Gregory J. Heym
Executive Vice President, Chief Economist
By CHRISTINE HAUGHNEY
While housing prices are falling in many parts of the country, the cost of a Manhattan apartment is continuing to rise over all. But a stark divide is emerging between the prices of co-ops and condominiums. More buyers are choosing condominiums over co-ops and are paying far more for them, according to studies being released today.
The average price of a condo in Manhattan rose by as much as 28 percent in the second quarter of this year compared with last year, according to data tracked by four large real estate brokerages. In the same period, the average co-op price dropped by as much as 10 percent. Buyers paid an average of $1.49 million for a condominium, compared with $1.13 million for a co-op, according to figures from Brown Harris Stevens.
Brooklyn did not share Manhattan’s price rise. There were more deals, but the average apartment price dropped by 4 percent, to $629,000, compared with last year, according to data from the Corcoran Group.
The decrease in the average price paid for co-ops in Manhattan does not mean that co-ops are dying; to some degree, it just shows that apartments sold in the quarter included a lot of small co-ops and a number of large condos, according to Brown Harris Stevens. In fact, in terms of average price per room, that brokerage found that postwar co-ops on the East Side remained the same and those on the West Side increased by 3 percent.
But brokers said that co-ops are also depressing their own prices because their boards require so much liquidity and assets that many buyers from overseas and people who work in finance are instead choosing condos. Hall Willkie, the president of Brown Harris Stevens, said that foreign buyers, especially Russians, have been snapping up sprawling multimillion-dollar condominiums. “In the past, a lot bought pied-à-terres,” he said. “We see a lot of foreign buyers are buying very large apartments.”
They also choose condos because they would probably not be approved by co-op boards, which often demand full-time residence. Pamela Liebman, the president of the Corcoran Group, said buyers also prefer the conveniences of new buildings and the perks like concierges who can “stock my refrigerator, get my theater tickets and have my dog groomed.” The dazzle of living in a new building doesn’t hurt either, she said. “New, new, new — all of the foreign buyers love that.”
Dottie Herman, the president of the brokerage Prudential Douglas Elliman, said co-op boards may be forced to change their rules. “I’ve brought buyers that have tons of money, that have tons of assets, and still the co-op boards turn them down for no reason at all,” she said. “I do think that you’re going to see co-ops ease up in some cases. The prices have gone up so much that some of the rules don’t work today.”
In some cases, buyers who can afford multimillion-dollar apartments are forced to buy condos or risk rejection from co-op boards because they are required to have a multiple of the apartment’s price in liquid assets. Michele Kleier, president of Gumley Haft Kleier, said buyers in the $3.5 million to $4 million price range are choosing apartments in new buildings like the Lucida, at 151 East 85th Street, where they can live on the Upper East Side but avoid dealing with a co-op board and the extensive renovations that are often needed for a prewar apartment.
The difficulty of getting past a co-op board is making it tough on sellers, she said. One of her listings was a Park Avenue apartment that required extensive renovations. Five buyers offered roughly the asking price, $4.95 million, but none had the extensive assets required by the board. The price was reduced to $4.75 million, and it ultimately sold for even less to a bidder who had assets acceptable to the board.
“I looked at every single balance sheet and there was not one person among the five offers who had the assets to get into the building,” Ms. Kleier said.
These eager and rich buyers are swallowing up the stock of condos. Today, Manhattan has just 5,237 apartments up for sale, compared with 7,640 condos and co-ops for sale last year at the same time, according to data tracked by the appraisal firm Miller Samuel.
Jonathan Miller, the president of Miller Samuel, said inventory is also shrinking because potential buyers had been renting until they were sure the market had stabilized. “They have re-entered the market,” he said. “We’ve essentially eliminated most of the fat out of the inventory.”
Among condos, the fastest price growth was among entry-level studios. The highest price increase in any size category was in the studio market, according to Brown Harris Stevens data. The average studio rose 26 percent to $574,197.
“The smaller units led the way in terms of price increases on the condo side,” said Gregory J. Heym, an economist who prepared market studies for Brown Harris Stevens and Halstead Property.
Manhattan’s wealthiest buyers are paying even more money to get the most prized trophy homes, and they are not deterred by co-op board rules on assets. Brown Harris Stevens data showed that prices for co-ops with more than four bedrooms rose by 19 percent to an average of $7.016 million, compared with the same period a year ago. Town house prices also increased by 30 percent to $1,644 a square foot.
Prices for Brooklyn town houses did not change, Mr. Heym said.
Tuesday, July 03, 2007