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

the price premium for apartments facing fifth avenue is only for apartments above the tree line.

>Since co-ops are corporations, I feel like they reek of antitrust violations?

Might be a HIPAA violation too.

I think my Sutton Place listing illustrates the proximity/view point perfectly! In the F-line at 35 Sutton have proximity to Sutton Place's amenities (cute restaurants, Trader Joe's) but since you are in the "front" of the building, you can buy an apartment for one million, instead of the multimillions that it costs to be in the back and have continuous riverviews.

Although, FWIW, we're high enough up that you have good river views in the formal dining room (possible third bedroom) and the second bedroom (which I would make into the principal bedroom, honestly, just to wake up and look at the river.)

ali r.
{upstairs realty}

Well, I live west of Lex (but not far), and I find myself walking up Park more than 5th to get home (Madison comes in a distant 3rd). And I typically walk on the east side of 5th, rather than the park side. I can count on 1 hand the number of times I've been in CP in the last 5 years. This is mostly because I have a second home, probably like many of the 5th Ave residents. I'd still like to live on 5th, mostly for the possible views, and the convenience to midtown (so not interested in, say, buildings in the 80s or 90s, though there are some really nice ones). Spent years at the beach, don't care if I never saw it again.

Like Steve's proposal, my building permits limited rental: 2 of every 5 years, if I remember correctly. Beyond that, you could ask for an exception (which my neighbors, stationed overseas, had for several years). I don't think our surcharges are anything significant. I agree with Keith: It's about having resident owners, and not non-resident investors, as well as owners whose financial condition means they don't need to pimp out a bedroom or the whole unit to make ends meet.

>> I don't know the under-contract price. The unit was basically on the market for 3.25 years, starting at 1.9M with the last ask at $1.2........

There is also the maintenance reduction offered by the seller, putting the last ask at $1.1m. Adjusting for sq ft, your last ask kinda seemed 20-25% higher. Condition looks similar on the pics, although sometimes reality can differ.

This seems to demonstrate that there is a market, just not at the price you want currently.

Lots of differences. But yes there likely would be a buyer at 1.1. The question is how long it takes to find that one buyer given how terribly sluggish the market is. The maintenance is a hefty carry while one waits. Our hope is that renting will cover that and bring us at least a snappier market in 2026 if not a bit more value….

>>"owners whose financial condition means they don't need to pimp out a bedroom or the whole unit to make ends meet"

Any intelligent investor will make his assets sweat. And for the middle class units we are talking about here, yes people will highly value the rental income. The wealthy have far more options than they once did and aren't buying average coops.

The fundamental problem is that so much NY real estate assumes people live a static life. The husband goes to work for EF Hutton after finishing Yale, gets married to a SAHM, sends kids to Trinity for $2000 a year, watches the kids go back to Yale, and retires from EF Hutton at 65.

This doesn't happen anymore. People are constantly moving. The wife might work and get send to London for several years. The kid gets dyslexia and needs a special school in Westchester. The husband takes a new job in Morristown.

People need and value flexibility in life. NY real estate doesn't provide that unless you rent. Every aspect - from the overly-painful application process, the "caveat emptor" non-disclosures, the high agent fees, transfer and mortgage taxes, hassles and fees to rent it out - it's all designed for that 1950s family that buys a place once and dies in it 60 years later.

Hence why people rent in the city and buy their vacation house or rental properties elsewhere. It's also why the city is more vulnerable to the bad leadership we've had under Blas and Adams - it's a lot easier to vote with your feet today.

I think you need to be a little bit smarter about what you're buying and where you're buying it. Look at the history of the particular property, how often apartments In a particular building sell across various market cycles.

But in some neighborhoods, it is really hard to win in the financial management department no matter how much due diligence one does. I am sure there are a few non-conforming data points, but for the most part, if you want to anchor for any length of time on the UES or on Sutton or Beekman place, you are looking at a spend rather than a save for the most part.

>>>I think you need to be a little bit smarter about what you're buying and where you're buying it. Look at the history of the particular property, how often apartments In a particular building sell across various market cycles.

No matter where in Manhattan you are buying, in the last decade there was no winning....

>>>Do you really think yentle's apartment is overpriced? Sutton place apartments are sitting unsold for many months at $800-900 a square foot.... Look at Ali's listing at 35 Sutton place? Do you think that's overpriced??

I still don't know which building and apartment that is, but probably overpriced. What other explanations are there? Yentle isn't saying that there are lots of interested buyers but they don't work for the board, for example, which tends to be the case with lots of low priced Sutton place apartments. Yentle is saying that there is no foot traffic. And we did the math, it just does not work for a value-minded Krolik.v2
And then the neighbor drops the price, and they are in contract...

>>>But yes there likely would be a buyer at 1.1.

Yentle thinks its overpriced.

"No matter where in Manhattan you are buying, in the last decade there was no winning.."

What do you mean by winning? Beating the s&p 500? I recently posted a listing in flatiron that we handled the sale of, and he did pretty good. There are plenty of people who bought in 2009 through 2011 in Manhattan that did just fine. It's just that when I have posted examples, they get zero attention here.

I assisted 300 with his primary residence purchase. I think he'll confirm he did okay.

I don't like to post other people's listings, but here is one that we recently did. How would you rate this?? Krolik

https://streeteasy.com/building/9-west-20-street-new_york/7

@keith - That is a nice apartment. I could not readily see how much the sellers paid for it or how much they may gave spent to renovate it. With that said, however, it looks like a win for anyone who gets to live in that space if that is their preferred location.

They paid 2.5 in December of 2012, The asking price at the time was 2.595. No renovating, just some decorating, painting, We also assisted them on the purchase. And we sold this in a someone trying market.....

Keith>> How would you rate this?

How would you rate it?

Beyond painting, it looks like there was a small degree of reno (wall in dining room removed, light soffit added, many light fixtures got a much-needed upgrade). Let’s call it $50k. Transaction costs at $300k (including Keith rebate). So a profit of $550k.

Average amount of principal in the loans were $750k. This made the average net rent benefit over the years zero: interest + cc + taxes + insurance + upkeep offset rent more or less (I’m assuming $10k/mo average).

So $550k made on a $750k investment after 11.25 years. That’s a 1.73x ROI, or 5%/yr, pre-tax. If I’m correct in assuming the owner is single, after-tax is a 1.57x ROI, or 4.2%/yr. Inflation has been 1.36x, or 2.7%/yr.

Putting that all together, the after-tax real return has been 1.15x, or 1.3%/yr.

At that pace, it’d take 50 years to double your money in real terms. So I personally don’t rate that as a “win” investment-wise for something that carried a significant degree of risk (3-4x levered RE). It just wasn’t a “disaster” investment-wise. But that’s just my opinion, others may have different viewpoints on whether or not it was a “win” investment-wise (putting aside the emotional benefits of the home, which I acknowledge may have been present).

Married. They paid 2.5, sold it 11 years later for 3.4, and the comment is it's not a disaster. I mean that is something, coming from you ; )

Married helps — it’s 1.7x after-tax, or 4.8%/yr. In real terms, a 1.26x outcome after 11.25 years, or 2.0%/yr. At that pace, 35 years to get to 2x in real terms. Better than 50 years, no doubt: if you’re lucky, you might live long enough for two such doublings in a lifetime.

Living in NYC in a space they loved for 11 years - priceless. What happened to those ads? They all spoke to me.

Also, for married couple using the space as a primary residence, $500K gain has no tax, so the bulk of the gain is tax free. I don't care what finance savant would call this; as a run-of-the-mill person who values living in Manhattan, I view this as a win!

And here is an interesting data point: https://streeteasy.com/building/30-beekman-place-new_york/7a

I don't see it, but somebody did. It only takes one.

Getting quite a bit more than you paid for your NYC apartment is a win. Its not the rule though, and also they bought it before the prices peaked in 2016. This kind of success has been very hard to replicate since then.

You mentioned the "last decade", that's why I went back to 2012. @krolik

Certainly when you look at Sutton place, some of the upper East side and neighborhoods like midtown east, the likelihood of not having success over the last 10 years increases significantly.

I may have mentioned this before, all of these comparisons of real estate vs stock market omit the factor of amount of rent $ you are paying in this time period for a similar dwelling in which to live. It's almost like there is an expectation that housing should be free of charge for some reason.

Not sure if this is true, @stache. I definitely count paying rent to myself as part of my returns calculation.
Still, my relatively well timed purchase with a sub-3% mortgage yields mid to high single digit levered return at best (before considering any loss of principal due to transaction costs or prices going down). It would be a negative return for Yentle's apartment at the current mortgage rates...

Not really, stache. All the comparisons I’ve done and (and most I’ve seen) account for the rent benefit. It’s right there in black and white:

>> This made the average net rent benefit over the years zero: interest + cc + taxes + insurance + upkeep offset rent more or less (I’m assuming $10k/mo average).

FWIW, I think there have been plenty of “wins” in Manhattan RE… if you didn’t bought at prices that made sense on fundamentals. For example, see this article from Dec 1995:

https://www.nytimes.com/1995/12/08/business/real-estate-these-days-it-may-be-cheaper-buy-studio-small-apartment-new-york.html

GREENWICH VILLAGE -- At 2 Horatio Street, off Hudson Street, a one- bedroom apartment in a prewar building sold for $205,000 with an $875 maintenance fee. Monthly mortgage costs are $1,077. With the deductions, the apartment costs the equivalent of $1,482 a month to buy, compared with an estimated $1,800 to rent.

Including the maintenance tax benefit, the cap rate on the apt was 6.5%. The after-tax mortgage rate was 5%. Assuming an average of 4x leverage, the yield was 6.5% + 3 * (6.5% - 5%) = 9.5%/yr.

That’s a pretty decent “win”: 11.25 years of that compounds to a 2.8x return. But wait, there’s more!

After 11.25 years, the price had skyrocketed from $205K to $950K based on the 2 Horatio’s sales price of a 1BR around that time. Let’s call it $855k of proceeds instead of $950k after transaction costs. So a $650K gain. Let’s call downpayment circa 1995 $40k, but then bump that to $80k for reno, upkeep, principal payments, etc. So $80k became $650k after 11.25 years. An 8x increase, or 18.5%/yr.

Put the two together, you have a 22x increase after 11.25 years — 27.5%/yr fully compounding. Inflation-adjusted, it’s a 16x increase or 25%:yr fully compounding.

That’s a real “win”. So forgive me, Keith, for not getting excited about a 1.26x real gain after 11.25 years.

Having said all that, there was one way you could have had a big “win” from Manhattan RE 11.25 years ago. That would have involved joining the SE forum, listening to me babble about the fundamentals of Manhattan RE compared to AAPL, and deciding to buy AAPL instead:

https://streeteasy.com/talk/discussion/35729-rate-rise-impact-on-manhattan-property-prices

https://streeteasy.com/talk/discussion/34987-manhattan-at-2004-prices

I don’t know how much the others did, but you can see w67th put in his proverbial $1M downpayment (and emailed me a snapshot out of giddiness at one point). I don’t know if he held on, but if he had, it’d now be $16M or so. Although if we inflation-adjust, it’d only be 12x not 16x.

@nada - get w67th to come back! I suspect you still have his contact info . . ..

The presence of his eminence has been requested, although the email address may have gone dormant. We shall see..

Definitely a great call on Apple! I only had the benefit of owning it indirectly through an ETF. However, I wish every stock that some very smart person recommended did as well! Sometimes you get lucky, I lucked into Nvidia about 2 years ago, but that's because somebody else was handling my portfolio at the time... As tempting as it is to buy individual stock recommendations, I've been sticking with just a couple of ETFs over the last 15 years, and I'm back to that strategy. With the exception of 2 years giving professional managers a shot.

But hey, if you've got another nugget please share it. I have a little money set aside for rolling the dice with....

Apple was a better investment than Big Apple in the last 10 years. How about going forward?

Keith, I’ve got no nugget for you. You’re looking to gamble a little money for fun; all I can do is discuss valuation.

Krolik, neither Apple nor Big Apple’s valuations seem attractive to me right now. I haven’t really thought about which seems less unattractive. Which do you think, and why?

I should have put a winky eye on that... I'm not looking to gamble any money!

I pick apple stock. Big Apple, primary residence real estate is not an investment. Although I dislike Apple products, and the cult surrounding Apple (in the US), it should continue to be good investment. Especially seeing how their accessory products become obsolete with newer products. And consumer's desire to have the newest iPhone, iPad, etc...

Apple is probably overvalued, although still a better investment than Big Apple coops. Not likely to 10x again though

Ah, another fine investment analysis bereft of fundamentals and the price being paid!

Apple is a wonderful, profitable business. Buffett & Co bought 1B shares when it seemed like a great investment. Buffett’s favorite investment horizon is “forever”, and he deplores selling anything. But he had shaved his position down to 800M by the end of Q1 and then sold half of that in Q2. He sure didn’t need the $80B to bolster his cash balances, now sitting at $280B and approaching half of book value. Buffett still professed Apple as a wonderful business in Q1.

I don’t have an inside line into Buffett’s thinking, but I imagine the valuation has gone very far beyond his estimate of intrinsic value. So much so that he’s now selling (which he deplores) — he sure doesn’t need the cash.

I don’t know what will happen to Apple. But as far as long-term investing is concerned, I generally don’t want to be buying something when and at prices Warren is selling it at.

Agreed on Buffett point.

The iphones and ipads and applepay are brilliant, but there is no car and likely no more payments from google and others due to antitrust. Not sure where growth could come from, and you need some growth to justify this valuation. Its an AI company now but few people understand what that means and how it translates into earnings.

Sweetgreen seems to have a good formula right now.

"we have decided to go the sublet route - the rental market is robust and it will cover our costs and buy us some time in hopes things will improve."

So did these people:
https://www.urbandigs.com/building/155-west-126-street/1b/sale-listing/

Take a look at the price history of this unit. Looks like it has not appreciated in ~20 years!!!
https://streeteasy.com/building/139-east-94-street-new_york/9a?

@Krolik - an interesting example of a trend many have observed in UES Coops yes

Not sure how useful that 3rd bed is, looks like former maids quarters right? Not sure a modern tween/teen with bed/desk/dresser is gonna squeeze in without bunk bed. My 2nd bed is 12.5x10.25 and often feels a bit cramped compared to the 2nd/3rd bedroom in my childhood home in nowhere.. 11.6x7 is another matter. Bare minimum legal size too. Nothing in new construction is remotely this small.
"The minimum bedroom dimensions in NYC are 8 feet in any dimension with a minimum ceiling height of 8 feet. A legal bedroom in NYC must have a minimum square footage of 80 feet. "
Ah but-
"If the apartment has three or more bedrooms, one-half of the bedrooms may have a minimum dimension of 7 feet."

Anyway I think that micro sized 3rd bedroom limits the useful life of this apartment for your typical buyer to 5-10 years, depending on how long your youngest can be squeezed in there.

Also how does the buy vs rent math work out if you plug in 0.0% appreciation which is what the last 2 buyers over 20 years experienced?

Add to that 33% down that isn't sitting in the SPY appreciating average 7%/year... and that some of your monthly payment goes to paying down equity (which again is more dead money not earning 7%/year in SPY). Oh and a nice 2% buyer paid flip tax lol.

Why so much fascination with people that have made what turns out to be a bad deal, rather than pointing to some winners? Schadenfreude is rampant in the streeteasy threads.

Posts regarding negative real estate transactions dominate here. Other than a couple that I've posted, I can't recall anyone posting a win. You know, some nice family that purchased a home, raised their children in it for 15 or so years, sold it for a nice profit and then retired in the south of France? : )

@keith: Fair point on wins: I can think of two - the sale of the Park Slope brownstone I used to live in, and the person who sold me my apartment. The difference between those and many current cited examples is that both were long-term holds (40+ years), and SE (and even ACRIS) records don't readily support analysis of long-term price changes. Also, very few people want to give credit to long-term buy and hold real estate -- partly because that's not how we live now, and partly because there is an epidemic of severe short-termitis as an investment thesis. Certainly, many of the estate condition units are coming from long-term owners, and their heirs are winners (except of course as it regards the loss of their beloved family member).

@Keith, I think because rightly or wrongly wins are kind of expected. Flat for 20yrs is a surprise/exception. Surprise is more interesting to discuss.

@steve123 so you are saying that it is still overpriced?
2brs have a right to exist - there are people with one child out there that could use maids room as an office.
I currently have a 2br without a maids room… but mine was a lot less than 2mm. So I guess I agree, it is overpriced. 13k a month is a lot for a 2br with an office.

@Krolik - 2BRs obviously have a right to exist, I live in one. The 3rd BR maids room here is stunningly small, my home office bedroom is 50% bigger and can often feel cramped. I think $13k/mo (plus the tied up capital) could be better spent elsewhere.

I'm tempted to start a new thread "NYC RE - pessimism or optimism" on this topic given how long in the tooth this one is now but..

Thinking it over today.. there's two ways you can look at it. (For "established" areas like UES Coops):
NYC RE went through 3 shocks in the last 20 years- GFC, COVID and high rates.. and the bottom just never falls out.
On the other hand, it also doesn't really go anywhere to the upside either when economy/jobs/etc are good.

From either angle, I think, NYC doesn't have the boom-bust cycle that much of the rest of the country does anymore. It's a non-volatile, though somewhat illiquid, high transaction fee, boring bond you can live in.

So plug 0~2% RE appreciation into your rent vs buy calculator if you want to make a rational decision, or fall in love and follow your heart.

I think people are ignoring about 139 east 94th is that you can make small 3rd bedroom fairly big by merging kitchen with the dining room. What is critical is the third bathroom. Then it would be truly comparable to a 3/3 rental most of which don't have a separate dining room.

>You know, some nice family that purchased a home, raised their children

Doesn't mention of this violate some fair housing law? HIPAA? ERISA? COBRA?