Gregory J. Heym
Executive Vice President, Chief Economist
Prime Areas Dip Below $1,000 a Square Foot
By KATHERINE DYKSTRA
IN 2004, the average price per square foot in select areas of Manhattan started inching over the $1,000 mark for the first time. The West Village, for example, broke through in late 2004, according to Greg Heym, chief economist for Terra Holdings. The Upper West Side and Chelsea followed in 2005.
For established New York neighborhoods, $1,000 a square foot was a bellwether; the price was symbolic of the limitless possibility for growth in Manhattan real estate. The future, as they say, was bright.
"There are just certain price points," says Heym. "The first time [prices] crossed a million [dollars], for example; $1,000 a foot is a milestone."
Longtime residents found their apartments were suddenly worth scads more than they had thought.
"Five years ago, our apartment on the Upper West Side went through the roof. Someone was selling downstairs from us for about $200,000 more than what I thought it was worth," says John Rojak, who owned a 500-square-foot apartment on 74th Street and Amsterdam Avenue with his wife, Kait Mahony.
The couple, who had always dreamed of living in the West Village, didn't need to be told twice. They promptly put their Upper West Side apartment, which they had purchased for just more than $550 a square foot in 1999, on the market. It sold easily for nearly $1,000 a foot, almost doubling their investment.
With their money, they bought a 550-square-foot space on Perry Street for which they in turn paid nearly $1,000 a foot.
Though $1,000 a foot was the barometer for a time, it wasn't the ceiling. In fact, it was just the beginning. Prices kept climbing.
"There was a time when $1,000 a foot was the threshold," says Core Group Marketing broker Maggie Kent. "A one-bedroom in the West Village spiked [from] 2007 to 2008." She saw some prices rise more than 15 percent, reaching about $1,200 a foot.
But then came Lehman Brothers and AIG, Fannie and Freddie -- and pop, Kent is now helping Rojak and Mahony sell the apartment they bought on Perry Street . . . for 2004 prices.
The West Village is "actually going back to those 2004, 2005 prices . . . it remains to be seen how much it might adjust from there," says Kent, who put the couple's apartment on the market last October for $625,000. After two price reductions, it was recently chopped an additional $60,000 to $515,000 -- or $936 per square foot.
"It's got to be painful to be in such a stable neighborhood and feel that it's in rewind," says Kent.
And the West Village isn't the only neighborhood where pricing has effectively gone back in time.
"If you're using price per square foot as the barometer, there is definitely a lot more product now below $1,000 a foot than there has been in the last three or four years," says Shaun Osher, CEO of Core Group Marketing. "We're even doing deals in prime locations like SoHo at below $1,000 a foot."
"I've seen less [than $1,000 a foot] on the Upper West Side. I started seeing that about two months ago," says Rick Wohlfarth, president of Wohlfarth & Associates. "I'm seeing it on the Upper East Side, as well . . . I'm seeing condos from [East] 76th Street to the 80s anywhere from $650 a foot up to $1,000."
The latest market reports, released last week, don't quite bear this out. And data provided to The Post by Terra Holdings (the parent company of Brown Harris Stevens and Halstead Property) had the average price per square foot on the Upper West Side as $1,159 and the West Village as $1,150. But these numbers reflect closings, which can happen months after contract signings, meaning that the market reports include many transactions that took place last year, when numbers were higher.
But for the pulse of the market, all one need do is check Streeteasy.com or Natefind.com to find dozens of listings in the most prime areas of Manhattan that fall at or less than (often way less than) $1,000 a foot.
Of course, a price that caused a "feeding frenzy," to use the words of Rojak's broker, in 2004 isn't bringing anyone to the table today.
"Sellers are a year behind the market, or more," says Jonathan Miller, president of appraisal firm Miller Samuel. "They're still thinking of their property in relation to the high sale of the last few years, and so sellers are thinking they're being conservative by pricing at the last high-water mark in the building rather than pricing it above. But really anything that's happened prior to September is irrelevant."
Brokers hope that encouraging their clients to go under the $1,000-a-foot mark will send a message to buyers that sellers are aware of the current reality of the market and are offering a deal.
"It's almost like when you're going into a grocery store, and it's 99 cents as opposed to a dollar . . . You feel like you're getting a deal," says Jim Moran of the branding agency Co-op.
The psychology seems to be working.
"I'm finding it's the only way to get traction on larger units," says broker Frances Katzen of Prudential Douglas Elliman. "I have a 2,700-square-foot loft at 26 E. 22nd St. We priced it at $960 a square foot, had the first open house -- and 15 couples came through. Three requested a second showing." She notes that had it been 2007, even 2008, she would have priced the apartment between $1,350 and $1,450 a foot.
"I said, 'If you really want to sell, you have to trust me,' " says Katzen.
And for some buyers, it could be the right time to make a deal.
"If you're a professional -- someone making between $100,000 and $175,000 a year, with reasonable financials, good credit -- you can find a good home in Manhattan for the first time in years," says Wohlfarth. "I haven't seen this in my 30 years of experience."
As for sellers, beyond the shock of the sinking market is the stress of watching their apartments sit for weeks, months sometimes.
"I think that this price drop is significant," says Rojak. "It says that we're serious and we'd like to sell it . . . maybe we'll get at least the asking price now. It'd be nice to not be trying to sell an apartment anymore and move on with our lives. We have a lot of things to do, and obsessing over selling an apartment is not high on our agenda for what we want to be doing with our time."
Thursday, April 09, 2009