UES/UWS Townhouse Market / Trends / Time to Buy

I think one of he things you are seeing is that it is often harder to differentiate between townhouses than apartments. In an apartment building, all apartments within a "line" are pretty much the same except for view (same layout, etc.) but any two 20 foot wide townhouses are probably very different. You also probably have a bigger difference in condition: in an apartment you only worry about inside the unit you are looking at, but in a townhouse there's all the building mechanicals you have (roof, boiler,etc. plus the facade, foundations...).

As such I think it's much easier to "comp out" apartments than townhouses. I think what you have probably seen is that townhouses tend to come on the market more often at "wish" prices because everyone thinks their townhouse is unique and special. Also, if you own a townhouse you probably are not in as much pressure to move because you need more space so it's easier to take your time and go fishing for a high price.

I have been following the market and individual listings in this segment and few thoughts:
1. Market is very illiquid and always has been. 30y has a good point about comparisons.
2. High-end condo are indeed a competition for townhouses as a some percentage of buyers in the 5-20mm range may be indifferent between a 3500 sq ft condo vs 6000 sq ft townhouse. Townhouses do indeed have a much more unusable space due to stairs and landings.
3. A lot of sellers on the UWS and UES got too excited after seeing 4k per sq foot sale in the village and thought that they can get that price for their UWS/UES townhouses even if it is not on the park block. Village townhouse market has very limited supply which coupled with the celebrity desire to live there has pushed up prices. This created supply with ambitious prices on UWS and UES.
4. In my mind, $1000-$1200 per sq ft ex basement and outdoor space raw/no elevator and vacant is a good price (park block with have some premium; so will 20 foot+ width; discount for narrower) and you can surely move at that price. $1500-$1700/sq ft finished with elevator is the market with adjustments about. Smaller 4k sq ft are trading at a premium per sq ft relative to larger 6-7k sq ft houses.

5. There always are a few outliers as some ultra-rich person liked it.

Also, I have found that many have some type of rent stabilized or control tenants but want free market prices. Rich buyers who want to convert to a single family do not want to deal with this as once the rent stabilized tenant realized that the new owner has deep pockets, they negotiate hard.

townhouses are not my specialty; I think that's true of 99.9% of the people who sell real estate in Manhattan, whether they will admit it or not. So in answer to your Question #1, you might consider talking to a broker at a firm that actually specializes in townhouses, like Garfield or Vandenberg.

In answer to Question #2, why not? It doesn't take that much of an investment of time and money to make an offer. As one of my old bosses used to say, "it's a stamp." The one thing that you might want to be aware of is that listing contracts may have extension provisions, so you could be in an area where you think the deal is commission-less but the seller is still obligated to pay the broker.

In answer to Question #3, I think capitulation in the New York market always takes longer than buyers think it should. I have seen cases of death, divorce, job relocation where any sane person would have thought that the property should have been marked to market years ago, and the sellers just held on. If houses have been pulled because the sellers did not hit an aspirational price, then the relist might be never. (I've seen this with townhouses in Park Slope, the one place I did learn the house market at one point because buyer clients were interested.) I would think your best shot would be to ride the coattails of a general economic downturn, and the strongest signal of that is a collapse in equities.

Last recession we had, the housing market's bottom was about a year after the stock market fell, so if you smell a downturn, you might want to try to position yourself to buy 6-12 months out.

If I could market time that precisely I'd be on a yacht instead of talking to you guys, but my best guess is that you're looking for two years from now.

ali r.

Thanks to you all. We're not at all in a rush to buy. Although we are serious buyers if we see the right house at the right price, so we want to be properly prepared. It seems that this particular segment of the market is just as challenging as I suspected.

One follow-up point - for a typical seller broker contract, how long after the contract is terminated (and the house is delisted) before no commission would be owed on a subsequent sale?

TeamM - typically the protection clause is 90 days. The broker sometimes has the right to provide you with a list of names who they've shown the apartment to. So if you just let it expire and then sell it to someone who's been shown the apartment then you'd owe commission.

With that said, I'm still not sure why some sellers still want to sign traditional exclusive right to sell agreements where they owe 6% as long as a "ready willing and able" buyer is found. The listing agreements Hauseit affiliates use for their agent managed listings are much more reasonable I hear. Have you considered doing it yourself with a flat fee RLS listing (through Hauseit etc)?

TeamM, Wondering if you considered this one (110 West 81st) and what you thought. While I do not know the contract price, I thought around $9mm vacant for the end-user was a fair price (current sq footage is around 8k including ground floor; needs full reno).
http://streeteasy.com/sale/1205808

I grew up on West 78th Street and I never cared for the West 81st street museum block. West 78th Street is also a museum block, I looked at the pics and it has all or most original detail, but it is not to my taste. Also I would prefer to have a southern exposure facing the street. It would be worth while looking at the park blocks in the nineties below 96th Street. A Whole Foods Market has opened (actually about 4 years ago) on West 100th Street and Columbus Avenue.

I could send you any listings I get on the West Side. I know every block. and would be happy to give my feedback. Good luck with your search.
Ellen Silverman
Licensed Real Estate Broker
Buyer Rebate
Licensed Mortgage Broker since 1990, NMLS#60631
esfundingco@aol.com

300 - interesting question about that house, and I really don't know because I don't know what kind of money you need to invest to renovate. It seems like there's a wave of townhouses that were purchased about 3 years ago as investments, were renovated nicely and are trying to be sold now (some successfully and others not). I don't think that a real market price has been established yet, but my sense is that the market is not going to be at the level that folks projected when they made the investments. However, it's really tough to say because it depends on the degree to which you see a townhouse as being fungible with other housing options. Some people (e.g., me) don't see the as interchangeable at all, but for many other people they are closer. I think that this dynamic (which I'm ignorant about) will dictate whether Sellers will hang tight to see if the market improves or just unload at a disappointment at some point.

This is a thread worth saving and sharing. Honorable mention to Front Porch, 300 Mercer and 30 years. So glad you are all still on the board.

Bill, Thank you for your kind words.

Team M, Good luck. I would not be afraid to bid purchase cost + 500 per sq ft reno (ex basement and exterior; includes elevator; high-end but not crazy with back facade partially changed to glass for more light; includes carrying cost) + $1mm profit on the recent purchases you mentioned. Think you may get done.

Sorry, please add 10% broker commission, staging, transaction cost and taxes to the the developer's bottom line.

300 - interesting rule of thumb. There are a few in the market now that fit that description, and I'll be interested to see if they close in that range. I think that some will and others may fall short. I will probably hang tight for a while to see if some of those move and at what prices, although maybe I'll lob in an offer if something looks perfect and I hear that a seller is willing to cut to the bottom line.

Thanks for the thoughtful comments.

300 - as a follow-up question - are there any particular properties on the market that you suspect will follow that rule of thumb? I'd be interested in monitoring. As I watch what lingers on the market (for a very long time) and/or has price cuts, I am curious where the price breaking point is where some of these properties will move.

As an aside, I don't understand the seller strategy of just keeping properties on the market for months (or years) on end given how incredibly easy it is for buyers to see the market with resources like SE. Unless someone new moves into town as a new buyer, it seems that after a month or so, all potential buyers at a particular price point will have surfaced and if the house hasn't sold then the seller should either adjust the price if the seller really wants to sell or remove the property from the market.

TeamM, If you want to connect outside of this board, my email is 300streeteasy@gmail.com. Send me a link to a couple of properties you like. I do not know the examples offhand in the areas you are looking in. I have an example closer to Riverside as I was looking at investing in a townhouse needing gut reno but found even those prices a little aspirational. I can share some of these with you.

300 - thank you. I shot you a note.

I'd also appreciate any and all thoughts from others on the market generally. Fascinating to watch, and at the right time I'll buy...

Markets tend to go down the same way they went up. Based on the tremendous increases in townhouse prices in the past 15 years there is a whole lot of downside potential.

30 - I somewhat tend to agree that the segment will take a meaningful hit because I think there was some irrational speculation in the segment (e.g., people buying/renovating for sales, but the pool of likely buyers is so much smaller than for apartments because they are tough assets to hold vacant and/or to easily rent out (particularly for foreigners)) and because I think that all of the luxury condo inventory is going to hurt their values (no matter how nicely a townhouse has been renovated, it isn't going to offer the convenience and amenities of the high-end buildings, unless someone has a staff at the townhouse).

However, my sense is that a lot of the townhouse inventory is held by extremely financially secure individuals, and that they don't really have to sell (and often pull the houses off market if they aren't getting the prices they want). So while I think there will be serious downward pricing pressure in theory, I think that other than for investor-held properties with a finite holding period in mind, there is a limit as to how far the prices will drop as a practical matter as opposed to inventory simply coming off the market and the transaction levels going into the toilet.

I'm watching carefully to see how it all plays out... if the right property gets to the right price then I'll move on it.

I hear what you are saying, but one thing which will add downward pressure to the townhouse market is that one thing which has historically driven that market is a rather extreme lack of apartments which are comparable size wise (especially downtown). It used to be that if you wanted a 4-5 BR living space (again especially below 34th St) you didn't have much other choice. With a decent amount of new construction being units which are that size it puts even more pressure on that market.

30 - I don't disagree with anything you are saying in terms of the market forces, but the two factors I am unsure about are (i) whether this will actually lead to reduced prices or just halt transactions - it is such a small segment of the market that it is tough to judge and (ii) the full extent to which people see large apartments as replacements for townhouses - I just don't know.

It wouldn't surprise me to see a bunch of townhouses held by folks that have to sell take a pretty significant drop, but then for the market to grind to a near halt because of a mismatch in pricing expectations as between buyers and sellers.

There are some townhouses that folks have been trying to sell for an extremely long time without any luck, and I think this emphasizes this mismatch. The question is which Sellers will make the decision to make the significant cuts to get the deals v. which ones will back off entirely from the market and wait until there's a better market (which could be many years away) - I think the challenge from the Sellers standpoint is trying to find that sweet spot of where to cut to maximize value while avoiding trickling down the price in a manner where they are a step behind the market such that people cut faster than them and actually grab the buyers that don't see apartments and townhouses as being fungible.

The one thing that I can say with complete confidence is that I'll find a way to screw up in all of this:)

I had occasion to be on the UWS the other day. I decided to pass by 110 West 81st Street. It's been sometime since I have been in the area. I think the block looks worse now than 20 years ago. There is this terrible eyesore at the corner. Actually as I now recall this has always been there. It looks to have been two townhouses at one point but now doesn't resemble townhouses. The exterior is dark brown, smooth cement like. The block looks practically seedy. Would be more than happy to send the pics I took if anyone should want to see. As a broker I would not recommend this property. Not being a park block is a minus. When one walks from west 81st St., CPW to Columbus Ave, the block is simply beautiful. But when one crosses Columbus Ave West 81st Street changes dramatically. This has always been the case with the Upper West Side , and that is that there are changes such as this. And the blocks from Columbus to Amsterdam to Broadway were never as desirable as park blocks or the West End To Riverside Drive Blocks. I also noticed that so many of the trendy cafes on Columbus Avenue are gone, except for one that is now a Shake Shack. At least there isn't any overt crime in the area as there once was. Good luck to the buyer.

streetsmart, I actually think at $9mm vacant, it is a fair price. It is 22 wide in the front and 25 wide at the back. Facade is beautiful. Location is very good even though the block is not necessarily that beautiful. Problem with this is whether it would delivered vacant or not. 1100 per sq ft for 8000 existing sq foot is fair value in my opinion.

TeamM,
I don't have any numbers, but from memory i think the volume in the townhouse market (Downtown at least) is MUCH higher than it was pre-2000 and I agree that I could easily see it going back to what it used to be.

#@300_mercer, I am not arguing about what is a fair price. All I am saying that as a real estate investor I would not buy it. I would sooner pay more especially since rates are still at an all time low and buy something that would have a better chance to appreciate. And in a downturn this property would lose value faster than a townhouse on a better block.

Just looked at the Corcoran mid-1997 report which lists townhouse sales Downtown as 33 for 1992, 49 for 1993, 47 for 1994, 39 for 1995, 43 for 1996, and 39 for 1997. The Doglas Elliman 2006 - 2015 Manhattan Townhouse Report lists 96 sales in 2015 (up from 69 in 2006).

30 - I'm not surprised to see the massive increase in volume. This is consistent with the macro trends of families moving back into the city. However, as you note, there are a lot more family-friendly housing options coming online now to complete with townhouses. The question is whether the volume of transactions will come down or the prices. I don't know and as a potentially buyer, I'm scratching my head trying to figure it out because I don't want to overpay.

It seems that Sellers don't really know what to list their houses at, and I don't blame them given the lack of data points. There are houses that sit on the market for years, and knock the price down occasionally by large (or small) chunks; however, a lot of those houses don't seem to be able to find the right landing point on price as evidenced by them languishing on the market.

It almost looks as if due to the low volume of recent transactions, the potential sellers are listing their houses based upon comparative pricings of listings, and that they aren't pricing to the actual reality of buyer demand. I think it will come down to which sellers (if any) really want to sell, and will make the dramatic price cut to actually grab the buyers' dollars, rather than incrementally dropping in small margins to try to overly maximize price (which I think will be a failing strategy in this market because the inventory is on the market for so long that no buyer feels compelled to move). For examples of what appears to be Sellers acting wisely, 22 East 95th and 174 East 64th just dropped their prices by $1mm or more, which I think was smart as opposed to dropping by a few hundred k. This will allow them over the next ~30 days to assess whether they've found the price territory where buyers reside by seeing if anyone start poking around (I have no idea whether the houses are now correctly priced, but they should find out soon). If they dropped it "too low" then there's little doubt that multiple buyers will emerge to allow them to try to press the price up, so I don't think their strategy will leave much money on the table and it helps them avoid what appears to be a dropping market for sellers. If they didn't drop it enough then they can reassess whether to hold the property or do another large drop in X days.

By contrast, some of the houses are just sitting there or dropping by such a small amount that it is within a range that someone would have certainly offered even at the higher price. E.g., 159/161 East 82nd, 230 East 68th and 51 East 92nd - they all dropped the prices by such a small incremental amount that I can't imagine that new buyers will emerge at that lower price. The only benefit I see of their price drops is that it moves them to the top of the list of houses on a SE search if you search by "recent updates."

None of this is an expert's opinion - just speculation from watching the market. Both buyers and sellers need for some transactions to actually go through so that there are some real data points. There are a few in contract that will be helpful to see when they close (e.g., 240 East 74th and 26 West 87th) although even those will be tough because of the delay between when they sign and when they close.

Take a look at 238 East 68th - it looks like it has been listed for over two years (apparently going into contract at one on point and then coming back onto the market), with the asking price coming down over $3mm. During that time,

Apologies for the last paragraph. I realized I was rambling and tried to cut it off, but didn't delete enough...

Small incremental price drops never make sense: the point of a price drop should be to bring the property into a new price category that buyers are doing searches in. If the same buyers are seeing the property in their searches then what did you accomplish with the price drop? If someone had no interest in the property before then seeing a small incremental price drop probably isn't going to suddenly make them like a property they didn't like before.

FWIW, the pricing v expectations issues in this market seem to be getting worse rather than better... Really interesting to watch and tough to figure out if buyers or sellers will flinch or if transactions will simply halt (which is largely the case for now). More inventory coming onto the market at prices somewhat in the ballpark of other listings (although these listings aren't moving). Those houses that actually move seem to be priced way lower than what Sellers are looking for (although trying to comp these houses is tough). The one exception seems to be 311 West 90th, which moved at $1,868 per sq ft but it's such an outlier that it's tough to figure out (maybe it was just an amazing renovation?). 240 East 74th just closed (elevator house on the UES) at a price of ~$1271 per sq ft, although it looks like it needed some improvements (although not nearly as much as most of the other houses that have moved).

I can't imagine that the situation will improve while more luxury condos come online. I think that one of the more interesting parts of this dynamic is that I think these Sellers are probably better positioned than many in order to wait out the market if they so choose because I think they tend to be wealthy.

I think the buyer of 240 east did well. 17 ft does have a discount but it seems nice. Bath and Kitchen pictures are absent so does look it needs work.

agree with 240 east, but also think it is indicative of the real market value of properties. I think Sellers are just dreaming with their asking prices in a big way.

Makes sense. 500k for kitchen, baths will put it below 1500 per sq ft which I think is great data point for fair value for 17 foot wide in that area.

Yep - probably about right. The question is whether Sellers prefer to move prices to that level to move the properties, or just wait for a different market dynamics. I suspect that there will be higher end townhouses that will still move but I think the potential standoff will be the glut of townhouses asking $7mm - $14mm (although some of the higher end townhouses are dropping their prices into that range, and I would think they would move).

Maybe better in a separate thread, but since it relates to a townhouse, I'll ask here. Any ideas on how to find out the story behind a house that goes into contract and doesn't close? I have seen examples of this happen with a couple townhouses over the last couple months, and I'd be interested in figuring out why. Any way to find out what the price was for the contracts?

You'd really have to know the seller, their agent, the buyer, their agent, or the lawyers on the deal. There are so many reasons that could scuttle a deal, most not relating to price, that I think you'd be hard pressed to find a common thread.

http://ny.curbed.com/platform/amp/2017/3/28/15094334/manhattan-townhouse-sales-decline

I miss TeamM.
https://streeteasy.com/building/43-west-74-street-new_york/1?card=1

This one had a problem of tax reassessment if converted to 3 family or less.