall of 1776. Post Revolution it became a tavern and stagecoach stop, and then in 1810, wealthy French wine merchant, Steven Jumel, and his comely wife, Eliza, took title. Once again it became a residence, now decorated in grand French style, which is on view. The flamboyant Mme. Jumel, rumored to be the daughter of a prostitute, is said to have tricked Jumel into marrying her, and then while having an affair with former Vice President Aaron Burr, is suspected of having a hand in his death. The moneyed widow married Burr in the front parlor of the house in 1833; the marriage lasted only two years. Following the divorce Eliza became a virtual recluse, dying in 1865, at age 90. A visit provides a rare glimpse of Colonial New York, as well as yet another peek into the lifestyle of the rich and (in)famous of the 19 th century.
(Morris-Jumel Mansion, 65 Jumel Terrace, between 160 th & 162 nd Streets, west of Edgecombe Avenue, New York, N.Y. (212) 923-8008. Open Wednesday to Sunday 10am to 4pm .)
P.S. Although I don't subscribe to such notions, both of these homes are reputed to be haunted: The Merchant's House by Gertrude, and the Morris-Jumel by Eliza. Shhh!
Have a fun-filled summer!
-- Rick Wohlfarth
TALES OF THE CITY
“It was the best of times, it was the worst of times.” For Mr. Dickens this was a “Tale of Two Cities.” In the real estate market of the last decades it has more often than not been two tales of one city – this city, New York City. The story was either boom or bust – or about to be one or the other. Of course, today it is neither, which is probably why contemplating it is so confusing to so many.
Corrections are not as much fun for pundits to write about, so many have turned to wailing about the failing mortgage market and the rising tide of foreclosures. But there is enough going on in New York in the spring of 2007 to make the market very interesting for buyers and sellers, both of which have had reality checks. For everyone the playing field is shifting.
Perhaps I should knock on wood before saying this but just like with pots, pans, and some “pols,” New York's real estate market appears to have, at this time, the equivalent of a protective Teflon coating. The bad news from the rest of the country just does not seem to stick. Of course, there are some very concrete reasons for the disparity. Major among them is the fact that the army of speculators who bought multiple condos in places like Miami and then flipped them before the foundations were poured were never part of the equation in New York's recent boom years. (Changes in the tax laws in the eighties regarding the deductibility of investment property took care of that). It's one of the reasons this city's inventory of available property is not as large as in many other areas of the country.
Although there is more property on the market now than in the halcyon days of previous years, numbers have recently dipped. Part of the reason for this is the withdrawal from the market of outrageously priced properties whose owners, trying for windfall cash outs did not register that the heyday of the housing boom had effectively peaked at the end of 2005. The withdrawal of these “testing the waters” listings has diminished the numbers of what is available. Couple that with the growing numbers of buyers who are awakening to the fact that they waited too long (to the delight of their landlords who have been reaping the benefits of sky high profits renting to the undecided). Those who stayed on the sidelines fearing they would be the last to buy high or hoping to be among the first to buy cut rate have now realized that barring the catastrophic and unforeseeable they had better get in. Demand is rising as evidenced by crowded open houses and even some bidding wars.
As almost antidote to the poisonous predictions emanating from the rest of the country, news flashes of buyers at the top-end of the luxury market spending multimillions for coops, condos and townhouses in New York have filtered down and given courage to those who waited. (When the mayor of your city plunks down $45 million on a limestone
townhouse, how can you not feel confident?) Whereas the market in the last half of 2006 was being driven by the top down change is evident in the fact that the movement is starting to be seen in all price ranges.
The feared new condo development glut has so far not had the negative effect many had feared. At the end of 2006 incentives for buyers and brokers increased the pace of sales, as some planned projects fell by the wayside, while others are holding back product. Only time will tell if there are enough renovation-phobic buyers to absorb an adequate amount of these new “lifestyle” driven projects.
Whether prewar or new, the coop and condo market in the city began seeing a strong resurgence at the beginning of 2007 as Wall Street bonus money entered the game. There is consensus in the industry that both the number of signed contracts and prices are up, and (if the local economy remains strong and mortgage rates stay low) there is every expectation that both will continue to rise.
The trickle down result of all of the aforementioned has brought about a change in the climate and in the psychology of the real estate marketplace circa 2007. The happy result is that a properly priced property will sell quickly to a serious buyer who is smart enough to know that low ball offers won't cut it and that today's mortgage rates -- which are quite near record lows – will not last forever. Deals are being made and as we head into spring things are definitely going to heat up and the latest tale of this city is still a work in progress.
-- Rick Wohlfarth
TO BUY OR NOT TO
BUY – THAT IS THE QUESTION!
If not now, when? That is the other question!
No doubt you have been reading and hearing about the changes
in the real estate market and what it all means for potential
buyers and sellers. The media pours out a dizzying array of numbers
to give what purports to be a broad view of the market trends.
Depending upon the source and the size of the headline the reaction
can be visceral – “Oh, my goodness, the sky (translation: the
value of my real estate or - if you are a buyer - the price) is
falling.”
But the reader or listener must take a closer look and listen.
Where is the reporter standing? Is that Miami, Mojave, or Manhattan
in the background? Are the numbers national, thereby reflecting
the high rate of real estate speculation that fueled the boom
in places like Florida and Arizona? Are they taking the temperature
of places where the local economy is in a nosedive because of
a particular industry’s downsizing? As with most other areas of
interest – food, finance, and foolishness – what holds true for
the rest of the country does not necessarily apply to New York.
What is true is that New York continues to improve its reputation
as a highly livable city as the crime rate plummets (attracting
the rich including rich Europeans), schools continue to improve
(retaining families), and Wall Street continues to flourish (creating
bonus-fed millionaires who then can attain the American dream
of ownership at a younger age).
Yes, by all indications, the dizzying pace of New York real estate
has slowed (how could it not?). Properties remain on the market
for a longer period of time – now up to 150 days. This is a symptom
of the increase in the inventory in all categories especially
newly constructed high-rise condominiums (with more to come).
Bidding wars are a thing of the past and the heyday of the sellers’
market is waning. The only segment of the marketplace where sales
are brisk is the high-end with multi-million dollar properties
heading for a record. (The super-rich are apparently undeterred
by interest rate hikes.)
Uncertainty about mortgage rates and the direction of the economy
in general have made potential buyers skittish, and many are waiting
for bargains. Yet, this may be the perfect time for many to buy,
especially first timers just entering the market, as studio and
one-bedroom apartments make up a considerable portion of the available
inventory.
Higher interest rates go hand in hand with higher rents, and
right now the rental market is strong (high demand, low vacancy
rate). But with rents soaring up 15 percent higher than last year
to an average of $3,970 and mortgage rates still relatively low
– compared to the double digits of the 1990s - buying now may
still be the better option, one that’s sweetened by the tax benefits
of ownership. The Gold Rush mentality of “see-it, buy-it” has
cooled considerably so that looking for a place to love is now
a far calmer proposition; and the ability to negotiate a reduction
is now a realistic possibility.
Yet, if all of the so-called indicators mark the end of the boom
there are no fire sales taking place. Properties that sold in
the second quarter of 2006 increased 18.6 percent over the first
quarter and over 17.6 percent over the second quarter of 2005
to an average of $1,453,803. So buyers are taking their time,
but when they do make the leap they are willing to pay when they
find what they want. As for the foreseeable future, the doom seers’
dire predictions for the real estate market of a “bust” have been
replaced by more reasoned assessments like “steady,” “stable,”
“lull,” and “breather.” So, to buy or not to buy, is a question
that only you can answer, but now just may be the perfect time
to start or restart your search
MANHATTAN MAGIC
When people ask me about the current state of Manhattan real estate, this is what I tell them.
John Jacob Astor dominated the fur trade in this country from 1811 to 1834, but it was his huge investment in New York real estate that made him the richest man in America and its first recorded millionaire. It is reported that on his deathbed, Astor lamented the fact that he had not bought all of Manhattan. A form of that lament may be heard nightly at soirees around town. Buying Manhattan started with Peter Minuet in the 17th century and it has not let up since. Along the way it has made millionaires of many and it is that trend which continues today (Mr. Astor meet Mr. Trump).
Although the media generated bubble-babble continues, figures released in March show how resilient the Manhattan market continues to be. Even as price declines are recorded in the rest of the country, Manhattan continues to dazzle. Experts see several reasons for the phenomenon, but primary among them is the fact that Manhattan is a place where people with money - from all over the world - desire to live. Also, as opposed to the rest of the nation, where in large part investor speculation drove the market, Manhattan gets its vigor from first-time buyers and primary-residence home ownership. In addition, it is safe to say that most sellers are also buyers who are trading up, usually to something bigger, often in an emerging neighborhood such as the Lower East Side or Harlem. Of course, this does not mean that investors are blind to the value of owning something in Manhattan that is sure to appreciate.
Most analysts in and out of the industry feel that the comparison of today’s real estate market to overvalued tech stocks and their precipitous fall in the late 1980s is akin to comparing apples and – oh, well – bubbles. Figures released by the Real Estate Board of New York for the calendar year 2005 show the average sales price,the median price and the price per square foot were solidly up for both coops and condos from the previous year.
Despite a slowing of the market at the close of 2005 the median sales price of Manhattan condominiums was up 22 percent to $975,000; the median sales price of cooperative apartments rose as well to $625,000, up 24 percent. Downtown (south of 42nd Street) experienced a 27 percent condo median sales price increase from the previous year, up to $849,000. For the same period, condos in Northern Manhattan (above 96th Street) posted a whooping 46 percent increase for a median sales price of $364,609.
On the Upper West Side the median price of a coop was up 19 percent to $722,000, representing the largest percentage increase of any Manhattan neighborhood. Even more exciting for sellers, for the first time in that area the average coop sales price passed the million-dollar mark.
Although buyers appeared to be more cautious at year’s end due to higher interest rates and the fear of bubbles, in the first three months of 2006 the picture once again looks quite rosy, especially for sales of larger apartments. The average sales price for that period was reported to be $1.3 million, 7 percent higher than in the same quarter last year. Although not as impressive as the 20 plus percent spikes sellers had become used to, it is an increase being fueled by affluent buyers purchasing apartments with two or more bedrooms. If you look at the current market from the buyer’s point of view, the news is also good. Though prices have continued to hold or rise, there are some changes from last year that make this a more level playing field. The market has slowed primarily because there are many more apartments on the market -- pre war, post war and significantly, new developments. The increased inventory means that buyers are in a better position to negotiate, with less of a likelihood that a bidding war will necessarily ensue. There is more to look at and less of a need to rush into what is likely to be the most expensive purchase of a lifetime. If there is any one thing that someone looking at this market can agree on, it is that Manhattan is the capital of the world, and the reality of being a home-owning citizen of that particular world continues to lure anyone with a dream.
-- Rick Wohlfarth
Condo Market's Loss Is Apartment Market's Gain
Builder confidence in the condo market dropped dramatically in the second quarter of this year, while confidence in the apartment market hit record highs.
There is "clearly an oversupply" of unsold condo units, NAHB Chief Economist David Seiders says. Vacancy rates for apartment buildings are dropping and rents are increasing, he says.
That's because apartment-to-condo conversions shrunk the rental market and boosted apartment demand, says Leonard Wood of Marietta, Ga.-based Wood Partners.
Bruce Menin, president of Crescent Heights, a New York City-based developer of high-rise condominiums, cautions local governments against requiring a large number of low-income units, as this could prevent developers from proceeding and result in a lean supply and higher prices in tight markets.
Wood, meanwhile, warns that impact fees and stricter building codes could hamper construction.
Mortgage Apps Increase as Rates EaseApplications for U.S. mortgages have rebounded in response to falling interest rates, the Mortgage Bankers Association reports.
The seasonally adjusted index of total mortgage applications rose 11.9 percent in the week ending Sept. 29 to 633.9. That’s its highest level since January, but on an unadjusted basis it is 10.9 percent lower than it was a year ago last week.
Nearly half of the applications are for refinancing as homeowners with adjustable rates trade them for fixed rates. At 46.7 percent, this is the highest that the refinance share has been since February 2005.
The average interest rate for 30-year fixed-rate mortgages increased to 6.24 percent from 6.18. The average interest rate for 15-year fixed-rate mortgages increased to 5.86 percent from 5.81 percent. The average rate for a one-year ARM decreased to 5.86 percent from 5.90.
