factoring future depreciation, what is the fair price for a renovated harlem brownstone

The brownstone market in Harlem is difficult because there are so few transactions. Some recent sales I have followed:

116 West 120th - 1.495 million. Needs substantial work but could be spectacular - it's 20 feet wide and has great original detail.
15 West 122nd Street - 1.375 million. Needs work in my opinion but not on the level of 116 West 120th - you could potentially move in as is. Beautiful facade. Around 18.5-19 feet wide. Had originally been listed for well over 2 million.
9 West 123rd (may have address incorrect). I think this went for around 1.8-1.9 million. Fully rennovated, with Central A/C.

The few data points there are all over the map. I still think the market is a bit overpriced, but at least some listings are getting more realistic.

Truthfully I find it hard to predict how much farther it goes down. The reality is if you want a brownstone in Manhattan, Harlem IS compartively cheap. I would say the discount on a Harlem brownstone vs. an UES/UWS brownstone is greater than the discount between a Harlem condo and UWS/UES condo.

A fully rennovated, fairly wide (18-19 feet) Harlem brownstone can be had for $2 million. On UES/UWS - I don't see a whole lot for less than $5 million, and most of those that are need a lot of work. Most are much more than $5 million. So the discount to UWS/UES is well over 50% - I'd argue the equivelent brownstone in South Harlem is 1/3 of the cost of one 30 or so blocks South. In the condo market the discount seems to be about 30%-40%.

So I don't know either. I think many are overpriced, but I am not sure the sky will fall out here. There aren't many listings right now. My gut says more will list this spring; many were pulled in 2009.
Will be interesting to see where it goes. Best guess is fully rennovated turnkey will still be in the mid to high 1s for a nice brownstone. True shells I think will go back down to $500k or so. Everything else somewhere in between. This is my best guess, and this is assuming Manhattan real estate overall only declines another 15% or so. If it goes further, all bets are off.

Give it up Joe. You drank the lemming juice. There's no turning back. 100% guaranteeed Harlem goes down an addl 30% from current 20% drop. Plz.... Stop it. You are already under with 3.5% down.... Sorry.

I don't see how that kind of talk is productive, w67th. You can't guarantee what will happen in the future. I think everybody believes there is some downside price momentum to Harlem remaining but nobody has a crystal ball about how much it will be.

You think 50% chance 15% drop. I think 100% chance for 30%+. How is yours helful and mine not?

FYI. I yr ago I said 100% no buy NYC re in the nxt 3-5 years. Joey did it anyway, and now is asking when will the beatings end, the answer : when morale improves. I'm not drinking champagne, r u?

I think rubbing anything in somebody's face is a tad immature, but that's just me. Especially if you don't know what price they paid, you have no basis to say anything - maybe they got a below market deal that will allow for a price drop. Also, I think to guarantee anything is a bit overstating the case. Did you guarantee a Jets victory yesterday?

Jets r random. NYC re is not., ESP after a run up from shells selling for tax arrearage to $1mm. Joe is known to us. He worked every nickle to get his 'deal' in the last year, including every dumb 'owner' argument known to a borker. Fwiw, anyone who thought 20% off peak was a bargain is and will be a fool. That's a guarantee

"ou are already under with 3.5% down.... Sorry. "

joe, did you buy a brownstone with 3.5% down? when? men, sounds like bad timing to me.

On the underwater, ppl are mailing in their keys. Maybe someone should've rubbed it in their face when it was only Down 5%.

kspeak, homeowners were bragging about their super smart moves to renters not so long ago. what's wrong about reversing it? it is only fair to let the rubbing go on for at least 4 to 5 years imho (say till 2012/2013). this is just to break even.

I feel your pain, Joe. At an emotional level, there were points when I found it really hard not to jump in the Harlem market. There was some downward price movement, interest rates were ridiculously low, and people were signing contracts (although not nearly at the levels they were in 2006-2008). The low point came when I watched a beautiful apartment that I loved sell for almost half off the peak price. Whatever I felt emotionally, though, on a rational level, I just couldn't pull the trigger, because the economic fundamentals tell me that buying in Harlem right now was not a financially prudent thing to do. I'm seeing apartments that were asking $1.7 million now asking below $1 million and still not selling. Sure, there are a lot more condos than brownstones, but look at at it another way. There are still quite a few empty lots in Harlem. I've gotten estimates from high end architects that I could buy and build a spectacular townhouse today in Harlem for much less than many of these sellers are asking. As long as that's the case, I don't see myself paying anything more than $1.2 mill for the 122nd Street space, or $1.3 mill for the 121st Street townhouse, if that. Moreover, I wonder if the banks would be willing to finance the purchase of these places at 20% down. I'm beginning to be skeptical I see, e.g., that 525 Manhattan Ave is back on the market after having entered contract. Several other townhouse properties that have been listed as in contract for a long time haven't closed yet. Assuming buyer pre-approval from a bank, there's no way in the world it should be taking this long for some of these deals to close. When I look at how many places are in pre-foreclossure, and the predictions on Calculated Risk and Housing Crash about the coming wave of defaults on Alt-As and ARMS, not to mentioned HELOCS (of which I think there have been more in Harlem than elsewhere), I'm persuaded that it would take a really steep price discount for me to play in the Harlem townhouse market before the beginning of 2011.

I'd say the dick-measuring contests are just as tiresome now as they were then.

Agreed! I think specific, insightful commentary like cherrywood's is helpful.

Cherrywood - you are definitely right on the vacant lots- there are several, even in South Harlem. It's often cheaper to build from scratch than to rennovate an existing structure; of course then you don't get the period details, but it's a real challenge - and expensive - to preserve the period details without making a townhouse look too dark, like a museum, or generally not functional.

The wave of foreclosures will surely be interesting ... although I've been tracking this too since Fall 2008 and am surprised how long it is taken for forced short sales.

There was a penis contest I missed? Seriously I candy coat to my kids not over-leveraged lemmings looking for a pat on the azz.

Joe did a tenant leave? $10k boiler bill? Re taxes up too much for you? Pipe broke? Can't go on vacation cause a lease is turning over? Can't afford broker fee? What is it?

kspeak and cherrywood -- thx for your comments
based on your responses the deal still works for me
w67 -- interesting that you feel compelled to comment

admin: purchased at 5% down, 4.5% interest for 30 years at a mark approx 30% below the numbers kspeak assigned, for a gut renovated place with a 1 year builders warranty, comparable in size to the ones indicated
no bragging here -- just making sure the deal still makes sense since it has been in contract for 6 months now.
I am not an investor -- simply interested in making sure that affordability works+ the deal leads to financial sustainability, and the world around the place does not fall apart.
I am sure you and w67 will make a lot of money on something and will live happily ever after

joe.. 3.5% equity to 5% equity.. my bad joe... you are SO SO covered.... dude if i were you i'd buy the biggest yacht in the world and take a well deserved "$" cruise on the expected income from you property.. congrats on being part of the landed gentry... I must now call you Biff.

Joe - Sounds like a decent deal. The brownstone market is much less liquid than the condo market and therefore much harder to time. As you know I too am tracking the market - if I could get a completely rennovated place (including central air) that still had some of the original detail, was > 18 feet wide, on a nice street S. of 125th and West of 5th, - for around $1.6-$1.7mm I too would bite.

It's true the market may go down another 20% - or maybe more - but I think townhouses are a bit different of a proposition than traditional apartments where there are likely to many more in a given price range/location. With brownstones there is by definition limited inventory, then you have to find the one you like. Even if it's rennovated, you have to make sure it's rennovated and configured the way you want (multifamily vs. single family, location of the kitchen, etc.) - otherwise you have to pay to get it the way you want. I just think there are nuances with this market.

So timing the market is great, but for people who have a 10 year time horizon, it's not crazy to pull the trigger if you find one that works for you at a reasonable price. You have to live in the house, too.

"I am sure you and w67 will make a lot of money on something and will live happily ever after "

i did with the housing crash already. sitting pretty now and not moving a finger for the few years to come (made enough to chose whether to work or not, whether to move to another country or not... that's the freedom i wanted and got it). don't take it personal though. my point is that nobody stopped the bragging of homeowners during the bubble. why is then the opposite bragging unacceptable?

the past decade (and imho the next) was the decade of the renter (in terms of wealth accumulated). renters couldn't take the credit during the bubble and were made fun off. so why not letting all renters take the credit now?

>>> renters couldn't take the credit during the bubble and were made fun off. so why not letting all renters take the credit now?

I don't disagree with the factor that renters were made fun of, but note the passive voice. Not all buyers did this. And I'd venture to say that most buyers who bought in 2009 did so with great trepidation - they bought because they found a place they liked that made sense for them (and as I pointed out earlier, buying the right place for you is even more important for townhouses) knowing there was a risk of further depreciation, not because they thought they were going to double their money in 5 years.

i don't disagree with you kspeak. but if you want to be impartial, only if you stopped homeowners from bragging in the past you should stop renters from bragging now imho. notice also that the previous bragging referred to paper profits and instead the current bragging relates to actual substantial savings. the renter as the underdog winning bragging rights, kind of romantic if you ask me.

btw, those that brag now contribute taxes towards helping those that bragged in the past but don't even get a "thank you" not and a "sorry about that" note. the current bragging might actually be very needed towards waking people up. you never know, maybe they even stop listening to lobbies (home builders, realtors, mortgage lenders, ...) as if they have joe 6pack best interest at heart...

the brainwashing towards homeownership had run so deep that a renter bragging might wake up somebody. i agree that we are not reaching the pinnacle of great taste, but if it contributes towards the financially literacy of at least 1 youngster that is just starting his RE choices... bring it on!

It is ridiculous to attach prices on assets right now. The market has not cleared out and there is a lot of false impressions and government intervention. There is a dependence of prices on income but even this one has broken down with unemployment and wage deflation.

I do agree there is brainwashing towards home ownership. My favorite is when people say "I'm going to be there for a while - at least 5 years." I want to say - FIVE YEARS IS NOT A LONG TIME! You are relying on appreciation to make your money back in 5 years.

But for people who are truly long-term holders (10 year time horizon) and not investors I think a little kindness is in store. While the decision to buy needs to be considered in the context of finances, it is not purely a financial decision.