The Beginning of a Co-op Trend?

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