New York Luxury Apartment Market Loses Some Luster in 2016

Median apartment prices in Manhattan set a record in 2016, but by other measures it was a tough year for residential real estate.

Even as the median price of an apartment rose 9% this year, brokers said, the luxury market slumped. Fewer overall sales closed, and even fewer new contracts were signed.

Overall sales declined, with significant drops in sales of co-ops and older condominiums, which make up 80% of all transactions. Despite the record overall, prices for those categories either fell or rose far more modestly, a Wall Street Journal analysis found.

Much of the price surge in 2016 was limited to purchases of apartments in new developments, with the large windows, high ceilings and designer kitchens coveted by many buyers.

At 432 Park Ave., near East 56th Street, a penthouse sold in September for $87.7 million, the fourth-highest apartment price ever. Over the course of the year, the building’s developers, CIM Group and Harry Macklowe, a New York developer, closed on 75 transactions with an average price of $19.7 million. Although these deals closed in 2016, they were negotiated over three or four years.

That helped lift the median price of Manhattan apartments by the 9%, to a record $1.08 million in 2016. The average price surged almost 15% to $2.04 million, according to a Wall Street Journal analysis of New York City Department of Finance records through Dec. 19.

But the increase was far greater for new developments. As of Dec. 19, more than 2,300 apartment deals closed in new developments in 2016, the most in six years. The median price was $2.55 million, up 42% from new-building closings in 2015.

These included 182 transactions at Carnegie Park, a conversion of a rental development by Related Cos. on East 94th Street in Yorkville, at a median price of $1.44 million. Another development, Greenwich Lane on the site of the former St. Vincent’s Medical Center in Greenwich Village, closed roughly 142 transactions at a median price of $6.2 million.

Of the top 10 sales of 2016, five were at 432 Park Ave., and eight of 10 were in new developments.
The surge in new-development sales in Manhattan, which began in the second half of 2015, is already easing and is likely to slow further in the first half of 2017, brokers say.
The rest of the market, meanwhile, faltered in 2016.

Co-op sales were down 12.3% through Dec. 19. The median price was up 5.4% to $775,000 compared with 2015, but was down 3% since the third quarter.

Resales of older condominiums were down 7.6%, while the median price fell by 1.6% compared with 2015. Overall sales declined 6.1%.

Brokers and analysts attribute the slowdown in 2016 to uncertainty over the presidential election, buyer resistance to high asking prices, dips in the stock market early in the year and global economic uncertainty.

Hall Willkie, president of brokerage Brown Harris Stevens, said “gross overpricing” by many sellers has been a drag on sales, since buyers have been acutely price-sensitive since real-estate prices tumbled after the 2008 financial crisis.

 “Buyers want to know that the prices they are being asked to pay are justifiable based on recent property sales,” he said. “Once you get outside that price range, properties sit.”

Source: The Wall Street Journal

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New York City’s High-End Co-op Market Slumps

Sales of co-ops that sold for $4 million or more plunged 26% last year

When Len Blavatnik, the billionaire investor, paid a record $77.5 million in 2015 for a duplex apartment at 834 Fifth Avenue, it seemed only logical that a bigger cooperative apartment a few floors down would command even more.

That huge apartment is still on the market nine months after it was listed. It is the home of the late John Gutfreund , former chief executive of Salomon Brothers Inc., and it went on the market last April for $120 million.

A sharp slowdown in co-op sales has hit the rarefied upper end of the market especially hard. Sales of all co-ops were down 12% in 2016 compared with 2015, while sales of co-ops that sold for $4 million or more were down about 26%, a Wall Street Journal analysis found.

The decline in activity has been so steep that many real-estate brokers are wondering whether luxury co-ops, with their rigid rules and complex financial reviews for buyers, are permanently losing ground to towering new condominium buildings offering cushy amenities and less-rigorous rules.

The biggest sale of 2016 was the fifth-floor apartment at 4 East 66th Street, on the corner of Fifth Avenue, which fetched $52 million. That was followed by a $35.3 million sale on the West Side at 101 Central Park West.

Luxury co-op sales have boomed in recent years, with the number of co-ops selling for $4 million or more setting a record in 2015. But sales of co-ops selling for $10 million or more have been dwindling since 2014, when 63 changed hands.

At 834 Fifth Avenue, a limestone building opposite the Central Park Zoo, the sellers in September cut the price of the sprawling 20-room apartment, with about 12,000 square feet of space, to $96 million. Mr. Henckels said he believed it was “worth every penny” at that reduced price, but it has yet to find a buyer.

Mary Ann Rothman, executive director of the Council of New York Cooperatives & Condominiums, said co-op boards aren’t likely to change dramatically to make it easier to buy and sell co-ops. “We want a shareholder who understands they are part of a community, and it should be a community they are prepared to contribute to,” she said. “Presumably they will stay there for a while.”

Source: The Wall Street Journal


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Manhattan is home to 5 of America's priciest zip codes

Forbes has released its annual list of the 500 most expensive zip codes across country and New York City has even more zip codes in the top 20 than it did last year. With just three in the top 20 last year, that has jumped to eight with five of them making it to the top 10 this year.

Unsurprisingly, the Upper East Side has three of the priciest zip codes in the city. At the top of list, and sitting at the second position nationwide is 10075, which covers the upper East 70s in that neighborhood. The median price for a home in this area is $7.2 million, and this zip code has experienced a massive bump from last year when it was sitting at number 98 on the list.

Numbers 5 and 6 on the list are also from the Upper East Side. The fifth is 10065 which covers the Lenox Hill area. That zip was also on the list last year. The median price here is $6.935 million, and just jumped up 10 places on the list from 15 last year to 5 this year. At sixth place is 10028 which covers most of the East 80s. The median price here is $6.3 million.

Moving away from the Upper East Side, the priciest zip code after that is 10012 which includes parts of Greenwich Village, Soho, and Nolita. Last year, this zip topped the list in New York and was at number three nationwide. This year it’s sitting at number seven and the median price has taken a tumble from $7.3 million to $6.278 million.

Rounding out the top 10 is 10014 which covers most of the West Village and parts of Greenwich Village. Sitting at number nine on the list nationwide, the median price here is $5.785 million, and this area’s also come up significantly since last year moving from number 31 to its current ranking.
To check out the rest of list and continue to fret (or celebrate depending on how you feel) over the number of zip codes in this list head on over to Forbes. They analyzed 29,500 zip codes nationwide to create this list.

Source: Curbed New York

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What Will a Trump Presidency Mean for New York Real Estate?

Two months ago, Pierre E. Debbas, a partner at the boutique law firm Romer Debbas, was representing a couple buying a Manhattan condominium who wanted the option to back out of the deal if Donald J. Trump won the election. After Mr. Debbas explained that no seller would agree to such a contingency, they signed the contract and took their chances.

Other buyers and sellers have been skittish, too. By the morning after Mr. Trump’s upset victory, nerves were downright frayed, with buyers canceling viewings and delaying contracts, saying they needed to reassess, according to brokers, lawyers and developers.

“People don’t know what to make of the new situation,” said Stephen G. Kliegerman, the president of Halstead Property Development Marketing. “They don’t know if this is going to have a positive or negative effect on the economy.”

But even a few days can make a difference. By the end of the week, potential buyers were rescheduling appointments they had canceled on Wednesday, Mr. Kliegerman said. Others who had spent the summer cautiously eyeing apartments were finally signing contracts, relieved that the election was over. “The phone has been ringing a lot this week,” Mr. Debbas said. “People are realizing that the world’s not ending.”

And as for the clients who wanted a way out of their contract if Mr. Trump won, they are “going to proceed despite the election,” he said.

Mr. Trump’s candidacy divided the real estate industry, with the city’s dominant real estate families taking opposing sides. For example, Stephen M. Ross, the chairman of the Related Companies, said of Mr. Trump, “I don’t really see him as president of the United States,” while Steven Roth, the chairman of Vornado Realty Trust, advised his campaign. But now that Mr. Trump has emerged as the victor, some real estate executives are voicing their enthusiasm for an administration that they hope will be friendly to business.

“A lot of people want to jump on the winner’s bandwagon,” said Pamela Liebman, the president of the Corcoran Group. William C. Rudin, the chief executive of Rudin Management, supported Hillary Clinton’s candidacy, but a week after the election, he said: “I’m looking forward, not backwards.”

A Trump victory will likely improve the fortunes of some New Yorkers. Proposed tax breaks aimed at the wealthiest Americans could reinvigorate a flagging luxury housing market, looser government regulations could benefit business and infrastructure improvements could spur job growth.

Affordable housing advocates, however, worry that the most vulnerable Americans could suffer under policies that could be hostile to housing subsidies and fair housing rules. It’s also unclear what effect the policies of the new administration might have on foreign buyers. While Russians might feel welcome, given the admiration Mr. Trump has expressed toward that country’s president, protectionist policies and rhetoric could have a chilling effect on investors from China and Arab nations.

Predicting what might come in the years ahead is a little like reading tea leaves. Here are some of the postelection thoughts percolating in the real estate community.

Optimism

 

Mr. Trump is more of a branding expert and reality television star than a traditional real estate developer, yet he knows the industry, as does his son-in-law and close adviser, Jared Kushner.

So some developers are optimistic about having one of their own at 1600 Pennsylvania Avenue. “There is someone in the White House who at least understands the challenges of the development community,” said John H. Banks III, the president of the Real Estate Board of New York. “It could just be a very positive opportunity.”

Mr. Trump promises to not only cut taxes and regulations, but also to invest in infrastructure and jobs, a potential boon for business. “Once you start creating jobs, development follows,” Mr. Rudin said.

The stock market plunged on election night but recovered the next day, a sign that investors are confident in the future, business leaders said. “When you get behind all the babble and all the buffoonery, you have to ask yourself, what are his instincts and what is he about?” said Joshua Stein, a commercial real estate lawyer. Mr. Trump’s business instincts “are probably good for the economy and good for real estate.”

Uncertainty

 

Wealthy Americans can expect deep tax cuts from the Trump administration, “and they buy luxury apartments,” said Jonathan J. Miller, the president of the real estate appraisal firm Miller Samuel. Such a shopping spree could reduce the glut of luxury apartments languishing on the market, but other changes to the housing market are on the horizon.

If Mr. Trump dismantles the Dodd-Frank financial reforms enacted after the subprime mortgage crisis, home buyers could find it easier to get a mortgage. But a lack of oversight could have other consequences. “Maybe we’ll have another 2008,” Mr. Miller said, referring to the financial crisis. “Human beings have a tragic flaw, we tend to screw things up over time.”

Republican lawmakers have been pushing to privatize or even eliminate Fannie Mae and Freddie Mac, the government-controlled mortgage giants. Either Fannie or Freddie backs most American mortgages, making it easier for less affluent families to buy homes. Changes to how those companies operate “might adversely affect those that have been underserved by the mortgage market,” said Ralph B. McLaughlin, the chief economist for Trulia.

And interest rates could fluctuate. “Rates are likely to be quite volatile,” Mr. McLaughlin said. “It’s likely to be a day-to-day, week-to-week phenomenon driven by statements that the administration makes.”

Worry

 

Affordable housing advocates worry that Mr. Trump’s policies could endanger federal programs like Section 8 housing vouchers or legal services that help the poorest Americans find and keep housing. “We have millions of people who rely on federal support for housing,” said Harvey Epstein, the director of the community development project at the Urban Justice Center.

The Fair Housing Act, which protects people from discrimination, is also vulnerable, say housing advocates. Mr. Trump’s management company was sued by the Justice Department in 1973 for discriminating against minorities. “Enforcement of that is discretionary,” said Samuel J. Himmelstein, a lawyer who represents tenants. “They don’t have to go after people” who violate the statute.

The future of the Department of Housing and Urban Development is also in question. Among the names floated to lead the agency is Westchester County Executive Robert P. Astorino, who has sparred with the agency in the past. “If they got rid of HUD, that would be a catastrophic event,” Mr. Epstein said.

Wait and See

 

By 3 a.m. on Nov. 9, text messages from Russia were arriving on Edward Mermelstein’s cellphone, as the world realized Mr. Trump had won. Mr. Mermelstein, an international real estate lawyer, fielded jubilant calls from Russian clients hopeful that Mr. Trump’s victory would improve ties between their country and the United states. His Chinese clients, though, expressed concern about the prospect of a protectionist American administration. “It’s hard to tell what it’s going to look like a year from now,” Mr. Mermelstein said.

Mr. Trump’s calls for mass deportations of undocumented immigrants and barring Muslims could harm the housing market, too, if foreigners no longer see the United States as a welcoming destination. “The housing market relies on housing formation,” said Mr. McLaughlin of Trulia. “And a portion of that relies on new immigrants.”

Developers, however, are confident that foreign investors will continue to see the New York market as a safe haven. “I have not seen or heard any nervousness or skittishness from foreign buyers,” said Ms. Liebman of Corcoran.

Despite the rhetoric, a Trump administration could be a boon for foreign investors. Mr. Banks of the real estate board hopes to see the administration roll back a Treasury Department policy that identifies and tracks secret buyers of high-end properties. It could also bolster immigration programs that favor foreign investors, like the EB-5 visa program.

But if investors no longer see the United States as a safe bet, they might sink their money elsewhere. “It’s not about economic factors, it’s about safety,” Mr. Kliegerman of Halstead said. “If they see civil disobedience, fine; if they see civil unrest, those buyers will pull back.”

Source: The New York Times

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