Which segment is selling?

Interesting.
Broker who does a lot in my building sent a report that number of contracts were up 20% in the $5M+ range but down 20% in the sub-$5M range

OMG. It's dead, picking up slightly.

(and I say this as someone who had a $5mm closing yesterday)

ali r.
{upstairs realty}

A ridiculous article from streeteasy. Could it be that "average asking prices" are measuring high end stuff listed but not selling (which over time becomes a greater proportion of total listings)?

A lot of New Dev is very high priced, which might skew the average.

Why is so much more new development on the market than before?

Krolik, What are your stats for new development as a percentage of total inventory? Also how did the mix change since 2019?

I'd imagine naturally that in a slow market, new dev would occupy a higher % right?
New devs are planned years in advance so there's a sort of steady listing volume, while during a downturn the resale listings get pulled. Therefore the new devs occupy a higher % of total, even if their nominal level is flat or down a bit?

Steve,

I am just asking for supporting data before an article supported by data get called ridiculous.

"A ridiculous article from streeteasy."

Sounds like a reasonable theory, especially buffeted this time by owners who don’t want to give up their cheap mortgage.

What steve123 says is where my intuition is. New dev is probably a higher proportion of total because there are fewer resales on the market. But I am a bit curious if streeteasy has data to back this up, and if there are other factors that caused new development list more units that before.

In any event, I think streeteasy post is misleading trying to pass what is probably just inventory mix change for price increases when clearly the opposite is happening with prices of similar units.

That makes it ridiculous in your opinon without any data backup?

Here is a pesky unit mix with new development percentage decreasing. There are other data sources before I would call some info "ridiculous".
https://millersamuel.com/charts/manhattan-co-opcondo-listing-inventory-new-development-v-resale/

Some more interesting data.

https://millersamuel.com/charts/manhattan-co-opcondo-new-development-ppsf-market-share/

Here is Streeteasy price index data based on repeat sales. Pre-covid closings (likely Jan 2020 contract) vs latest recored sale comp. Not much change despite some drag of new developements with losss of tax abatements related decline and people having taken losses on their intial purchases of ultra-luxury. The biggest thing I take away is how much NYC real estate market has lagged relative to the rest of the country as well as inflation.

Month Brooklyn Manhattan NYC Queens
3/1/2020 707081 1076987 624662 515500
5/1/2023 708601 1065318 621063 516053

>Month Brooklyn Manhattan NYC Queens
3/1/2020 707081 1076987 624662 515500
5/1/2023 708601 1065318 621063 516053

Just checked the rent index between 3/1/2020 to 5/1/2023, it probably goes up between 10-20%.

Since price has not changed much, the cap rate is definitely improved.

Buying gives the people (especially with kids) the peace of rent protection. The same way as many people are stuck in the rent stabilized apartments.
People in NYC have to make do with what they have. If their income increases, they can upgrade to a bigger apartment and they don’t mind losing a little bit.

Of course, the overall picture is different from what nada experienced.

New Dev doesn't get reported correctly. Among other things, the vast majority of what's actually on the market isn't reported as being on the market. Contracts signed often aren't on a timely basis but reported in batches. There's often little verification of information.

In fact REBNY has a whole different "Cooperating Broker Agreement" for New Dev which is much more favorable to New Dev marketing than resale brokers need to abide by.

And just to be clear, *I* didn't state there's more New Dev on the market. I'm talking about buildings like 217 West 57th St. I think that building alone has skewed the average asking price upwards.

>Some more interesting data.
https://millersamuel.com/charts/manhattan-co-opcondo-new-development-ppsf-market-share/

This is closed deals, not listings. One interesting thing on this graph is the % of new dev units in '06-'09. I wonder what happened then. A lot of stuff built during housing bubble of early 2000s?

Also, why have new dev prices per square foot increased so much in 20 years? From under $750 to above $2,500?

> >Month Brooklyn Manhattan NYC Queens
3/1/2020 707081 1076987 624662 515500
5/1/2023 708601 1065318 621063 516053

Closing prices flat to slightly down is what most people on this forum have observed. From brokers to consumers. The article claims it is "seller's market "in NYC, which it really isn't.

>> If their income increases, they can upgrade to a bigger apartment and they don’t mind losing a little bit. Of course, the overall picture is different from what nada experienced.

This is true. Inonada is a curmudgeonly troglodyte who minds losing any and all little bits!!! ;)

>> Also, why have new dev prices per square foot increased so much in 20 years? From under $750 to above $2,500?

In my view, the first few years were the bubble. Developers targeted build quality X, and prices doubled market wide so the price at which X sold also doubled. That’s the 2003-2008 increase.

Thereafter, developers responded by increasing build quality, because the market was clearly there, and it expanded the opportunity set. But the pipeline takes years from planning to selling. The 2013- increase reflects the increasing build quality coming to market.

Of course, individual properties are different, etc., but that to me paints the broad picture. It’s like the question that was recently asked — “Why does this new dev have PTAC”? Because that’s 2010-era new dev, rental at that.

Add another one to the scoreboard:
https://twitter.com/robtfrank/status/1680902572616318976
"John Thain, former Merrill CEO and ex-President of Goldman Sachs, finally sold his duplex at 740 Park priced at $25 million. He paid $27.5 million in 2006 — so he’ll likely take a loss after 17 years."

Steve, Rich people do not need 740 any more with so much ultra-luxury supply which continues to get cheaper.

On the new development price increase from late 90s/early 2000's to now, tall towers with high ceilings and views is a huge contributor. Then there is construction cost inflation of appx 2-3% per year.

One difference is that New Dev is occurring in better locations even if it's the same location. 30 years ago units at The Osborne were selling for chump change because no one wanted to be in 57th Street. Now it's "Billionaires Row" so it's trading at a premium. In the armpit of Tribeca (far Northwest) it was a hard sell (like when we sold a 1800SF loft at 288 West St for $275k). Now 70 Vestry and other projects have sold for big $. Coupled with larger units gring produced, higher ceilings, better finishes, more ridiculous amenities, etc.

But you still see what happens and a developer overreaches and builds a dog project like One Manhattan Square.

>> John Thain, former Merrill CEO and ex-President of Goldman Sachs, finally sold his duplex at 740 Park priced at $25 million. He paid $27.5 million in 2006 — so he’ll likely take a loss after 17 years.

You know I cannot resist…

$2.5m loss from the purchase to asking price. But likely another $2.5m on contract price below ask. Plus something like $2m in transaction costs. And another $2-3m in renovations? Plus $3.7m in maintenance over the 17 years. Call it $12m all-in cash out the pocket.

Bought in 2006, renovated for a year (?), left CIT in 2016, put it on the market in 2018. So it sounds like they got perhaps ~10 years of use out of it? That works out to $100k cash out the door per month of use. That kind of cash could’ve rented some really nice places, nicer than this. But let’s call it a wash.

The real coup de grace is the small matter of $25M tied up for 17 years. Thain probably had access to all sorts of fancy investment opportunities, but a pleb like me would have been relegated to S&P 500 or a 60/40 find. The former would have made $100M profit on the $25M, while the latter a mere $60M.

But I know, Thain is a rich guy. Would another $100M matter? On the one hand, sure — it’s not an insignificant sum relative to his net worth. On the other hand, whatever — it’s not gonna make or break him. I think he would view it as the latter??? He seems like a sensible person, and that would be the sensible view. But then, if he doesn’t care, why is he wasting time with pricing and chops that takes 5 years and a 40-50% haircut to finally clear the market?

But was it important for him at some point to be able to say that he lived at 740 Park Avenue? What was the utility of that?

sounds like a candidate for the annual Veblen award

>The real coup de grace is the small matter of $25M tied up for 17 years. Thain probably had access to all sorts of fancy investment opportunities, but a pleb like me would have been relegated to S&P 500 or a 60/40 find. The former would have made $100M profit on the $25M, while the latter a mere $60M.

This assumes that Thain didn't have mortgage on this apartment. If he did, say with 30% down payment, the profit by investing the down payment in S&P 500 or 60/40 mix would be much less, though still impressive.

I always heard the rich people can always obtain a very low interest mortgage rate, e.g. Zuckerberg had unbelievable low 1% Mortgage.

>> This assumes that Thain didn't have mortgage on this apartment.

He didn’t. Just search for his name in ACRIS, there is no mortgage recording. Coop purchases cannot be through LLCs, so you’ll see the purchase show up but no mortgage. Perhaps one of the brokers can also enlighten us about this building’s financing policy, as they may not even allow mortgages?

>> I always heard the rich people can always obtain a very low interest mortgage rate, e.g. Zuckerberg had unbelievable low 1% Mortgage.

I have seen / heard of this too. I always figure there must be some sort robbing Peter to pay Paul, especially when the financing rates approach or go lower than risk-free rates at the same term. If Zuck has $1B parked with your wealth management team, you’re not terribly worried about credit risk. And if he’s paying 25bps for financial advice basically of the form “hold a 60/40 portfolio” or whatever, amounting to $2.5M/yr, the least you do is discount his $5M mortgage by 200bps at a cost of $100K/yr.

It’s like the “complimentary” bottle of sparkling wine left by hotel management at check-in. That’s a nice touch, but let’s not kid ourselves over how it was paid for.

@nada - wasn't that the Silicon Valley Bank hustle

Make the startup kids park their startups $10M/$100M/$1B cash raised into a low/no interest bearing account.
But "introduce them" to lots of vendors, give them some AWS credits, and you know.. not coincidentally, a 1% mortgage on their loft?

Of course this was a conflict of interest since they were benefiting off company funds mis-investment..

Exactly. It’s sorta like airlines giving individuals points & miles for corporate travel.

If you’re getting a sweetheart rate from a place you’re personally providing revenue, that’s one thing. If you’re getting it based on revenue your company brings (or may bring), that’s another. I don’t look kindly on that sort of behavior, but some people are just ethically challenged.

That said, with Zuck I am guessing he just has to have the $1B parked somewhere. Or simply executing block sales whenever he needs to unload a few FB shares.

">> This assumes that Thain didn't have mortgage on this apartment.

He didn’t. Just search for his name in ACRIS, there is no mortgage recording. Coop purchases cannot be through LLCs, so you’ll see the purchase show up but no mortgage. Perhaps one of the brokers can also enlighten us about this building’s financing policy, as they may not even allow mortgages?"

There is a rather large market of "non-mortgage mortgages" for these Coops. There's just an agreement that there will never be UCC filing because the lender understands the Coop financing restrictions.

Are these secured by the coop shares as collateral?

Yes

And nothing exists in the coop’s proprietary lease to the effect “Buyer shall not encumber these shares in any manner. Should any encumbrance be placed, shares will be immediately forfeited to the corporation.”?

>> This assumes that Thain didn't have mortgage on this apartment. If he did, say with 30% down payment, the profit by investing the down payment in S&P 500 or 60/40 mix would be much less, though still impressive.

FWIW, I think a mortgage would have painted an uglier picture.

I misspoke earlier: the cash purchase was $27.5M, so the 5x multiple in S&P 500 actually works out to $110M in profit.

At 30% down, 5x on $8.25M would only be a $33M profit. On the other hand, 17 years of interest on $19.25M at a blended rate of 4% would have meant $13.1M in interest atop the other rent-equal expenses. So a -1.6x multiple on the downpayment.

So yes, “only” a $46M differential rather than a $110M one. Call me crazy, but (leaving with -1.6x of your equity instead of 5x) seems worse than (leaving with +1x of your equity instead of 5x).

It's been going on for decades
https://www.nytimes.com/1997/11/20/garden/turf-co-op-buyers-sidestep-rules.html

But yes, most of the time they also pledge the unit even though there is no UCC.

Seriously, how is the Coop going to find out?

It sounds like what we would today call a margin loan. Disallowing any loans taken by buyers across the entirety of assets seems like a fool’s errand. “You may not make any purchases on credit cards…”. But placing restrictions on collateral seems relatively straightforward.

OK, reading/thinking a bit more, I think I might get it.

A zero-financing coop can say “Encumbrance disallowed. Any attempt to transfer based on a disallowed encumbrance will result in forfeiture of shares back to coop.” And that should kill any lender from making a loan, because they won’t be able to seize collateral in case of default. Right?

But suppose a coop allows 50% financing. Then they cannot have any such clause. Bank finances the first 50% the normal way. Then they lend another 30% separately. As part of the second loan, they require payments made be recognized on the 30% loan first. This means borrower cannot default on the “collateral-free” 30% loan without first defaulting on the collateralized 50% loan, which would result in forfeiture.

Does that sound about right? Details are spotty in the article and on the Internet.

https://therealdeal.com/magazine/new-york-june-2012/a-comeback-for-unrecognized-loans/

Thanks. Details there are spotty as well but seem to confirm what I surmised:

“The banks want to make sure that [at least a part of their loan] is recorded,” Goldberg said. “A negative-pledge loan [in an all-cash situation] is essentially a personal loan. There’s really no security for that loan.”

At that point, it starts looking like a lender giving consideration for an illiquid asset in determining whether to make a loan that may be otherwise secured, or not.