Cobble Hill Office
By Vivian S. Toy
MORE than 200 people showed up for an open house at a town house in Cobble Hill, Brooklyn, last month, and the crowd, filled with stroller-pushing parents and young children, was so lively that an ice cream truck pulled up to join the happening.
The house, at 214 Kane Street, went into contract quickly, after the owners sifted through 14 offers, nearly all of them above the $1.875 million asking price.
In the West Village a few weeks earlier, more than 300 people lined up on a Sunday afternoon to see a sunny fifth-floor walk-up with two bedrooms, 15-foot ceilings and a $997,500 price tag. Eleven offers later, it went into contract about 20 percent above the list price.
Even though the most recent market reports show Manhattan real estate prices holding steady, as they have for more than two years, other signs indicate that the New York City market may finally be willing to stop flirting with recovery and commit wholeheartedly.
To start with, open house traffic for some properties has reached levels not seen even at the height of the market in 2007 and 2008. But buyers haven’t just decided to start looking at properties again; they’re actually buying. Bidding wars have become more common.
On the development front as well, sponsors say the pace of sales has picked up with the warmer weather. The number of new building permits for residential units, which dwindled to a trickle in 2010, has seen an impressive increase. For the first two months of 2010, no residential building permits were issued. For the same period in 2011, permits were issued for 52 units. This January and February, the number increased nearly 800 percent, to 457 units.
Developers also say that banks that had steered clear of construction loans for residential buildings have started to loosen their purse strings, although they are still unlikely to approve loans for condo projects with more than 100 units.
“If you were not cognizant of the underlying state of the American economy and you lived in New York — in this bird cage we call home — you would think everything is just rosy,” said Jeffrey E. Levine, the chairman of Douglaston Development. But given that the federal debt looms large and higher interest rates are around the corner, he said, “there’s no way of knowing if the recovery is as broad or as deep as we’d like it to be.”
Jonathan J. Miller, the president of the appraisal firm Miller Samuel, warned that buyer exuberance could be short-lived. With Wall Street bonuses much smaller than in years past, the surge in buying is not likely to last long, he said.
“Also, once we hit summer, we’re going to see a lot more distressed properties hitting the market,” he said. “Even though Manhattan is not a hotbed of foreclosure, the world around us will be, so there’ll be more negativity in the air.”
Despite all this, many brokers are optimistic about a busy spring season. Having grown accustomed to staging open houses for four or five people at best, they are savoring the wave of enthusiasm. The new normal for open house traffic is about 20 visitors, and it seems to extend to all apartment sizes.
Of course, age-old maxims still hold, so spaces encumbered by less-than-ideal locations or inflated prices, or places that don’t show well, remain unlikely to generate much interest.
Judith Furgiuele, a vice president of Brown Harris Stevens, said she was stunned late last month when an open house for a $1.625 million three-bedroom listing on the Upper West Side drew about 150 people, even though it had been “priced very well because the owners had already bought something.” Several other apartments in the building were holding open houses that day, so she suspects there was some overflow traffic.
“But at one point,” she said, “as we were trying to handle all these people, I said I thought it was the only listing in Manhattan, and one buyer said to me, ‘It kind of is.’ ”
The number of new listings coming to market in Manhattan has indeed dropped. For the first three months of 2012, the Corcoran Group counted 5,349 new listings, nearly 16 percent fewer than the 6,406 new listings over the same period last year.
Much of that drop may be ascribed to the construction slowdown in recent years. Corcoran estimates that the number of new units dropped 47 percent, to 2,700, in the first quarter of this year, from 5,056 for the same period in 2011. Brokers say that certain neighborhoods and types of homes seem to be experiencing the shrinking supply more severely.
Meryl Blackman, the agent at Halstead Property representing the owners of the Cobble Hill town house that drew 14 offers, said the limited number of single-family town houses available in brownstone Brooklyn had definitely helped prompt the multiple bids.
“We had more kids and pregnant moms waiting to get into the open house than I’ve ever seen,” she said.
Many of the offers were above the $1.875 million list price. Ms. Blackman sat down with the owners, James and Ann Raimes, and went through each one, beginning with the lowest bid. She started reading heartfelt letters from prospective buyers explaining why the house was ideal for their young families. “But I burst into tears at one point and told her to not read any more,” Ann Raimes said.
Along with limited supply, pent-up demand may also be driving the new activity.
When the financial crisis hit, buyers held back, waiting for the market to hit bottom. More recently, they waited in anticipation of a double-dip recession. “But now people are realizing that while the economy may not be as strong they want it to be, the big fear of it collapsing has gone by the wayside,” said Frans Preidel, a vice president of Brown Harris Stevens.
Mortgage brokers, too, have seen an increase in buyers entering the market. Melissa Cohn, the president of the Manhattan Mortgage Company, said that while the recent uptick in interest rates “will slow down people who are thinking about refinancing, it helps people who are thinking about buying to get off the fence.”
Most of the deals her firm handles are still for refinanced loans, but she said the percentage had dropped to 60 percent from 70, with buyers seeking new loans accounting for the shift.
The increased demand is not just at the high end. Doug Perlson, the chief executive of the brokerage RealDirect, said he had observed more activity even in the studio market. He has a client who lost a studio in a bidding war and is now in contract on a second apartment after another bidding war, both at 200 East 27th Street, a postwar building in Kips Bay.
“These properties typically take several months to sell and usually don’t get multiple bids,” Mr. Perlson said. Many of the buyers he has encountered, he said, “have decided to buy because their rent has just been raised 10 to 12 percent and the math just doesn’t work for them to keep renting anymore.”
Charlie Homet, an executive vice president of Halstead, said that while open houses are much busier these days, “not everybody’s buying; there’s still a little bit of hesitancy to pull the trigger.”
That was not the case, though, at a listing he had for a West Village two-bedroom that drew more than 300 pairs of eyes at its first open house.
Mr. Homet shares the listing with Ari Harkov, a Halstead senior vice president who spent most of the open house holding people back, because the 850-square-foot apartment can only hold about 50 people at one time. “It was like a really fun cocktail party where you wanted to get to the kitchen, but you could only see it from the living room,” Mr. Harkov said. “I felt like a bouncer at a nightclub. ”
Buyers tried to make offers on the spot, but he asked them to please put them in writing. Several bids came in that night, and the sellers received a total of 11 offers after asking for best-and-final offers. They had a signed contract five days after the open house.
Managing the multiple offers was tricky, Mr. Harkov said, “because it’s obviously not 2007, and people were not accustomed to the kind of bidding we had.” He and Mr. Homet compiled a spreadsheet with all the bids, sorting by price, level of financing, and closing date.
The apartment is now in contract with an all-cash client who is represented by Martine Capdevielle, a vice president of Sotheby’s International Realty. Ms. Capdevielle said that pricing the apartment just under $1 million had helped create a buzz for the listing, since “it’s impossible to find a two-bedroom two-bath in the West Village for that amount.” Her buyer, who is from France, is unfazed by the fifth-floor walk-up, she said, and besides “in New York, it’s a give-and-take, you can’t have everything.”
Most buyers in the last two years have been averse to buying property that needed significant renovation, but Dan Critchett, a sales associate at Stribling & Associates, said he had seen a distinct shift in buyer behavior.
Mr. Critchett represents an Upper West Side apartment first listed in 2010 at $2.287 million and reduced to $1.99 million by late 2011. Nearly 100 people saw the apartment, a Classic 6, in that year, with several offers coming in at the $1.5 million range. “The market clearly wanted a huge discount for anything that needed work,” he said. The 1,800-square-foot apartment needs a new kitchen and would require redesigning to become a true three-bedroom, he said.
At Mr. Critchett’s urging, the owners took the apartment off the market in December, painted it and weeded out some furniture, then relisted it in February at $1.899 million. Two open houses each drew more than 30 people and the offers started to roll in, all of them close to the asking price.
“It was a very different market,” Mr. Critchett said. “This was a new crop of buyers who weren’t afraid of renovating and who realized there aren’t that many apartments of this size that are in move-in condition.”
A new sense of urgency has been felt at new developments as well.
Ken Horn, the president of Alchemy Properties, said that open house traffic had picked up at his finished projects, Griffin Court in Hell’s Kitchen and Isis Condominium on the Upper East Side. Two projects under construction, one on West 15th Street and one in Cobble Hill, also have waiting lists with about 100 names of prospective buyers.
“If you roll the clock back one and half years,” he said, “you would have no one on a waiting list. No one would even call until the building was up and done.”
He and other developers said that construction financing, which had all but dried up with the financial crisis, may be starting to flow again.
Skyline Developers, which has owned the site on the southeast corner of Third Avenue and 79th for several years, announced last month that it had closed on a $112 million construction loan with Wells Fargo and was beginning construction on a 19-story tower with 45 condos.
“We had been waiting for the right time to move forward,” said Don Becker, a Skyline executive. The bank made it clear that it was doing such large deals only with established clients, he said. Still, “we’re starting to see banks become more competitive” and more willing to negotiate on interest rates and other loan terms.
However, Mr. Levine of Douglaston Development said that most banks would still lend money only to developers with good track records and for projects with 40 to 100 units. “The days of doing a 600-unit site like the Edge are behind us for the moment,” he said, referring to Douglaston’s condominium tower on the Williamsburg waterfront.
If 422 West 20th Street is any indication, smaller projects in prime locations can be a good bet. Seven hundred people arrived on its opening weekend late last month, and all but 7 of its 36 units were in contract two weeks later.
Kelly Mack, the president of the Corcoran Sunshine Marketing Group, which is overseeing the marketing of the property, said that when she showed up at 8:30 a.m. to help set up for the first open house, about a dozen people were already lined up and waiting for the 11 a.m. opening. “That was a complete shock,” she said. “I didn’t see that even at the height of the market.”
The building was once a dormitory for the General Theological Seminary, and the apartments range from 600-square-foot one-bedrooms, for $670,000, to 1,600-square-foot three-bedrooms for about $2.1 million. “That covers a very underserved market in that location,” she said.
Sharon E. Baum, the director of Corcoran’s Exclusive Properties Division, said that she, too, had detected a change in the city’s real estate attitude.
Shortly after Lehman Brothers collapsed, Ms. Baum traded in the Rolls-Royce that she had used to ferry clients to apartments around town, because while “people were still wealthy, they felt embarrassed to talk about it.” Her driver has since been driving a black Mercedes-Benz sedan, which Ms. Baum says is roomy and much easier to park.
Today, any discomfort with luxury brands and ostentatious spending has all but disappeared, she said, because “people have to get on with their lives.”
Besides, she added, she never did get rid of the rubber floor mats with the double R insignia. “And we have the Rolls-Royce umbrella in the car,” she said. “We didn’t totally give it up.”
Thursday, April 12, 2012