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Posh pads begging for buyers

By Amanda Fung

Former Lehman Brothers chief executive Richard Fuld sold his 16-room Park Avenue co-op last month for $25.9 million, $6 million less than the price he'd set in May.

All appearances to the contrary, Mr. Fuld ranks as one of the lucky ones. His 6,200-square-foot spread, with its stunning library and five fireplaces, is one of the relatively few superposh Manhattan properties to actually change hands over the past year.

“It is an unusual thing,” says Frances Katzen, a top broker at Prudential Douglas Elliman. “It's a deal everyone holds up to build confidence.”

The astronomically expensive end of the residential market needs the boost. Sales of Manhattan's top-tier, $10 million-and-up properties are languishing just as activity in the lower reaches of the market—apartments below $3 million—is showing signs of picking up.

Brokers and industry experts blame the deep chill at the high end on everything from buyers' newfound aversion to conspicuous consumption to big stock market losses to buyers' unwillingness to purchase today what could well be had for millions of dollars less tomorrow.

Top down; bottom up

Last month, the number of contracts signed for $10 million-plus properties in Manhattan was down 75% from August 2008, according to data from Streeteasy.com, a Web site that tracks home listings and sales. That collapse has come even as contracts signed for homes valued at between $500,000 and $1 million doubled in the period.

“The luxury market is struggling,” says Diane Ramirez, president of Halstead Property, a brokerage that estimates 162 properties valued at over $10 million are currently being marketed citywide. “We have more product than I have ever seen.”

And most of it is going nowhere fast. So far this year, Halstead notes that only  only 47 homes have sold in that range. That contrasts sharply with 2007, when the firm logged 159 such sales, and 2008, when the figure jumped to 234 as apartments at two new superluxury buildings—one the former Plaza Hotel—were sold.

The sheer dearth of deals is now depressing sales volumes. With so few transactions to judge by, it is difficult for buyers and sellers to agree on the real value of that TriBeCa triplex or that special Fifth Avenue penthouse with views of the Central Park reservoir. On one side, sellers are hoping that their one-of-a-kind urban palace has held more of its value than the average home. On the other side, buyers, convinced that the recession is playing no favorites, are lobbing in bids that are as little as half the asking price.

Another factor behind the lack of deals at the top is that the number of such units has shrunk dramatically. Deflation has taken scores of units that once sold for upward of $10 million and pushed them down into the single digits—in millions, anyway.

Thus, what was always a tiny part of the market is getting smaller still. Typically, the Manhattan luxury market is defined as homes selling for $3 million and up. That segment represents 10% of total sales in the borough, according to Jonathan Miller, chief executive of appraisal firm Miller Samuel Inc. In the second quarter, there were 1,844 such luxury apartments for sale, with only a small fraction of them on the market for over $10 million.

“Two years ago, the market was giddy. The sky was the limit,” says Caroline Guthrie, president of Edward Lee Cave, a division of Brown Harris Stevens. “People could ask virtually anything and achieve it.”

These days that is harder, but far from impossible. In fact, brokers point to the sale of Mr. Fuld's Manhattan home and to those of two other high-profile properties as just the beginning. In July, Russian multimillionaire Andrei Vavilov purchased a five-bedroom penthouse on the 78th floor of the south tower at the Time Warner Center for $37 million. Meanwhile, pop star Madonna snapped up a 12,000-square-foot mansion on East 81st Street, with two kitchens, a garden terrace and a wine cellar, for $32 million—reportedly 28% under the asking price.

Flood of new entries

Others point to a bumper crop of listings that have come on the market since Labor Day.

“It's a good sign,” says Barbara Fox, founder of Fox Residential, who recently listed a $33 million 11-room duplex at 834 Fifth Ave. She sees owners' willingness to put their properties on the block as a sign they think the market is firming.

“New Yorkers can only wait so long to spend their money,” says Kirk Henckels, executive vice president at Stribling, who has made several deals in the $7 million to $10 million range since mid-May and is currently negotiating a $20 million-plus deal.

Correction: Halstead Property estimates there are 162 properties valued at over $10 million that are currently marketed citywide. Halstead is not actively marking those properties. That fact was misstated in the original article, published Sept. 20, 2009.

Post Date: 9/20/2009

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