What Will It Take For Co-ops To Sell Again?

Sadly I can neither afford that maisonette for myself, nor would I be likely to pass the board at this point even if I could given the strident stance I have taken against many of my historic crew.

I dunno, 20% of the units are listed for sale. Beggars can't be choosers.

Turning back to the useful life of buildings and 417 Park Avenue, I am confused. @George talks above about how it made sense to sell that building because it was one of the great old beauties with excellent bones, but it looks like they razed it and an office tower is going up in its place? https://newyorkyimby.com/2022/03/demolition-concludes-at-417-park-avenue-in-midtown-east-manhattan.html
But then when I search SE buildings, there is still a page for it that makes it seem as if the residential coop is still alive and well. Which is it?

Krolik.v2 isn't buying as she needs a mortgage and math does not work at the current rates.

We purchased a 2/2 in 2021 for just under 1M and spent high five figures on renovations. Few maintenance increases later our monthly is about 6k (with a 3% mortgage rate) and comparable unit rent is 6-8k. Simplistic payment comparison of payment to rent suggests this purchase makes some sense.

There an almost identical apartment few floors higher currently listed for same for 1.3M. The sellers are a middle class working couple with kids who moved to the suburbs. They purchased right before pandemic for just over 1M and renovated nicely, adding washer and dryer.

Krolik.v2 payment on this apartment at ask is 9.5k, so simplistic math does not work. Krolik.v2 could bid on the apartment if she has limited RE experience and gets the wrong advice, but I doubt it.

The sellers are likely going to drop the price, as they probably cannot afford to carry it indefinitely and also pay for their current house.

A price (for the renovated) unit of just over 1M would require a monthly payment around 7.5k, and the numbers would roughly work when comparing monthly payment to rent, so Krolik.v2 might move at that price. In this scenario the sellers are loosing what they spent on renovations (about 20% of the value of the apartment).

@Krolik - Your timing on purchase was essentially perfect in that you captured the pricing bottom and locked in a low on interest rates. Purchases 2022->now are at higher rates, purchases ~2015->2020 are at higher prices.

However - isn't the breakeven rent vs own comparison missing - lost investment returns from having XX% locked up in down payment, reno costs, money lost to purchase costs/fees, and any losses you will incur selling to various fees.

For example let's say you put down $250k down payment, $75k into renovation, and lost $25k to purchase fees. Assuming a paltry 5% investment return, those upfront costs mean you are foregoing $~18k/year return (so another $1.5k/mo). Plus general maintenance/repair costs you are on the hook for.

Your scenario is still better than most who bought in the last decade and a half. Looking at my area of Brooklyn where rent & prices have actually appreciated...

7 years post-purchase, I could still rent what I have for less than my monthly payments (and I also locked in low rate). I don't even have to factor in investment loss and other costs.

Steve, I think Krolik was just commenting on her “rule of thumb” for pulling the trigger. I’m sure she has spreadsheets up the wazoo circa 2021 backing all the details you ask about. On the flip side of those fees, investment opportunity cost, etc. would have been principal payments she included and expected depreciation.

Krolik, it kinda sounds like a 20% drop relative to 2021 prices would whet Krolik.v2’s appetite but it’d really take 30-40% to get her excited enough to pull the trigger?

Krolik,

Your timing was indeed very good.

Separately, I wonder how buyers like your neighbors are making buy vs rent decisions in good burbs in NJ (many desirables cities and suburbs nationwide are similar) where prices are up 30-40% pre-covid and rents are up 30% (my guess). Mortgage rates from call it 3.50 to 6.50.

https://www.zillow.com/home-values/39839/montclair-nj/
https://www.zillow.com/home-values/27319/summit-nj/

@mcr: 417 is definitely gone. Walked by it the other day. Dunno why SE still has an entry for it, but it is useful for the floorplans and to see what I assume the buyout prices were (all those 2/18/20 closings).

Correct about spreadsheets and various calculations. I would say I underestimated reno costs and maintenance increases. Also the apartment is already a bit too small. So while it was a uniquely good time to buy, and we love the apartment, overall this was a just ok decision.

1H 2021 was the low point when sellers capitulated. I think a similar or a slightly lower price than that might be good enough for Krolik.v2, if Krolik.v2 has some non-financial objectives. “Non-financial” objectives could include stuff like “ we just got married and in-laws offered to help with the down payment if we buy property”. Or “kids got into a really good school and will be in that school for 10 years, so i need a place nearby”

About the burbs, the idea comes up in our household but is usually quickly dismissed. We like the short commute and the resources of the city. We have not yet accepted that the kid dominates our life and that we won’t be able to take advantage of NYC because all of the spare time is spent on him.

A number of friends and colleagues that look similar to us or a bit younger (incl the neighbor that is selling the apt above) moved to the burbs recently. I noticed a few differences that helped tip the scales.
1) stay at home spouse. Only one spouse has to travel 1.5-2hrs per day, while the other spouse and kids enjoy a large home.
2) significant amount of WFH, lesser need to travel to the office. While Mr Krolik and I go to the office a lot, and my workplace is shooting for 5 days a week at the office (but no face time on the weeekends! yay! LOL)
3) family nearby in the burbs willing to help with the kids. My family is in the city, and his is on the other coast.
4) Have and love a car, want to keep going on weekend car trips and don’t want to pay $600 monthly to store the car in manhattan/LIC/expensive area in brooklyn. Whereas we don’t drive, don’t have a car, and having to buy a car in the burbs is actually a negative.

On the financial side, yes those houses are more expensive, but less of a sticker shock when you are looking at a large house that costs the same as a small apartment in the city. Suburbs mostly make sense on fundamentals even after the price increase, so price is just a lesser evil than that in the city.

So people buying in the suburbs don't do buy vs rent? Otherwise, how do you justify prices up 30% (call it rents up the same amount to isolate rate impact) and rates up?

I think in the burbs rent is a much lesser option because there is very little rental inventory in great school districts. I am not very informed here, let me know if i am wrong
People do realize the rates will drop and they will have the option to refi (how much drop and when is obviously TBD, so they need to be able to afford it today, but there is upside)
Buying used to be much better than renting in the suburbs, so there was room for prices to move up. The city had a different starting point that was just irrational.
In the burbs you could also comfortably buy too much house and grow into it, which makes it a long term hold. In the city, unless money is no object, you don’t want to have spare room, which means a buying a home that could be too small soon after.

Krolik, You are generally correct that rental options are fewer in suburbs but they do exist in good school districts. However, I am still scratching my head with prices up 30-40% despite 3% increase in mortgage rates. Buying (call it montly payment) is certainly far more expensive than it was pre-pandemic. Are peiple not doing buy vs rent in the burbs?

What is the cap rate currentlyon a 3-4 br house in scarsdale NY or summit NJ?

Here is what showed up in my Summit search first. It has a Zillow rent estimate as well $8650. Price is below Zestimate and it is expected to move fast as per Zillow. $1.8mm (used to be $1.4mm pre-pandemic).

Rough numbers $30k taxes + $18k upkeep/insurance to keep the property in existing condition. $4k per month. NOI $4650 per month. $56k per year on $1.8mm. 3.1 cap rate. Give a haircut to ask at $1.7mm and some to expenses. 3.5 cap optimistic cap rate.

https://www.zillow.com/homedetails/39-Dale-Dr-Summit-NJ-07901/40068883_zpid/

Similar cap rate for this one. 3 to 3.5 range depending on assumptions.

https://www.zillow.com/homedetails/281-Summit-Ave-Summit-NJ-07901/40065133_zpid/

I think when buying a large house in a school district, people think very long term and financial considerations with this years cap rate are secondary. People are probably more focused on not wanting to move every few years, redecorate, etc

Also, are there any comparable rent listings that we could check out? Can you really rent this kind of house for 8500? Or is that rent for an entry level house?

So basically mortgage rates go from 3.5 to 6.5 and cap rates largely unch if not lower (price increases are 30% plus with rent increases lagging a bit) as people want to buy instead of renting and there is limited supply where they want to live. So buy vs rent calculation is really not happening for luxury suburban homes(call it min 2x median priced for county; min 3x median home price for state).

>>> I think when buying a large house in a school district, people think very long term and financial considerations with this years cap rate are secondary. People are probably more focused on not wanting to move every few years, redecorate, etc

Zillow rental estimate seems to check out using this. Sold for $1.125mm in 2021. Likely will sell for $1.35mm using Summit ZHVI price increase. Renting for $6900.

https://www.zillow.com/homedetails/8-Franklin-Pl-Summit-NJ-07901/40066610_zpid/

Why compare a mediocre NYC apartment with two of the most exclusive neighborhoods, in New Jersey and New York? Summit and Scarsdale.

Here's a tip, check out Maplewood,NJ... very Brooklyn vibe, 20 minutes on a train to NYC. We lived in Rutherford,NJ before making the jump to Fl., 10 min. Walk to express bus to P.A. about a 10-15 min. Ride into the city in dedicated bus lanes.

@nada whether we buy or rent is TBD, at this stage of the game I'm indifferent. Whichever makes the most financial sense. On this trip we rented airbnbs from Porto to the Algarve, lots of fun exploring all different types of homes, including some we would not be able to afford to purchase!!

@yentle I would have kept your apartment on the market for another 6 months. Imho.

Keith,

Sole purpose is cap rate calcs and that people are buying low $1mm plus houses for 3-3.5 cap which hasn't really moved with rates going up 3%.

Just picking lower end of Summit for Cap rate so the price is in the range of a 2/2 Manhattan apartment. Higher end Summit will have even lower cap rate but the calculation wouldn't be reliable due to a lack of comparable rental availability.

@theburkhardtgroup, would you have kept it on another six months with the three other units in the building sitting? Not sure what impact the multiple units are having on one another, but certainly doesn't seem to be playing as a positive so far. We're renting elsewhere, so the hope is that the sublet will cover the carry costs while the market plays itself out....The impetus behind my original post is noticing that there seems to be almost no traffic for any of the units now regardless of price. Perhaps that's typical for NYC summers, though two of the units have been sitting for some time....

@yentle Where are you renting? What was your reason to move?

A house in a suburb to be closer to grandkids- feeling burned out by City as well…. Renting for now. as the NYC experience has made us very hesitant about buying again - time will tell? Would have preferred to keep the NYC place forever, but the carry costs have become too high for us so we feel we’re working for the staff rather than visa versa…..

After owning the Coop I lived in for over 20 miserable years I'm considerably happier in the rental since 2016

>>>> Why compare a mediocre NYC apartment with two of the most exclusive neighborhoods, in New Jersey and New York? Summit and Scarsdale.

LOL that UES doesn’t make exclusive neighborhood cut anymore. It is now mediocre..

I think the below is a Krolik.v2 friendly unit. A classic 6 for under 1M. Subprime area in manhattan, but there is a staff room/ home office! The monthly payment is probably comparable with current rents, no?

https://streeteasy.com/building/138-east-36-street-new_york/9c

Only Krolik.v1 can tell us what Krolik.v2 would do! Here’s something similar asking $6k rent. A bit smaller but in move-in condition (which the 2020 buyers handled):

https://streeteasy.com/building/35-park-avenue-new_york/2c

This rental unit is like mine. 6k seems to be the going rate for large 2 beds in murray hill. My monthly payment (after downpayment of over 25%) is basically almost equal to rent.

I think the classic 6 unit is larger and more desirable, currently listed at a price similar to the price bought my 2br for (and is not even in contract!). This demonstrates that current price level is actually below the pandemic lows.

>> LOL that UES doesn’t make exclusive neighborhood cut anymore. It is now mediocre..

In all fairness to Keith, he was saying it was a mediocre apt being compared to “two of the most exclusive neighborhoods in NY & NJ”. But then again, I think the homes 300 posted from those neighborhoods were similarly mediocre for the neighborhoods?

Nevertheless, the perception that a mediocre apt in the UES no longer makes the cut illustrates the point I was making earlier. The UES has had a slow fall from grace across generations.

They are definitely bottom third for Summit in terms of single family houses. Out of curiosity, I did a search on type of home corporate owners like Invitation Homes have for rent. They are definitely entry level houses closer to the median priced home where cap rates are higher.

Nada>>But then again, I think the homes 300 posted from those neighborhoods were similarly mediocre for the neighborhoods?

>> I think the classic 6 unit is larger and more desirable, currently listed at a price similar to the price bought my 2br for (and is not even in contract!). This demonstrates that current price level is actually below the pandemic lows.

I agree on both points.

The classic 6 is a better apt, but OTOH it needs $200k (?) in cost, time, and effort to bring it up to standard once you look past the gloss of the virtual staging. So it might fetch closer to $8K rent once that happens, but not in its current state as I see it. And to do that, “cost” of buying seems closer to $10K/mo. I suppose Krolik.v2 could squint and say “close enough”?

Current prices definitely feel to have broken the pandemic bottom from the markets I look at, but it does not (yet?) reflect in the SE index.

"Why compare a mediocre NYC apartment with two of the most exclusive neighborhoods, in New Jersey and New York? Summit and Scarsdale."

Because kids in basement studio apartments in Alphabet City with tubs in the middle's of the space look down their noses at people who own 6 bedroom colonials in Summit and Scarsdale. You were probably one of them until you sold out and abandoned being a New Yorker (If you ever really were one).

I guess one of the downsides of working with someone who never owned property here and hasn't lived here well over a decade is they don't understand the motivations of woeople

people who do want to buy and live here. Personally that's one of the reasons I sell much more Downtown.

Agents used to work much more geographically than we do now. Because expertise used to mean something. But after y'all bought be the current line of bullshit y'all decided expertise didn't matter, and then after choosing agents who don't have any complain that agents don't know anything.

It's a self-fulfilling prophecy. Pick agents who don't know anything and then every agent you come across doesn't know anything. And then you tar people like Aly and me with the same brush based on your own poor decisions.

The "pandemic lows" weren't really "lows." Like any market on the way down it's a series of new "lows" with fits of plateaus and the occasional increase. Markets going down don't need to be, and seldom are, one long steady decline. And the denial that a market is in decline just because there are breaks is simply that:
denial in the face of facts.

A lot of people with children still gravitate to the UES because of the private schools there.
Tho I’ve seen private school kids taking the bus from the UES across the park to home on the UWS

I'm sensing some tension on this topic.

There's no tension, Rinette. I created a company 14 years ago that runs very efficiently and allows me to charge a maximum of 3.75% on the sell side and a rebate structure for buyers of 50,60,67% and still earn quite a good living. Over 50% of our client base has done multiple deals with our team. We just did a $4 million deal in Greenwich village, third transaction with the family. We're doing an $8 million dollar deal, with a client that found me here 10 years ago, this is their second transaction. Buyers and sellers can interview various brokers, and there's thousands of them and decide who they want to work with. Owning Manhattan real estate hasn't always been a very successful trade. I think you can help people make decisions to shield them from the worst outcomes. However, you can't shield them from a 10-year period of bad market returns, other than suggesting they rent an apartment. I've always felt that real estate was a 50% emotional purchase and 50% financial one for many people. There are a lot of buyers that are similar to MCR, they prefer home ownership to renting for various reasons. I also think there's some good examples posted here regarding the fact that getting an apartment sold is not necessarily facilitated by having a team from a big box brokerage working for you. In my opinion, 75% of it is getting the price right, and then of course the desirability of your property, location, condition and its presentation for sale make up some of the other 25%.

You can see what some people have said about us here.
www.theburkhardtgroup.com

@mcr still a lot of wealthy Germans and Russians living in Cascais. We've traveled from Porto down to the Algarve, still Lisbon is my favorite city there. Most likely the place we will eventually live is Ericeira. A beautiful windswept wild Coast with giant cliffs and some of the best surf breaks in the country. I came very very close to buying a beautiful little renovated 300-year-old house in the old village. Luckily I have a wife that is less emotional when it comes to such things!

Keith Burkhardt
TBG

>> Ericeira. A beautiful windswept wild Coast with giant cliffs and some of the best surf breaks in the country.

What’s the matter, can’t handle the big-boy waves in Nazaré? ;)

Nada, Didn't know you were a surfer boy.

Ha! I almost threw up just watching Nazare last year from the safety of the cliff!

I was going to ask if you went to Guincho to watch the windsurfing; I had never seen anything like it before, and have not seen anything like it since.

Looks enchanting! Wishing you best of luck getting health care and residency squared away - that can be challenging but lots of people do it. Enjoy!

@MCR I know of it but have not been there. @MTH after speaking with a lawyer, also touring a couple of schools, most likely now we will be waiting until after my youngest daughter graduates high school, and just continue our travels for now.

That's what happens when you have two children that are 39 and 36..... Then, fall in love with someone, and wind up with another child who is currently 11! You just never know what life is going to throw at you..

As some of you seem to know here, it's a truly beautiful country, with an extremely volatile and rich history (though I guess you can say that about many places).

I know a lot of State Dept kids and moving around at that age can be tricky. Some kids adapt, others get dinged up. You're right to hit pause.

On coop prices how is this as a rule of thumb: take the last price paid + the average rate of inflation from the time it was sold to today. Do you end up with a price that will work for both the buyer and the seller?

ok no tension

MTH,
In many cases I highly doubt it

@MTH - The fact that there is a glut of coops on the market at asking prices significantly below their last sale price evidences that your formula for a current market clearing price definitively does not work for prospective buyers of these units.

Here is just one example that reinforces the assertion @30yrs put forward about the long term trajectory. Compare sale price from 2005 to 2012 to current ask: https://streeteasy.com/building/439-east-51-street-new_york/3a
Note also how long it has been on the market, as well as the steady decline in asking price.
Ouch.

that apartment is so far east it might as well be in Queens. How about some actual Manhattan examples?

This is just a studio but it shows it was in contract and then no longer available in 1q 2008 (but not sold) - does that mean the deal fell through? Or just that the agent didn't update the posting?

Anyway, it's now in contract for $395K so the opportunity costs to ownership would be considerable. It's anotherwise pleasant studio in a nice area with a step up kitchen (a fatal flaw in my book and sth that can't be fixed in a renovation):

https://streeteasy.com/building/210-west-103-street-new_york/2h?utm_campaign=Consumer_Update_Saved_Building_Instant&utm_medium=email&utm_source=Iterable

>> The "pandemic lows" weren't really "lows." Like any market on the way down it's a series of new "lows" with fits of plateaus and the occasional increase.

I think most of the people buying in 2020/2021 or 2009/2010 thought they were catching a “low”. Whether or not they did is a matter of perspective. The SE index currently sits 20% higher than the absolute bottom in 2009/2010. It’s probably heading lower based on recent trends, but I’d put the probability of breaching at less likely but possible. And to some, that might provide a degree of satisfaction. So in that sense, they caught the “low” — yay!

But if you tally up everything, holding the average piece of Manhattan RE from the “low” has led to a rather poor outcome. The 20% gain is wiped out by transaction costs and upkeep. A financed purchase had interest + cc offset any imputed rent benefit. So very roughly, the downpayment has seen zero returns. Over the same period, putting money in the S & P 500 would have carried a similar degree of risk as levered RE but yielded a 7x return.

If you were putting 10% of your net worth into Manhattan RE, then it’s all a “whatever”. If you were putting 50% or 75%, then it was probably a lost opportunity. There are only so many 15-year periods in one’s adult life, and rarely do simple investments opportunities like passive indexing offer a 7x return. It is unlikely to repeat anytime soon. Unless you came into a wad of money, that period represented an opportunity to change your financial trajectory, or not. If you did, good for you. If not, you’re probably still doing fine.

MCR>> Note also how long it has been on the market, as well as the steady decline in asking price. Ouch.

If they get current ask, they’ll be down $700K on their $2.2M cash purchase after transaction costs. There was a rent benefit of about $300K, a number that degrades each additional year the unit sits empty paying monthlies. So if they get current ask (unlikely), it will have cost them a quarter of the cash they paid. At market price, it may be closer to a third of their cash. Call it a $700K loss.

The owners seem like they were in their 30’s when they bought, and somehow they had $2.2M amassed. Pretty good stockpile if you’re in your early 30’s! That’s an age where you can afford to take some risks. I’d personally feel more “ouch” about the opportunities lost than the $700K lost. The $2.2M would have become $6.6M in public markets. One of the owners seems to be a professional asset manager, so presumably there should be a degree of financial sophistication when it comes to investment for the family. That’s what would create the “ouch” for me.

@Rinette - I know you are a downtown snob and that my neighborhood has no appeal to you, but you should at take a stroll through it at least once before dismissing it entirely.

@MTH - It looks like 2H was sold in 2008 from UCC filings on ACRIS, but sale record with sale price is not on there - I am guessing it was misfiled. In any event, it looks like 2H was priced right as it is now in contract. If you are the one who is purchasing it, congrats!

@nada - If you are thirty years old and paying $2.2M in cash for an apartment, I would guess money is no object, but that does not mesh with a career in asset management, so I am stumped as to what is/was going on there.

I’ve certainly seen people in the asset management industry who make a bunch early in their careers and immediately put much of it into a large apt. It can serve as diversification in their minds, against an uncertain income outlook, and a way to “lock down” their future.

But it could just as easily have been family money, I suppose.

Either way, it looks like whatever loss those sellers might take is not material to them give what they bought while still carrying the apartment.

Yeah, I saw that too. A $10.75M purchase with $3.75M down in early 2022. At this point, I’d guess they’re down a third on that $3.75M atop the third on the $2.2M. So something like down $2M out of $6M in total equity on NYC RE holdings.

I’m sure they’ll be fine, but out of curiosity what is your definition for “material”? Two years ago, they thought they had $6M of “safe” NYC RE equity. They’re now down $2M after-tax. If my net worth were $10M, I’d consider a $2M hit down to $8M “material”. At $100M, it feels “immaterial” especially if the other $94M more than made up for it.

>>>I’ve certainly seen people in the asset management industry who make a bunch early in their careers and immediately put much of it into a large apt. It can serve as diversification in their minds, against an uncertain income outlook, and a way to “lock down” their future.
But it could just as easily have been family money, I suppose.

Almost certainly family money.

A couple of years ago, we got denied by the board in a coop where we tried to purchase a 2/2 that was quite a bit less than 2x our gross income. There were two of us on the application, each with a great salary, but too little assets we were told by the seller's broker (she actually has no idea, just speculating, could have just as well been illegal discrimination. There is no way to know).

6 months later, a colleague who was quite junior to me (just 3-4 years out of college) working at the same firm got approved to purchase a 1 bedroom in that same building. 1br costs less than the 2/2 of course, but the colleague's income could not have been more than 1/3 of ours (combined). And how do you save up for 30% down payment in just three years out of college? Definitely family money.

>> The "pandemic lows" weren't really "lows." Like any market on the way down it's a series of new "lows" with fits of plateaus and the occasional increase.

It was a low caused by exodus from Manhattan due to WFH and before the pick up due to income gains and cheap mortgage.

Now we have a lower low caused by a very expensive mortgage.

There is a long term slide down/sideways due to NYC fiscal troubles and earlier overvaluation, but there are still events that cause distinct highs and lows.

>>>So do you have any reason to believe things will be better in expectation based on analysis, or is this simply hope and faith?

I think its option value. Right now yentle would take a large loss. Yentle observes that the market seems frozen and does not react as expected to price cuts, and concludes it is potentially dislocated. Yentle *knows* a rate cut is coming (not when and how much, but still), and of course does not know how it will affect the price and the transaction volume, but knows that typically a rate cut is favorable. Yentle does not seem to have a liquidity need: seems happy renting for now and not particularly eager to buy in the suburbs that have appreciated post-pandemic despite higher mortgage costs. Yentle is still getting a few percent yield on the apartment, which is lower than the rate available in the debt markets, but the differential isn't huge / feels worth it to Yentle in order to check if rate cuts move the market.

> Yeah, I saw that too. A $10.75M purchase with $3.75M down in early 2022.

Too much free time on my hand. I did some digging and googling, knowing what you guys are talking about. Real estate have no privacy unless if they are hiding behind LLC, where exprienced lawyers may be able to dig further.

This guy is a professional in working real estate secularization,LOL

Insane, right?

Re my definition of "material," I would ordinarily think that $700K would be material to anyone, but agree that $700K may not to be material to someone one worth nine figures, and I am guessing these people must be up there given the amount of money they are willing to light on fire in purchasing Manhattan real estate?

Family money goes a long way to explaining NYC RE behavior at the margins.

In my condo ~20% of 2-3BR unit purchases have on closing documents in ACRIS buyers as "Mommy & Daddy Trust"..

Many buyers are also coming in with large parental gifts aged in their accounts for mortgage approval reasons. Arguably this is an even larger group (if X parents can afford to fully pay, then at least X parents should be able to HELP pay logically).

Many friends who bought in 20s/early 30s did so with 6-figure deposits into their account from mom&dad. MOST of them were actually coop buyers as the costs were lower and as long as the money aged a little, boards didn't actually notice/care.

How many of you want to take the action on a $1 bet that Yentle will be sorry they didn't get out when they could with relatively minor losses?

>> I am guessing these people must be up there given the amount of money they are willing to light on fire in purchasing Manhattan real estate?

That seems a bit harsh. Like most Manhattan RE buyers, I’m guessing their intentions were to make money, not burn it. With the exception of you, I think pretty much every buyer I know thought their purchase to be a sound financial decision.

There certainly does seem to be family money here. Based on my digging, I’d guess it as 8 figures, not 9. RE development, but not a major. The fact pattern certainly points to family connections in the RE investment career.

Krolik >> I think its option value.

That read like a list of factors in favor. No factors against. Moreover, no attempt to quantify anything. Not that I think you should be spending your time on such an endeavor with zero value to you…

Mostly, it sounds like case of psychological benefit based on loss aversion that is not financially sound. Take a look at this curve:

https://en.m.wikipedia.org/wiki/Loss_aversion

Yentle has already incurred a substantial loss. The “option value” seems to come from the possibility that this loss is recovered (yielding high gain in going back to zero), but dismissal of the potential for further losses. Is this dismissal appropriate? Not financially. But psychologically, the additional cost of losing 55% rather than the current 35% is low relative to the gain from going back up, even if the outcomes are equally likely.

@30yrs_RE_20_in_REO. For us, looking at a 500K loss didn’t feel relatively minor! You assume “getting out” was an option - remember that the reason for my original post was that we were essentially getting zero traffic for sale despite cut after cut.

Just giving my $0.02 as an active buyer in the area.

I have been looking solely on UES for a 2/2 for the past year. I only want to buy west of Park Ave. There hasn’t really been any inventory.

I know this will be dead money for the next 10-20 years, but I’m a forced buyer (divorce-cannot relocat). Also, the area is a lifestyle choice given young kids in private school and my daily walks in CP with my dog.

I would move out of NYC in a heartbeat if I could given all the reasons you all have provided (govt, crime, homeless, unions, etc).

All of the action has moved downtown and there are plenty of choices of beautiful apartments and areas.

Besides someone like me why would most people even think of the stale co-op apartments of the UES? Maintenance costs are ridiculous and you get zero for that compared to new buildings with tax abatements.

I’m just waiting for an estate sale or similar, which *maybe* comes 1x/yr and gets snapped up in 1-2 weeks.

>> For us, looking at a 500K loss didn’t feel relatively minor!

Yentle, I think it helps to keep the loss in context of all the times & gains you had sitting around doing nothing.

>> I have been looking solely on UES for a 2/2 for the past year. I only want to buy west of Park Ave. There hasn’t really been any inventory.

This is rather hilarious. On the one side, Yentle’s perspective is that there are absolutely no buyers out there for her UES 2/2. On the other, dogcatbird says there’s no inventory for that same market. I haven’t looked, but I’m guessing dozens of choices exist. Just not at the right price. Which goes to what MCR says — there will be buyers at the right price.

I don't know dogcat's budget but I see several estate sale around 86th and Park where I look mostly for entertainment. And West of Lex was always a family area rather than for some one single looking to go out on a date.

https://streeteasy.com/building/1050-park-avenue-new_york/12d

@nada - To be clear, while I viewed our purchase as consumption, I did not anticipate the price's being as high as it has turned out to be. Mr. MCR is fine with it all, but money does not come as easily for me as it does for him, so I feel it acutely if I allow myself to think about it.

It’s also kinda funny that the one active UES buyer fits the mold I cast. Thinks the place is stale, that no one who isn’t forced by circumstances would live in another part of town, and doesn’t actually *want* to live in the UES — or NYC for that matter.

@dogcatbird
Care to elaborate on your parameters that yield no inventory? Why wouldn't you buy Yentle's place, for example?

300_mercer. I agree its a family area, which is what I am looking for. I am cognizant of rising carrying costs given dead money. As such, that listing - maintenance was a bit too high for my parameters (~6500). Also, I currently live nearby and I am not a fan the corner of 87th/park.

Inonada - I think there's been a generational paradigm shift from NYC-only to many other options. NYC used to be the center of the world and now its definitely not. MANY well-known people have moved to FL for example and swapped their NYC apartment for Hamptons-only. No reall need to come here anymore except a pied-a-tere or even rent, hotel, etc. Sad to say as I grew up here, but that's just myself and peers in my network.

Krolik - I'm not sure where Yentle's place is located so cannot comment. I am certainly of the mindset that this is a buyers market (UES specifically) for a long time. I don't see how co-ops (outdated model) can increase value even @ cola rate. Too many negatives vis a vis condo as has been communicated here many times. IMO, the ONLY thing they have is location (if you like UES) and PRICE (50% condo)!

My parameters are 2/2 around $1.5m with 'fair' maintenance (up to ~4500) depending on bldg, location, etc. This includes park to fifth, high 60s to low 90s. I am in the minority in looking for a place that needs a reno or major refresh. I'm not the type to pay 300k for a coat of paint and a new $800 dishwasher. I'd rather pay myself and get exactly what I want.

>>>That read like a list of factors in favor. No factors against. Moreover, no attempt to quantify anything. Not that I think you should be spending your time on such an endeavor with zero value to you…

Factors against:
1) US could fall into a recession and RE values would go down (mitigant: the fed states it is "prepared to respond", and if rates go down the net effect is somewhat uncertain given the fed tends to overcompensate lately)
2) NYC could continue to increase property taxes, pressuring cap rates and own vs rent math (don't have a good mitigant here)
3) NYC (and UES specifically) decline and population loss could continue/accelerate causing demand for RE to fall (mitigant: it appears that there are always lots of people, young and old, interested in moving to NYC if only it was a little cheaper + migrants are continuing to arrive in the city)

I think the main thing is that Yentle thinks the market is dislocated as evidenced by no change in foot traffic relative when price is changed. Yentle also thinks there is too much competition in the same building at this moment. Waiting allows Yentle to test whether this is indeed a temporary issue vs permanent feature of the new NYC market.

Time might be required to overcome the loss aversion issue, but also not all loss aversion is completely irrational.

>>>My parameters are 2/2 around $1.5m with 'fair' maintenance (up to ~4500) depending on bldg, location, etc.

Does Yentle's place fit this filter if the downstairs storage room with associated extra maintenance is sold separately (per MCR's suggestion)?

Where is Yentle's place located?I don't think the internal bldg competition is going to fluctuate outside of market parameters especially on the upside. Co-op will have a floor price. That said, sale prices will be on record as 'current' for the next 2 years. If I was Yentle I'd calculate opportunity costs first! IMO shes not getting another 500k for a loooooong time, if ever.

Dogcat,

On condos, the carrying charges are far more as their taxes per sq ft are higher vs coops in the same area. Those abatements are things of the past. And Amenities are expensive!!

My solution to the carrying cost is non-doorman building of which there aren't that many on UES. Doormen are expensive as they are union employees.

@dogcatbird - I am going to respect Yentle's privacy and not divulge her address, but here is one that might work for you: https://streeteasy.com/building/3-east-71-street-new_york/2e

There is another one in that building a few floors up listed for a higher price in the same line. This group was discussing that building on another thread as one whose maintenance is alarmingly low. If you check it out, let us know what it is like!

>> I think there's been a generational paradigm shift from NYC-only to many other options. NYC used to be the center of the world and now its definitely not. MANY well-known people have moved to FL for example and swapped their NYC apartment for Hamptons-only. No reall need to come here anymore except a pied-a-tere or even rent, hotel, etc. Sad to say as I grew up here, but that's just myself and peers in my network.

I am in complete agreement, but I’m not really sad about it. I think a bunch of people thought NYC was the center of the world, and that’s why they lived here — but they didn’t actually like living in NYC. The pandemic gave, to their own minds, legitimacy to the notion that NYC may not be the center of the world. Therefore, they could finally admit to themselves (and others) that they didn’t actually like living in NYC. As demonstration of how NYC was no longer the center of the world, they’d point to restaurant groups establishing franchises in (say) Miami. I dunno, I’m kinda like “If you’re in Miami, wouldn’t you rather eat at a place that is actually from Miami?” But whatever, they want to eat at Carbone, and I’m happy for them to do it in Miami rather than take up oxygen & space in NYC if they don’t actually like living in NYC.

They got out. You, OTOH, seem like you have to serve another decade in this joint before you can leave. And there’s no harder place to serve time than the UES. ;)

Dogcat, What are rental alternatives to your sub $1.5mm 2/2 west of Lex? Appreciate a couple of listings.

The world is more globalized and distributed now, but lots of people still enjoy a big city! Even some that work fully remotely.

Reminds me of the time in 2020 when fox news declared that NYC was dead and “everyone” was leaving. That was the moment when my partner and I decided to buy a place.

@nada - I also find amusement in dogcatbird999 description of UES buyer as basically being the stereotype in my mind / why I bought in N BK instead.

Feels like a lot of factors continue working against NYC RE - macro/rates, taxes/local law costs, maintenance/labor costs, options to live elsewhere, the huge drop off of school age children in NYC vs pre-covid, etc.

Laugh at them all you want but.. the funny thing with the Miami branches of NYC restaurants is.. if you are in town for business, they are a great arb for hard to find tables.

I spent days of logging into Resy trying to secure a table in the first 60 seconds they are released each morning for some NYC spot, and laughed at myself when I saw their Miami branch had a table basically any day/time I looked by comparison.

It's one of those random reminders that life outside NYC can be substantially easier, and why I enjoy spending time elsewhere 50%.

COVID really freed a lot of people of having to live a life they didn't actually want to live, whether they knew it at the time or not.

Thinking about the fate of the UES coop, I am reminded of a certain flame that would periodically burn here in the days of yore ~15 years ago.

Story went like this. Older UES owners would call younger Williamsburg buyers idiots for paying $1000 ppsf when UES went for $1500 ppsf. UES-ers seemed immune to comprehending the apples vs oranges comparison they were making with shiny new condos vs stale old coops. Nor how the cap rates of the new Williamsburg condos were actually decent at 5%+ vs UES at 3% or worse.

The Williamsburg Millennials weren’t having it en masse, I guess. They’d rather pay less for a bigger / nicer apt even if it wasn’t in the vaunted UES, compared to eeking out the next 10-20 years in an apt they found uninspiring and small even if in the “prime” neighborhood.

I recall one such poster who was on the receiving end of the flames, bjw2103 (or something like that). True to form, he was exactly what steve123 describes. Bought his Williamsburg apt ~16 years ago in his late 20’s, with 50% down and under ownership with mom&dad. Purchased for $800 ppsf, and the building now trades at $1600 ppsf. Do the total returns on the downpayment (including rent benefit) beat the S&P 500? Not quite, but they are close enough. Meanwhile, UES coops seem to have gone from $1500 ppsf to $1000 ppsf…

Lesson of the story seems as follows. Old folks insisting on the superiority of their crap based on impressions from their youth doesn’t register with youngins. The more the oldies believe it, the more the youngins get driven away, never to return.

BTW, mark these bold words I’m about to write: in ~20 years, Tribeca will start becoming the new UES in this respect.

>> It's one of those random reminders that life outside NYC can be substantially easier, and why I enjoy spending time elsewhere 50%.

No offense, but this is why NYC has become more enjoyable, especially the summers. I don’t bother with the Resy thing anymore. There is some such restaurant I’ve been to in the neighborhood recently a couple of times. Walked in on a Sunday at 6pm, full house, but they sat me right down. Did the same another Friday thinking we’d put our name down (fuller house), get a drink, and return. They had a table available immediately, but we asked if they could seat us in an hour instead. “Sure.”

If you’re happy with your 50% time elsewhere, I’m happy for you and I’m happy for me. If you kick it up to 100%, I’ll be happier yet ;). But whatever you do, please stop reserving tables on Resy at 9am sharp for restaurants more than 10 minutes’ walk from your home just because some Instaidiot claimed it was life-changing. It’s just food, and it’s NYC: you just don’t need to go very far.

I went to Carbone once. Flawless food, impeccable service. But mostly I was left with the impression of UES-ers all deciding to go downtown to a hip Village restaurant to see the cool crowd, except they all end reserving every single table at Carbone, which sorta defeats the purpose of going downtown to see the cool kids in the first place.

My favorite park of NYC is neighborhood diners. My biggest fear about my neighborhood is that it will lose the density required to support all three diners that are in close proximity. We lost one a few years ago, and it was the one thar was closest.

*part

Perhaps unique to my building but the floodgates have opened. Apts are moving again. Cash or possibly buyers counting on interest reductions and then they will refinance. Maybe lots of people have been waiting in the wings.

300 - I pay ~$6/sq ft to rent. There are a few good rental buildings in the area, but hard to find. 12 E 86th is a great building for example.

Multicity - Thanks for link. That building was on my radar a while ago, but the apartment is a little over 900 sq ft and layout is almost impossible with the kitchen.

If anyone sees a listing like these I will try and snap up immediately. Thanks.

https://streeteasy.com/building/1095-madison-avenue-new_york/3w

https://streeteasy.com/building/17-east-89th-street-new_york/5e

The market's(Manhattan) pretty selective right now, with no rhyme or reason to why some things are selling and some aren't in many cases. We have a one-bedroom listing on the upper westside, showings have been dripping in here and there. We listed a small one bedroom in 14 Horatio that had multiple offers after the first few days on the market and we're now in contract above the asking price.

We saw a nice little pop in activity in June and some of July, I think we have about nine deals in contract right now. This is significantly lower than previous years for us. Overall, the market seems pretty dead right now, which is about right for the summer, but again, not typical of the zirp era when seasonality went away.

Also just did my first fixed fee representation for a buyer buying a condo on the upper west side. So far so good, everybody's happy. Hoping we have a successful outcome on the property we're bidding on.

>>>The market's(Manhattan) pretty selective right now, with no rhyme or reason to why some things are selling and some aren't in many cases.

I agree with this. Also see this in my building.

>>> It’s just food, and it’s NYC: you just don’t need to go very far.

That's how I feel as well, really enjoyed the emptier quieter city post-COVID lockdowns. Even now, plenty of restaurants within 5 blocks that have space at any given time. The convenience of not going far and finding plenty of decent options is one of the things I like the most about the city. Too bad post-COVID foot traffic cannot support the high density of businesses paying commercial real estate prices here that are needed to support the city's taxes/budget.

You could also of course find the best of almost anything within NYC, but the associated wait and struggle just doesn't fit into my life most of the time.

I have been to Carbone once for a corporate event. I didn't get what the hype was about, and was more annoyed that I had to go downtown and more than 10 blocks away from home...

Dogcat, The links you posted seem good options. BTW, UES west of Lex has far fewer homeless vs downtown East/Greenwich/West Village/Flatiron/Chelsea.

>> I have been to Carbone once for a corporate event. I didn't get what the hype was about, and was more annoyed that I had to go downtown and more than 10 blocks away from home...

I think the restaurant group caters to that crowd — UES, suits, etc. The sort of place you’d see if Mad Men were set in the 2010’s.

I went to ZZ’s Members Club once. Again, flawless food and impeccable service. Does it deserve hype? Probably not, but I’d say that about any such restaurant receiving hype. I just sorta expect flawless food & impeccable service from any restaurant at that price point, irrespective of hype. One can only underwhelm, never over-deliver.

The scene was aptly described by a neighbor recently, who had also been there once and actively did not care for it. “A lot of bonds salesmen.” I wouldn’t go out of my way to return, but I wouldn’t say “nah” either.

Returning to the theme of the thread, that’s how I’d feel about visiting friends living in UES coops.

Bail bonds? : )

I've been thinking a lot about this thread in the context of all the RE decisions Mr. MCR and I have made. The whole reason we have any presence in NYC is Mr. MCR's job. Much to Mr. MCR's chagrin (and my delight), for what he does, a New York presence is essential.

Mr. MCR does not love NY like I do because his entire exposure to it has been through work. Through his work he is thrust into meals at venues such as those described above, about which he feels fine, but he would rather be enjoying them with friends and family.

He works 14 hour days by choice (because he loves what he does), but when he has to work those hours in NY, he is assaulted by inefficiencies at every turn. In addition, he likes to walk to work and has noticed a decline in the sanitation and orderliness of what he experiences on his walk to the office.

While Mr. MCR could easily afford my favorite maisonette in our neighborhood, he is just not that into NY, but the irony is that he HAS to be there for work.

I LOVE NY, and would prefer to live in a studio without AC or even a stove (again, who needs to cook when there are diners?) in NY than a mansion anywhere else.

Mr. and Mrs. MCRs' real estate choices have been the result of this disconnect. Both of us love our current apartment. It has far below what Mr. MCR would choose were I not in the picture; it is far above what I would choose were he not in the picture, but it works perfectly for where we are and what we need.

My takeaway from all of this is that NY salaries for the industries that are still largely centered in NY are what keeps NY real estate so expensive. You have people like Mr. MCR who are paying prices completely unmoored from the fundamentals (I never would have purchased our current apartment; our first one was solid on the fundamentals as a long term residence) because it makes sense for them from a business perspective.

Discuss; or don't. FWIW - Mr. MCR absolutely loves the theater and comedy clubs that NYC offers at a quality not matched by anywhere else we "live," but his free time is so limited that his preferences in that area would be better served by an annual vacation to NY where that was the focus rather than a year-round presence.

And further to the points above, while I would "rather" be in NY than anywhere else, I am pretty happy wherever I am, such that the Venn diagram of "happiest" for the MCRs is not NYC. To the extent more of those high salaried jobs like Mr. MCRs can be performed remotely, I don't see UES coops coming back, because it was all the men and women in grey suits' salaries that kept that those prices high and many of them don't "need" to physically be in NY anymore, consistent with all the posts above.

Meanwhile, a cardboard box in the West Village will sell in a skinny minute with a bidding war.

But what's interesting, this isn't really about price on the on the UES. There are lots of relatively cheap apartments available, that are not finding buyers. The market will shift again, properties will start selling again with a little more gusto, why and when? Who knows?