Delusional prices in Harlem

I totally agree with you.

I think many owners in Harlem are so fixated on the visual changes (new stores, new construction, etc., townhouse restoration), which are ongoing in a positive way, that they're blinded to market realities. After all, the neighborhood is "getting better", thus more valuable, by their estimate.

In addition, a very high percentage [my guess] of Harlem residents (even newer buyers) are not employed in industries that are overtly plugged into the financial cycle, unlike those in more prime Manhattan ... and birds of a feather flock together, which means financial news and forecasting isn't likely to be party talk or dinner conversation among those owners.

I used to live in harlem between between 1989 and 1993,i now live in the west 90's.I have seen seen many changes in harlem but unfortunately the amenities available do not justify the asking prices!

i do miss my 17th floor view of morningsidepark

Rental prices have defintely come down a lot in just the past three months Mimi. i have tracking that closely. Sales prices - ASKING sales prices - have not. But they have to move in tandem. If 14815th is ALREADY lowering asking rents (they are) and rentals in Kalahari and Soha118 and Susan's court are priced 30% cheaper than six months ago - and add to that resotred Brownstones on the market for over a year, with asking prices cut 30-50% with still no sellers - how long before 5thonthePark, WIndows 123 etc simply have to cut? But I agree with another poster. Its because the economics for a highly leveraged developer often favor holding out until the last minute and going bankrupt rather than cutting prices - especially if they gurenteed buyers that they would not cut prices.

So I expect that you will see lots of developments in Harlem go rental or be auctioned off once the bankers foreclose. In the last downturn that process took years.

Any other opinion?

Harlem benefited from people being priced out of more "desirable locations". Same thing can be applied to Hudson Square, Hoboken etc. Harlem is probably in an illiquid state. The core buyers prefer the Upper East & Upper West.

"The correction in Harlem was expected to hit first and harder. It didn't happen that way. I think it's going to unfold in the coming months, when the huge amount of stock taken off the market is not renting, when condos galore hits the market (biggest concentration of new developments in the city,) when foreclosures start adding up and sellers realize that they don't lose their pride by accepting low offers."

true, i expect future prices to drop a lot and to remain illiquid. those that bought at mkt prices when so many people bought the same units through a lottery paying 1/3 of those prices and paying no maintenance are going to regret it big time. you just cannot compete with a lottery winner with such a low basis when trying to sell.

i know people that bought in units at mkt rates without down payment paying 110% so that 10% could be used to "decorate". wouldn't be surprise if no skin on the game makes those walk away in a couple of years, manhattan is no different than the rest of the country, plus those debts are non-recourse (as far as i know).

then you have the tax abatements. everything done in harlem during the last decade (besides few brownstones) got one. it would be nice to know how many units are going through the tax increases and how much the final tax on them would be.

"paying 110%" meant LTV of 110%

4) Most apartments on the market have been developed/bought in the last 5 years and thus have a relatively high cost basis, with owners generally under water. Most people are unwilling to lock in a loss and are (delusionally) holding out.

with the laws in ny, do you know onthemove if walking away means having to fill for bankruptcy? in the case that the owner anticipates not to need credit for a few years, keeping a good FICO might not be worth the 6 digits they are underwater.

Sorry admin, no idea.

NY is NOT one of the states where by law first mortgages are non-recourse. So, those loans ARE recourse loans. As discussed in a prior thread, historically banks have never gone after deficiency judgments on Condos unless there was some clear fraud in the origination of the loan, and the law makes it harder because a lender can only use one lawsuit per loan so they would have to make the deficiency recapture part of the original suit, which would complicate the foreclosure and make it take longer, which in most cases would outweigh the possibility for real total recapture enhancement.

Other states first, purchase money mortgages are by statute non-recourse, and you can simply mail your keys to the bank and say "take it, it's yours".

None of this is to say that banks in NY won't cut deals rather than having to go thru the lengthy foreclosure process.

sorry man. harlem is disgusting. beautiful brownstones, but the streets are littered with vagrants still. No thanks!

Eyes of the beholder.

Littered with vagrants? Hardly. Its funny how people who LIVE in Harlem on these boards never say such things. I lived in far west HK - there were more "vagrants" - I assume you mena homeless people - there. There were FAAAAAAAAAAR more back in SF, where I am from. I see more beggars on the subway than I do in Harlem.

I agree about the Harlem $$$.
It has yet to reach that critical point where price completly disintgrates

cont.
It's about the time line. It's not if price will disintegrate just when. Look at the volume of inventory as compared to sales that close and there you will will find the seeds of distress that take time to grow. Many renovated or reconditioned properties are on the market but, for relatvly short time period. I just don't see any economic miricles on the horizon. RE prices will die an ugly death in about 1-2 years. That slow motion RE market! Hey, if you like rapid responce play the equites market. RE is for the patient investor. One final note on central Harlem...my prediction...
Some time in the future (I don't know when) Harlem will emerge as the next 'Village'. The plethora of small apartments and the impending drop in rents coupled with Harlems improving safty reputation will eventually draw the young talented poor (as the East Village once did) to move in, mingle and eventually bring counter culture back to our beloved 'over priced' city.

Harlem is fine, it's just overpriced. Falco, it's a bit different than the East Village. The East Village has almost no purchasing options, full of rentals. Also, Central Harlem actually has a significant number of family-sized apartments. The exciting potential I see in Harlem is in retail. If the area can hold on, it could be a very compelling place for restaurants, boutiques, etc. Could become to the UWS what the East Village has become to "better" neighborhoods downtown.

Will be interesting, but I do think that prices are headed for a collapse here, at least for the short term. Some of the developments have very long abatement programs, which may make those units look much more attractive in 5-10 years.

Mimi -- you are right. It is surprising how resistant the sellers in Harlem are being to the pricing reality. As Jason has pointed out, there are several renovated townhouses that continue to sit and of course the new developments with their delusionally priced units seem destined to become a legend.
It is good to know that rents are decreasing. WIll really help the students in the area, who increasingly look to Harlem for a rental solution -- Columbia rents are now comparable to or higher than HArlem market rents -- so much for the subsidy

Harlem is already east-villagy. I have lived in 10027 for two years, and lately say like 20x - not kidding, 20 times more grungy east village/wburg white young 20 somethings in the neighborhood. Sometimes when I go to a sitdown restaruant I am in the minority - as in there are often more whites eating there than blacks, like 8-1.

That said, there are sooooo many projects north of 96th that it will take LOTS more market rate units to make it the gentirification story some think it will be.

This afternoon, I went to an open house at The Alycia, 304 W 114 St, an almost fully completed, 50% in contract building. Within sight are three larger condo projects with work advancing (and one stopped).

This building has a 2bd PH for $795K, with around 1000 sf and a large primary terrace and a second upper terrace (scary staircase but great views).

The front of the building brickwork looked a little strange.

HarlemNWCP,that needs to come down 200K to $595 to make it worth anything now.

I was a bit surprised to see quite a number of people visiting the building. We were just having a family stroll and noticed a new building with its door open.

I'd be afraid of the 50% sold (in contract) part.

I do think that FDB seems to be getting nicer. But $800K?

What is the selling strategy to get one of these buildings to 70% (out of the woods from a lender perspective) then to 90% (turn over the building to the buyers)? Sell some smaller units cheap and hold out on the PH?

the story about the Alycia is very interesting...
several months back I thought of checking on when they would be marketing and I was told that they were 100% sold out.
Now it comes on the market as 50% sold.
wonder if the next news will be that they are opening the marketing

I agree that 500 psf seems more than appropriate for such buildings even with the Penthouse aspect -- at least for a 1000 sf 2 level unit with stairs eating into the sf

That's right, joe davis. A few months ago all the apartments at the Alycia were listed in contract. Clearly several buyers have walked away.

The Alycia was "sold out," but when there were construction delays many, many people got out. The agent told me that none of those left without some major life changing event (presumably job loss).

That said, I'd love to hear from the board what, if anything, you think is a reasonable price per square foot for new development in West Harlem, Morningside Heights. I started my search over one year ago, decidedly a different time. Looking for large one bedroom and wondering when is the right time to seal the deal.

searchinginharlem, how many units were available in the Alycia (could look it up, but). Because it doesn't bode well for the market if every buyer had a major life changing event. And if they all didn't, well, the agent is lying.

you can't really determine a reasonable price per sf right now. it depends on the circumstances of the development. some of them you shouldn't offer a $1 for, they'd be more a potential liability than an asset. you may feel you are safe with a mortgage contingency, but what if the not so unlikely event occurs that you go to contract in a building that is 50% in contract, you get mortgage approval, and then sales stall forever? you are still in a building where one or two rentals may make it impossible for the others to sell. if you must buy, buy in a building that is at least 85% sold out, that hasn't had immediate large numbers of rentals, and learn something about the history of the development (how much was paid for the land, i.e.) and pay attention only to the past few closings in your apartment type before you make an offer. you ought to consider a further discount for risk. Good luck.

I agree with aboutready-- the broker's story is implausible on its face. They started marketed just a little over a year ago. It defies logic (and standard practice) to think that the offering plan would allow people to walk away from their contracts because of construction delays in less than a year after the AG approved sales.

oh, another thing i neglected to mention - they won't allow for a mortgage contingency on any unit.