USA! USA! USA!
But in the market, the rules seem to shift continually, and adjusting and defining new realities.
To some degree I wear at least two uniforms in this game: player and referee, though the referee jersey tends to be a bit more grey than black and white!
Some buyers think they know every play, set piece,
opposing team, and
inch of the field.
Others don’t understand how to tie their laces, and a fair number
overshoot the goal or miss the ball entirely (here,
I come in as
Of course, sellers keep changing the rules to fit their needs –
grabbing jerseys and playing dirty – because it is a sellers’ market at the moment.
(Insert the team of your liking to play the sellers here;
I won’t go out on a limb!)
With so few condominiums in reach for so many buyers, buyers have been pushing cooperative prices up.
But now, sellers have been pricing too aggressively, and momentum has slowed a touch on the cooperative side.
These are but a few reasons for the glut of apartments at the $8mm and up range for cooperatives; plus, we’re seeing the summer slowdown.
The absorption report from June bears this out – with apartment inventory only a touch lower than last year, and rising month over month about 10%.
With income levels growing at an outsized pace at the very top (the 0.1% and 0.001%, especially), a certain few buyers have no problem getting large mortgages.
And they would prefer to leverage more than 25-50% of the purchase, too.
Regarding buyers more broadly, the bar for entering to the housing market, despite low mortgage rates, continues to creep up.
The remaining alternatives, which allow buyers some breathing space to get their mortgages in order (and thereby avoid suffering the pains of bidding wars) are new development purchases.
No longer does a buyer have to spend inordinate amounts of time preparing a coop board package often unread by many board members until the interview itself (I have heard this too many times from buyers, and how frustrating that must be).
Time is money, after all.
The new development purchase becomes the beacon of hope – albeit an expensive one!
We see back and forth tussle between condominium and cooperative pricing in every cycle: sometimes condominiums will appreciate more quickly, like now, but in 2009, cooperative pricing memorably suffered far less than condominium pricing.
New development has led this charge, both in prime locations and on the fringes.
I’m incredibly impressed with the rapid gentrification of South Harlem as it merges with Morningside Heights, with smash successes like One Morningside Park, and with Central Harlem developments like the Adeline.
The census numbers show demographic shifts, and non-neighborhoods that were “threatening” to emerge have done so in Downtown Brooklyn and Long Island City (I tweet about 50% sellouts in 3 weeks in buildings like 388 Bridge in Downtown Brooklyn)
Meanwhile, the Fulton Street Center at Broadway, delayed again Monday to open in another 60-90 days, puts even more attention on Downtown – where buyers have been particularly savvy, strongly investment-minded, increasingly family-oriented, and with capital to spend on large apartments at eye-popping prices ($2000-2500 per square foot has become ho-hum).
Aside from the very high profile cooperative sales Uptown, we’re seeing condominiums outpace cooperatives by a wide margin right now.
$1200-1400 per square foot in Harlem becomes the value play for condominiums, and larger apartments there, which didn’t sell in the last cycle, are selling at amazing numbers!
$1700-2000 per square foot in Midtown East is starting to look more reasonable for new construction, and talk is even percolating of $2100-2500 per square foot on the West Side.
I’ll wrap up with a few more macro thoughts.
An investor asked me last week, “What makes this market different from any other?
Why are we not going to just see those buyers priced out, fleeing to the suburbs?”
His question points to the lack of inventory and to the buyer or couple earning $250,000-$500,000 who cannot afford a three-bedroom purchase anywhere Uptown.
While of course we will see the standard migration patterns, we’re also seeing buyers who are starting families later, who own one- and small two-bedroom apartments and are sticking it out in the city for longer, and who are squeezing families into smaller apartments.
This will keep some upward pressure on cooperative pricing at the lower end, which is above 2008 levels already.
And while I see a slight flattening of cooperative pricing, it’s not even a pause – just a move toward a healthy market.
I think things are looking up for those coop buyers willing to stay in the game.