NYT: Surviving After the Boom in Harlem

The real estate community needs to get rid of the mentality that Harlem is going to be some sort of trendy "SoHo North." It would be much better for Harlem and the city as a whole if the neighborhood is marketed as a viable alternative for middle class people who would like reasonably spacious houses and apartments while staying in Manhattan. The prices in Harlem will have to adjust accordingly.

Someone needs to send the memo to Harlem real estate broker Willie Kathryn Suggs.

She just listed these two Harlem homes this week at 3.2MM and 2.2MM, respectively.
http://www.streeteasy.com/nyc/sale/399910-anyhouse-130-west-130th-street-central-harlem-new-york
http://www.streeteasy.com/nyc/sale/399903-anyhouse-463-w-144th-street-hamilton-heights-new-york

What is she thinking?!

dude, those are fully renovated brownstones. Those are NEVER going to be "affordable." Most Harlem brownstone owners bought their houses as empty shells and spent small fortunes on the work.

And many of those brownstone owners who bought from 2005-2008 are so far under water that they need scuba gear to get in their front doors.

If the biggest housing bubble in history didn't turn Harlem into a Beverly Hills, NOTHING will.

back in the old days, you could buy a brownstone shell in Harlem for only $1. And if you did and made the place liveable, you should have a pile of equity as tall as Mount Everest.

Or a million bucks that you can't draw upon because you can't get a HELOC so you decide to sell because you have to and then, oops, nobody wants to buy it because buyers don't agree that you should get $2.2 or $3.2 million or whatever just because you want to and you think it's a great townhouse and you slaved over making a shell your dream.

alpine, take a cruise through the harlem brownstone listings and tell me you don't see people having a bitch of a time selling.

Those who were the "pioneers" will definitely make out well. My only point is that boom escalated Harlem real estate prices to such an extreme that the prices were getting out of reach even for middle class people priced out of the rest of Manhattan, which would seem to be the most prospective buyer in the area. The drastic quality of life improvement in Harlem means that we'll never see the days of $1 tax sales again, and THANKFULLY so ! However, the market correction occurring now is going to have to continue until there are more "affordable" options for middle class buyers.

Here's a Strivers Row townhouse that last traded in 2006 and is now on its way to becoming a sunken treasure.
http://www.streeteasy.com/nyc/sale/393508-townhouse-236-west-139th-street-central-harlem-new-york

Harlem prices for rentals and purchases have fallen, so the market itself has made it "middle class" in terms of pricing. The problem for most middle class and upper middle class new yorkers is the lack of income diversity in the place, which translates into "no services" complaints and paradoxically loads of empty retail spaces, even in brand new buildings. There are too many poor people and too much new housing for the top 5%+ of earners, and little in between, which is why its far easier to order delivery or find the kinds of restaurants, stores, etc you want in Astoria, Prospect Heights, or either similar AVERAGE income areas of NYC. Those places have a true middle in the middle, and Harlem really does not.

But isn't that the same pattern and complaint of those moving into any "gentrifying" area ? I have friends who told me they were in tears and despair when they first moved into a desolate TriBeCa during the 1970s. I know people who moved into Hell's Kitchen in the 1980s and couldn't even get a housekeeper who was willing to come into the neighborhood because it was too dangerous.

Astoria is not an apt analogy because Astoria has a history of being developed as a working class/lower middle class neighborhood where services emerged and have remained to accommodate various waves of 1st and 2nd generation "ethnic" immigrant communities. I don't know much about Prospect Heights. Even though Harlem had a long, long period of blight, it's more prosperous early history has resulted in a large supply of superior housing stock that gives it an advantage over many other neighborhoods in the long run.

While I wouldn't classify the "new residents" of Harlem today as pioneers, those with the wherewithal and patience just have to wait it out for better services like everyone else. If the demand is strong enough, the services will come.

And who needs Starbucks anyway ? Here's a brand new cafe for you on ACP
http://weblogs.amny.com/entertainment/urbanite/blog/2009/04/cafe_senses_big_things_brewing_1.html

HDLC that townhouse is an SRO, I believe that it could be impossible to ever get rid of the tenants...I might be wrong...

This is what I saw so far in Harlem:

Some wealthy people restored the townhouses museum-like quality. This houses are white elephants, to recover the cost in this market is just impossible. Most of these owners will stay put, the ones that need to sell will lose an awful lot of money.

Some people bought a 2 to 4 unit building. These owners tend to live in a duplex and rent the rest. The rents seem to cover the mortgage in some cases. Prices on multifamilies vary depending on many variables but seems than SROs and rent-stabilized tenants are what really push the prices down.

Some people inherited or bought very cheap. Unfortunately, many of these original dwellers (and the new ones too) took an awful amount of equity out that they can't pay back now. I know some of this buildings are at the verge of foreclosure.

Shells are becoming more affordable, and with construction costs being more negotiable, they can represent an opportunity. There is a lot of them in stalled reno, and some that show some action inside. In both cases, they will continue go down in this market. (there is a lot of unoccupied lots in Harlem)

Fancy condos are a mess. They are product of a gold rush and it shows. Many of them are quite boring. One of the ones I saw seemed more seriously constructed: 2056 5th av. Very high prices and absurd maintenance, though.

I wonder if it is possible to go to the banks before the properties enter foreclosures. Does anybody know anything about this possibility?

jason10006, You're right. We're on 111 St and FD Ave - we can get delivery from restaurants on Amsterdam, etc. Go a few blocks north or east, and I have the impression that that wouldn't be true. It's going to take a while for solid neighborhoods to develop. Great living by the Park, though. A couple of nice playgrounds and the Harlem Meer.

mimi, the Strivers Row house in the link is a foreclosure situation and while I can't speak for that particular building, many brownstones in Harlem have remained under SRO designation even after they have been vacated and turned into 1 or 2 family homes. Some owners just haven't or prefer not to change the zoning designation.

Mimi, I think you will have to let the foreclosure process play out. I just moved today into one of those new condo apartments that a speculator bought during the boom to ride out the wave of price drops which will be hitting all categories of real estate in Harlem. I lived for 15 years in Chelsea, and though I fully understand that Harlem is not (and never will be) Chelsea (thankfully), I want to be sure that I want to live there in view of everything that's already been said about lack of amenities, a substantial middle class, etc. I am hopeful, and feel good about the idea of investing in Harlem, once sellers come to their senses, as many will soon be forced to do.

I compare Harlem to Astoria and Prospect Heights etc because the average and median incomes are so similar and many parts, and because they are places where middle class people might consider moving. I hate it when people on these board s tell me I cannot compare Harlem to another neighborhood.

Mimi -- I considered that SRO also. Have wondered if one can get the tenants out in such a situation -- foreclosure. DOnt have a real estate lawyer so not sure how to figure this out. Contractor says it take 6 months and $2500. somehow it seems that it will not be so easy. There is also the residual guilt....

ANy opinions?

joe, it can take MUCH longer than 6 months to evict a tenant in NYC if the occupant really wants to stay and has legal counsel. Landlord-tenant court in NYC weighs HEAVILY in the tenant's favor. It's not unusual for a contested eviction proceeding to last well over a year. Concerning the Strivers Row townhouse, I can't tell from the broker's property description if it is currently occupied with SRO tenants or if that is just the zoning designation. Did you take a look at it or speak to the broker ? What condition is it in ?

there's an old saying..."don't buy a law suit."

HDLC -- I gave up on the Strivers SRO so I am not sure what the tenant status is. The complications with getting a loan were a disincentive.
However, the other building I am considering is a 3 family certificate of occupancy and not a SRO. This is better, but it is in foreclosure and there is reason to believe that both the owner and the tenants will fight eviction even if we win this building in the auction. The owner already has a video interview indicating they intend to stay. They succeeded in evoking my sympathy for their situation through the video, but it is also clear that they already cashed out their investment and have never made any mortgage payments -- interesting strategy :

Purchased for $x with 20% down. Refinance the next year for $1.2x -- thereby recovering their original downpayment and a small profit. HAve regularly paid taxes (which they petitioned down) and other bills but have never made a mortgage payment.

Looks like this is a dangerous situation for buying at the foreclosure.......

Looks like tax liens can complicate the situation further in a pre foreclosure. The title could be hard to ¨clean¨Anyone with experience with this?

you would be liable for tax liens and until those are paid you cant get clear title
I think one can save some money looking at these kind of properties but there is potentially quite a bit of headache -- in a donwtrending market it may be simpler to just wait for the sellers to try to cleanly get out --
mimi -- you said that several of the fully or partially renovated brownstones are financially in trouble -- this is interesting. I wonder if many of these people are willing to sell and what they will realistically take?

I spoke to a more-forthright-than-usual broker about some of the townhouses uptown that are in financial trouble and it really varies from situation to situation. Some people want to get out whole any way they can which is difficult as valuations continue to decline, others are trying to negotiate with the bank. What I was told is that under those circumstances "any offer" would be considered and we spoke of various options available. Concerning mimi's question, my understanding is that in a pre foreclosure situation the mortgagee is likely to pay the delinquent taxes in order to keep the title clear and marketable. The mortgagee doesn't want a tax lien foreclosure that would take precedence over the mortgage. A purchaser's lender wouldn't advance funds and you wouldn't be able to close with any type of lien on the property.

I have one for you joedavis

http://www.streeteasy.com/nyc/sale/211261-townhouse-14-west-120th-st-central-harlem-new-york

and I think also this one

http://www.streeteasy.com/nyc/sale/345222-townhouse-15-west-122nd-st-central-harlem-new-york

The first one CLEARLY needs at least 100k in exteriror work, though the interior is finished.

Don't buy any RER with the idea of kicking tenants out. They will make your life miserale. Plus, if you piss the tenants off, they will destroy the property.

During the recessiona and the upcoming surge in crime, Harlem is the last place I would want to live.

What upcoming surge in crime? Alpine, you have access to some crimebuster crystal ball?

Alpine, crime DECREASED during the last two recessions, both in NYC and nationwide. Recesssions do not therefore automatically increase crime.

Jason
I have seen 15 w 122 -- it is in good shape but rather 80s inside. They have been trying to sell for a long time. Are you saying that it is ripe for a low offer? 1.8 million is still too high I think since it will still need kitchen and bath updating at the very least

the 14 w 120 does not seem to be appealing -- priced too high, exterior needs serious work as you say and too far east. Good view of the park and deep lot are a plus

I assume the inside is nice or they cant justify that price. They would have sold in 2007 if they had priced them like this and were flexible at all

I am really looking closer to Morningside so would consider these only if the price came down a lot.
Thx for the pointers though

"Alpine, crime DECREASED during the last two recessions, both in NYC and nationwide. Recesssions do not therefore automatically increase crime."

What about the 70s? Did crime go down then too?

"Alpine, you have access to some crimebuster crystal ball?"

Nope, just this:

Leslie Crocker Snyder Predicts Crime Rise From Recession
April 6, 2009
Manhattan district attorney hopeful Leslie Crocker Snyder predicts the recession will drive up crime rates in the city.

“Crime will probably rise now, despite the fact that we have a lot of good policing techniques,” said Snyder at a candidates’ forum Thursday night.

Snyder attributed the expected surge to the “economic disaster” facing the nation.

Snyder stood her ground yesterday, citing NYPD stats showing robberies in the Manhattan South precinct are up this year.

“It’s common sense that … the severe downturn in our economy could well lead to an increase in desperate acts,” she insisted.

http://www.nypolitics.com/2009/04/06/leslie-crocker-snyder-predicts-crime-rise-from-recession/

Snyder's remarks are to be expected. As a judge, Leslie Crocker Snyder was so gruesome that she publicly lamented that there was no death penalty in New York because she would delight at the opportunity to inject the needle herself. Now salivating at the chance to get elected during a recession, it befits Snyder's character that she would get absolutely orgasmic just thinking of the potential of increased crime during the next D.A.'s term.

I heard of a couple of owners that borrowed too much after buying. They are ¨refinancing¨ with the bank 2009 style: they are being pardoned the amount of money they can't recover in the sale. So if they borrowed 1m, and can sell now for 600k, the bank allows them to sell for that price, gets the money and pardons the rest. Apparently owners prefer this than a foreclosure, because in this case they are delinquent for 1m. This is what I understood, I might be wrong.

Joedavis, have you visited any pre-foreclosure house in Central Harlem that you actually liked and is well priced but for some reason (basically banks not giving mortgages) is only suitable for cash only buyers? I can see there is an advantage for cash in some cases, but couldn't find anything yet. I am scared of rent stabilized tenants and places without a non harrasment certificate. I found one house close to Mt Morris, spoke with the broker, he said the place has squatters. Any comments on cases like this?

The crime rate was at its lowest during the Great Depression. Look it up. Law-abiding people who lose their jobs don't suddenly start robbing people and braking into homes, for goodnes sakes.

And crime rates really started to skyrocket in NYC during the 1960's, when the local and national economies were booming.

I meant breaking into homes, not braking!

Crime went up in the 70s, yes...but it also went up in the boom years of the sixties and early 70s. So you have not proved your point in the slightest.