Sellers of cooperative apartments who are seeing their properties linger are wondering what they can do. You can take a look at our reports here and here for a bit more color about inventory and the market.
I can point out a few trends which hurt the resale prospects of older, less renovated properties:
Buyer want “special apartments” now more than ever before, and the Post-war (1950-1990) housing stock can be very “cookie cutter.”
Buyers have less post-closing assets to do a renovation of an older apartment
Real Estate taxes have gone up significantly, impacting all but a very few buildings (who have tax abatements)
Costs of running buildings have gone up meaningfully- this and RE Taxes make the monthly carrying charges look a bit daunting at times
Purchasing power in general has not kept up with the run-up that we had seen until 2015-2016 with much of the housing market in NYC
Buyers don’t have the post-closing assets to gain approval in many stricter coop buildings, or even those that are less strict
Katy bar the door- to the co-op
With that as a backdrop, resale prices have indeed gone down and inventory has gone up over the past 12 months, adding to price drops over a 24-36 month period.
Is there anything that co-op boards can do to help?
As I’ve written in other posts, the buyer pool for buildings that require 50% downpayment on a purchase is much smaller than for buildings that allow mortgage financing more aligned with what banks allow. Add to the above, and these rules can be a near-death sentence to selling a property.
Lo and behold, we’re seeing a trend of co-op buildings starting to allow more financing on purchases. I’ll give you a few examples. Just to make sure we’re speaking the same language. If a building allows 75% financing, that means that on a $1mm purchase, the buyer is allowed to finance up to $750,000 of the purchase price. Most banks allow up to 80% financing (in this case, $800,000 loan on a $1mm purchase).
Here are a few buildings that have shifted their policies recently, on the East Side alone, where we have traditionally seen more strict rules- and funny enough, slower sales of late compared to other neighborhoods:
475 Park Avenue went from being an all cash building (no financing permitted) to 50% financing permitted
40 E 84 went from 50% to 75% permitted
60 EEA 50% to 65% permitted
35 SP 50% to 65% permitted
1025 Fifth 50% to 75% permitted
1172 Park 50% to 66% (2/3 of purchase price) permitted
1130 Park 30% to 50% permitted
Someone with more time and focus could easily compare Days on Market (DOM) for a building and see if there is any correlation to the amount of financing permitted. Anecdotally, and of course I’m writing from my perspective on this blog, I would say that there is definitely a correlation between the two. Now, oddly enough, in many stricter buildings the purchase prices remain very high. These are buildings with excellent reputatations, large apartments, communities that really focus on buyers who are incredibly financing qualified (and perhaps personally so as well, whatever that means).
That said, there is a tipping point where the financing requirements have become an impediment to sales taking place. And I would say that time has come. Co-ops who miss the boat may really create frustration for those sellers (either living or through estates) who just want to move forward with their lives. 70% of our market is cooperatives. It would behoove those stewards of these buildings, the co-op board members, to take heed and think through ideas to stimulate more sales.