finally...co-op prices are down and falling

"...The decrease in the average price paid for co-ops in Manhattan does not mean that co-ops are dying; to some degree, it just shows that apartments sold in the quarter included a lot of small co-ops and a number of large condos... In fact, in terms of average price per room, postwar co-ops on the East Side remained the same and those on the West Side increased by 3 percent.

But brokers said that co-ops are also depressing their own prices because their boards require so much liquidity and assets that many buyers from overseas and people who work in finance are instead choosing condos..."

If yur going to quote the NYT, then quote it - don't just spin it....

Spin it any way you want, parse the facts any way you want. The article in the NY times said the prices went DOWN for co-ops and up for condos. Brokers are also trying to spin it by now saying it's the Boards not the prices that are making the market fall.

Gee, could the brokers have a stake in spinning the reason for the prices falling.

Nice to put spin, loser. Try either reading the article or looking at price per square foot by number of real bedrooms abd you will see that all of manhattan is up

#3 is spinning so hard he's dizzy!

I guess NY Times should have spoken with #4 before writing the article.

I think it's clear that when there's a decrease in the rate of return people panic whether your talking about the stock market or real estate....so if you paid $1million for a place three yrs ago and the current pricing slipped from $2.7million to $2.5million what the heck is the big deal...you're still making a killing!

#7 - that's the real point.

We bought a place in 2004 for 1.825MM. A good solid comp in our building just sold for 2.75MM about three months ago. So in a worse case scenario what if our place goes down by 25% overnight from that comp price (and I don't think it's really going to happen)? So I only made a $237,500 in the past three years instead of $925,000 after having locked in a historically low 30 year fixed rate that I never have to worry about. AND the mortgage interest (and about half my maintenance cost) is deductible. AND the first $500,000 of appreciation (because it's been over two years and I'm married) is absolutely, totally tax free.

So exactly what's so bad with that? We had to pay to live somewhere, and we really love our place and don't want to ever move.

That's exactly the point...prices are down but profits are still going to be huge. Prices will never fall to pre-'2001. LET'S ALL BE HAPPY.

The average price of a condo in Manhattan rose by as much as 28 percent in the second quarter of this year compared with last year, according to data tracked by four large real estate brokerages. In the same period, the average co-op price dropped by as much as 10 percent.

They also choose condos because they would probably not be approved by co-op boards, which often demand full-time residence. Pamela Liebman, the president of the Corcoran Group, said buyers also prefer the conveniences of new buildings and the perks like concierges who can “stock my refrigerator, get my theater tickets and have my dog groomed.” The dazzle of living in a new building doesn’t hurt either, she said. “New, new, new — all of the foreign buyers love that.”

GLOBAL ECONOMY, PEOPLE. As the proliferation of condos vs. co-ops grows Manhattan will become increasingly tied to the global economy rather than domestic buying trends. No foreigners want to live in Craphole, USA -- they want NYC. As long as the dollar is weak, we are a bargain, and co-ops will go the way of communes. The local market is drying up -- and all of the growth in the next 3-5 years wil be wealthy foreigners snapping up condos.

#8--- why do you even justify yourself to these people? just sit on your growing equity and let them do whatever they do.

People actually have to live in these buildings and apartments too. Many will continue to believe it is better and nicer to live in much larger units for much much less money with stable, non-subletting, non-foreigner part-time residents, and a financially sound coop building.

also remember that the vast majority of buildings - I think 70% - in NYC are coops. Sure, many condos are being built but there's only so much supply.

I live in a coop that's financially sound and has flexible rules. Our board monitors the market values of comparables based on recent sales because they know that shareholders want a return in our investments. If more coops go this way it will help maintain the value.

While I agree wholeheartedly with number 12, the process for purchasing a co-op is ardulous for even the most motivated. I just sold my co-op and did extremely well - partly because the board maintained the reputation of the building. I am now looking for a much larger apt. as I now have two children. I am finding the whole process a bit frustrating as many of the buildings on the UES have strict requirements about pets, financing, full time residency and "summer rules" for renovations. We haven't even put a bid in yet and the broker is telling us to line up at leat 5 social and business references so we are "ready to go" with the board package when the time comes. Further, we are looking at some high end units and had to produce our financial statements. While we haven't thrown our hands up yet and "gone condo" it is very tempting at times to say "who the hell needs this"?

to #14, I am also a co-op owner/board member on the UES. I am emailing this article the older people on my board. Most absolutely do not understand that our rules are destroying value. They seem to think rejections are a matter of pride and prestige. In reality, we are now selling at 30% discount to old condo buildings, 40% to new condo buildings and 20% to the few condops on the UES. Note the condops on the UES sell in a matter of days where we take months. Also, the fact you cannot rely on a guaranteed closing dates will make it difficult to sell and buy another co-op here when we upgrade this year. The rules of even a moderate co-op board here mean a buyer of a $800K apt, needs $450K to 500K cash which is ridiculous. We are now paying the price from our wallets for our snobbery. There is no way but to turn to condop rules to save ourselves.

#14: This is happening in our coop as well - a real bifurcation between the 'old guard' and the newer tenants who recognize the situation for what it is.

I agree with #16 that the newer tenants who are often younger and very fiancially savvy will recognize the situation for what it is and make efforts to modify the coop board rules as they gain seats on the boards of their coop buildings.

The old guard are never going to leave their co-ops so they probably get enjoyment by making potential buyers squirm...

Yeah, but the old guard can be voted off the board eventually.

In our search for a co-op apartment, we too have been frustrated by the strict co-op board requirements, and have been kept out of many apartments that we could otherwise easily afford had we been allowed to finance 90% of the purchase (our debt/income ratios would have still been *well* below the acceptable limits). Furthemore, many older co-op apartments require a moderate to significant amount of renovation, which only adds to the upfront costs to a buyer. Eventually, we did find a co-op that does allow 90% financing, and are on our way to our first purchase. While we ultimately could have plunked down 20%, we are instead staying with 10% and using the "other" 10% to pay for much of the renovation that is needed.

While we had continued to look at brand new condos that do allow 90% financing througout our search, we may still be better off with finally going for a co-op, all of the annoying "board package" work notwithstanding. Afterall, the significant difference in closing costs between otherwise similarly priced co-op versus condo apartments do still make a co-op an attractive option for a first-time buyer.

And while we ultimately are taking advantage of a co-op with somewhat less strict financiang requirements, I will note one thing with respect to the generally more easily purchased condo. For all those thinking that the "old guard" of co-op boards are destroying their occupants' apartment values with their strict financing and board package requirements, consider the converse situation of the much more easily purchased condos: the sight all those foreign buyers taking advantage of the cheap dollar to scoop up NYC condos as pied-a-terres, investments, second homes, etc... , appears suspiciously like a speculative bubble in the making.

#20 is right on. But also, remember why co-ops have those "strict" financing requirements: if you get into financial trouble and can't pay, potentially everyone in the building takes a financial hit.

Does anyone know what happens if a condo unit forecloses? Or two units, or three, in a building? It can't be good for the building? I honestly don't know what the fall-out would be, but a condo buyer might want to investigate that.

Final thing: If you were buying a stand-alone house in the 'burbs, you would normally put 20% to 25% down. That is routine. Only exceptional buyers, usually, can qualify for a 10% or 5% or 0% down payment. I'm glad I bought a co-op in a building that requires 25% down, because I feel it's a less risky investment for me.

#21:

If someone forecloses in a condo, it's more or less the same as a coop. Everyone else takes the hit on the maintenance until the situation is resolved, and in most cases the coop or condo has the right of first repurchase before the foreclosed unit goes back out on the general market. Of course, if two or three units foreclose, it's not good, but again, the same thing can happen in a coop as well - there's no difference. Just because you checked someone's financials when they moved in, in five years it can be a completely different situation. Same for condos - many nicer ones check financials and references, but it really doesn't mean much at the end of the day. It's just a momentary snapshot.

And I've got news for you, in upper level condos, the only people who can qualify for 10% loans and the like are the very well off. Did you see the recent NY Times article? http://www.nytimes.com/2007/07/01/realestate/01cov.html?_r=1&ref=realestate&oref=slogin. It talks about this exact paradigm.

I really don't think in the long term the risk factor is substantially different. I think it comes down to the buyer, and what kind of vehicle they're comfortable with.

I believe the risk is significantly greater in any building where there is very little required as a down payment. If prices do drop dramatically and there are numerous buyers who put down 10% or even less, they may have morgages higher than their apartment's value. These are the people that walk away. It has happened in many areas of the country. This will also be true of foreign nationals who will abandon a shrinking investment.

#23, I'm with you. I'd rather invest in a co-op even though prices seem to be down (though that's not really clear). And even if there's a risk I'll lose money because co-ops can't compete with condos when it comes to lack of restrictions and thus attractiveness to foreign buyers. Those condos in less-than-prime neighborhoods that are half-sold to people who put 5% down are asking for trouble.

#24:

Poster #22 here. I agree with you regarding less-than-prime neighborhoods - I was only speaking of higher end condos is selectively prime neighborhoods.

#21--higher equity contribution = lower return on equity. basic principle of finance. saavy guys don't like being restricted on their equity contribution. its insulting. having said that, coops with a 25% contr. reqt have erected a substantial barrier to entry which definitely affects pricing. Can make it abnormally high, or abnormally low, depending on the neighborhood. having said that, nothing stops us from HELOC-ing out 5-10% right after a 25% coop closing. Only difference is the floating rate on the HELOC vs. the fixed (presemably) on the first lien.

Agree with #26 - #21 is taking a far less savvy view of how smart people handle their money.

#26 here. I'll add that in these old school 25% coops and the like, the level of financial acumen amongst certain board members can be downright dumbfounding. Some of these people have lived in the building so long that they have no grasp of the current financing techniques and have a severe fear of same. For instance, SPV purchasers. Condos, and lenders for that matter have no problem with the concept, but these coop dinosaurs hear that a business entity is purchasing and get uncomfortable. Its very frustrating to deal with financially non-sophisticated people when acquiring a large asset. very frustrating indeed....

#21, there IS a different between condo's and coops if someone forecloses.

If it's a condo, the bank gets the unit. If it's a coop the coop building gets it. This can put a coops at an advantage if the market goes up, the remaining shareholders benefit from the sale. The reason is the ownership structure of coops.

#28 -- the reason why most co-ops are so unsophisticated is that they bought when 2,000 sft apartments were selling for $200K. They can't and won't ever move, nor will they ever give up their board seats.

It is a downward spiral that will leave co-ops as an increasingly unattrictive option.

I have lived in 2 -- one UWS -- one Downtown. Both were filled with miserable old bags who didn't want to spend a nickel on anything.

Should you really have to haggle over buyin a new coach for a lobby for 5 YEARS??

Not worth the pan and suffering. Communes didn't work and co-ops will be the next to go. I am a condo man for life.

#29 - you're dense.

In the case of a coop, yes, the coop shareholders own the defaulted property. And they are still responsible for paying off whatever mortgage still exists to the bank - you don't think the bank will just forgive the mortgage, do you?!? So the coop can 1.) take the place, pay off the bank, and hold/rent out the property until it is advantageous to sell, or 2.) pay the bank and put the place on the market immediately. That's pretty much the two choices

In the case of a condo, yess, the defaulted unit goes to the bank - who will sell it as quickly as is practical to get their money back. The condo has first right of first refusal to buy that property - EVEN IN DEFAULT, if that option exists in their legal documentation. So the condo can 1.) buy the place from the bank at market (or more likely, a reduced market price) and hold/rent out the property until it is advantageous to sell, 2.) pay the bank and put the place on the market immediately, or 3.) let the bank sell the place outright and not get involved.

The difference, is that in a coop, if the place defaults the Coop is responsible, NO MATTER WHAT. In a condo, the option to exercise right of first refusal to purchase allows the condo to decide whether it is in its best interest to get involved or not at all.

#29--you are a schmuck and likely on a coop board. Coop foreclosures are no different than condo foreclosures, other than coop foreclosures are as against the shares, not the r.e. I know, I've participated in many of them. What you MAY mean, is that the COOP itself can foreclose on a unit for failure to pay mainentnace, in which case, again, it goes out to public sale but the "coop" does not automatically ever get an apartment without purchaing same at public sale, tool.

#30--- I don't see the issue as what the purchase price was when these old timers purchased. hell, 200K for a 2000 sq ft apt was expensive at one time. The problem is that there exists people who have business sense and people who do not. unfortunately, coops appear to trend toward being run by those who do not. What it is is jealousy of persons coming in, reno-ing a dump and flipping out in 2-3 years while these guys sit on their fat asses and/or hugely ugly apartments and are jealous of anyone with a clue. I've at in on coop board meetings and the level of stupidity is never ending. Artsy fartsy types, bored housewives, clueless retirees..... Tru problem is that guys like you and me (i.e. those with a clue) wouldn't want the hassles of being on a board, getting paid nothing, and having to re-educate these zombies in what little spare time we have. Its the dilemma of coops and why there hasn't been a new one other than a public mitchell lama in years.

#31 here again:

To #32 - you crack me up - I actually WAS on a coop board at one time! And I might add to your comment that"...the COOP itself can foreclose on a unit for failure to pay mainentnace..." is almost a impossibility - in reality, it is VERY, VERY hard to kick someone out of their home in NYC for failure to pay maintenance - it could take years. Not an easy process at all.

#34--I've been to three coop foreclosure sales this year so far all of which were instituted by the coop, not the bank. I must say, one was in brooklyn. Two I attended last year were bank actions, but bottom line is it happens more requently than you might think.

The average price thing is not a great way to figure out if prices are actually going up or down. Part of the reason the average condo price has increased is due to the closing of new condo apartments that are expensive and large (by square footage). Assuming a lot of them closed in the 2nd quarter, then the median price of condo goes through the roof. For coops, the median coop might have drop if a lot of smaller apartments closed during the quarter. The best way to look at prices is the square foot price so you can compare if prices are really increase.

I have been searching for a coop apartment since last Fall. The prices have definitely increased from last Fall, when the market was dead. I think the apartment is off the mark on coop prices.

If the co op shareholder defaults on his loan, the bank will step in and pay the maintenance in arrears.

If the co op shareholder defaults on his loan, the bank will step in and pay the maintenance in arrears.

I do not know why there is such a big issue with non-payment of coop maintenance. The coop has a first lien on the apartment, which is ahead of bank loan. Although it will take some time and legal wrangling, the coop will get paid if the apartment is worth more than the overdue maintenance. Banks ask coops to sign recognition agreement, which the coop promise to advise the bank of default. To protect their interests, banks will paid overdue maintenance.

co-ops are a nice way to pick your neighbors and hide it...because in fact they are a business that is not publicly traded. makes sense to me that condos, or not picking your neighbors, leaves for a neighborhood with average demographics built into the price. So a bit more stability i would think. Once a really picky Co-op is diluted, value should drop...co-op's are also the craziest thing i have ever been witness too in an equal rights world...

#40, they're crazy but are a fact that many a NYC homeowner needs to contend with. Why so many buildings went 'coop' years ago instead of condo I have no idea...anyone out there have a historical perspective on this?

Many coops have become more progressive, relaxing their rules, etc. You only hear about the crazy stories because they're more interesting. My coop board interview was more of a 'welcome to the building' in someone's apt. A friend of mine had the same for her building, met with a board member at Starbucks.

It's too bad we can't have these meetings BEFORE signing the contract so we can ask all kinds of questions about the building directly from the source, and get a feel for what type of board members we'll have to deal with.

the end result as a co op shareholder and board and younger board member is to push for condop rules. I think once it happens, there will be a stampede to convert. If you understand the financial and tax issues, co ops cannot convert to condos on any scale. Under condop rules, co op can still institute a one year residency requirement before renting to reduce speculators. A 20% jump in price within 6 months guaranteed.

this discussion is amongst idiots. rare ones at that.

"If you understand the financial and tax issues, co ops cannot convert to condos on any scale." #42, this is not true.

The NY Times ran an article recently about coops converting to condos. It can be done but it depends on the tax status of each of the shareholders because each one is hit differently.

http://www.nytimes.com/2007/04/08/realestate/08home.html?ei=5088&en=2ef36848c429930a&ex=1333684800&adxnnl=1&partner=rssnyt&emc=rss&adxnnlx=1183737675-TpdydCIBYWyFpJe38B8oow

Who gets to decide if the rules in a coop will be relaxed more like a condop...is it the Board of the building or do all the shareholders get to chime in?

Who gets to decide if the rules in a coop will be relaxed more like a condop...is it the Board of the building or do all the shareholders get to chime in?

The rules aren't set in stone so it's hard to make changes.

if the rulse weren't set in stone they would be easier to change. How changes are made depends on the building's by-laws.

#48 t.here are by-laws but the board can also reject someone without giving a reason