Manhattan on clearance: Comparing price cuts by neighborhood

just got this from a broker (in their monthly newsletter): http://ny.therealdeal.com/articles/span-style-font-size-24px-manhattan-on-clearance-comparing-price-cuts-by-neighborhood-span Manhattan on clearance: Comparing price cuts by neighborhood By Sarah Ryley Click here for The Real Deal's map of Manhattan's biggest price cuts No one is actually announcing a borough-wide "fire sale." But with... [more]

just got this from a broker (in their monthly newsletter): http://ny.therealdeal.com/articles/span-style-font-size-24px-manhattan-on-clearance-comparing-price-cuts-by-neighborhood-span Manhattan on clearance: Comparing price cuts by neighborhood By Sarah Ryley Click here for The Real Deal's map of Manhattan's biggest price cuts No one is actually announcing a borough-wide "fire sale." But with hundreds of listings — for homes ranging from trophy apartments in glittering towers to shoebox-sized studios in prewar walk-ups — with price cuts exceeding 20 percent, one could be excused for thinking there was a giant clearance tag on the island of Manhattan. Or that there could be one someday, as analysts are now beginning to agree such steep discounts will only become more prevalent as sellers reckon with the stunning recession that has already scorched big cities across the country. This month, The Real Deal drilled down to examine price cuts in Manhattan neighborhood by neighborhood. The island was divided into 12 districts (see map in A sinking island), customized data was gathered for each on past sales by PropertyShark and on current listings by StreetEasy, and industry players discussed how far listings would need to drop for property to move. The comparison found that in every neighborhood, current listing prices and recent actual sales differed widely, indicating a deep disconnect between sellers and buyers in the current downward market. Median listing prices would need to drop from 8 percent in Soho and Tribeca to a whopping 42 percent in the West Village and Greenwich Village just to equal the actual median sales price in those neighborhoods during the last quarter of 2008. "Listing prices, when they're higher above market than they should be, you see a slower pace of sales. That's measuring the buyer's resistance to those prices," said Jonathan Miller, president of real estate appraisal firm Miller Samuel. Industry executives also said, depending on the neighborhood, the divide could indicate a high number of luxury or large-sized properties sitting on the market (reports have found studios and one-bedrooms have been selling better), and could also be affected by the large number of unsold apartments in newly constructed luxury high-rises. In comparing the median listing in each neighborhood to last quarter's median sale prices, The Real Deal analysis is not predicting what actual sales prices will be in the coming quarters, but is only noting by how much listing prices are possibly inflated. Some analysts agree that listings must be cut back even further, to levels seen at the beginning of this decade, for today's glut of housing to move, and finding that prices will see staggering declines. Goldman Sachs concluded in January that Manhattan condo property values would require a drop of 35 to 44 percent before the market is stabilized. (So far, Miller has noted signed contracts are averaging 20 percent lower than for similar units sold last year.) Some are welcoming price drops. "For the good of the city you need to get a bottom here, and the sooner that happens, the sooner the city will recover," said Jon Gollinger, co-founder of Accelerated Marketing Partners, which auctions properties in distressed markets across the country. Gollinger basically agreed with Goldman Sachs' assessment, foreseeing drops up to a devastating 55 percent in fringe neighborhoods, "assuming a tenable solution to the credit problem is forthcoming by year-end." Accelerated has been discussing partnerships with Prudential Douglas Elliman and Miller, who will help determine the starting bid of auction properties, as well as other firms (see Going, going, gone: New York City condos could hit the auction block). Andrew Gerringer, managing director of Prudential Douglas Elliman's development marketing group, declined to reveal specific developers considering auctions, but said the Financial District is one of the prime areas. "There's a lot of people listening to us with open ears right now," he said. Lower Manhattan Go to Lower Manhattan chart In Lower Manhattan, the epicenter of the financial crash, there seems to be a particularly high proportion of troubled buildings. Embarrassing headlines have been written about 20 Pine Street — at least two buyers are suing to back out of contracts, and blog rumors are spreading that 80 unsold units are being marketed at half off — and 25 Broad Street, which shuttered its sales office in the Financial District, as well as Rector Square in Battery Park City, where condo owners allege units are being used for dorms and hotel stays. Though median prices staggered upward over the past two years, with the fourth quarter of last year its best showing, the median listing price in Lower Manhattan must fall 29 percent to match that quarter, which predates the vilification of Wall Street bonuses. Miller said the area's large, unsold towers and a transient atmosphere may mean larger price cuts are in order. Experts said the market also depends on a resurgence of Wall Street and interest from foreign investors. At the opulent Cipriani Club Residences, named after restaurateur and co-creator Giuseppe Cipriani, four apartments are listed below their previous purchase price. "If they want to sell and they don't get offers, they have to do something about it," said Ellen Kourtides, a Corcoran vice president who is marketing one apartment that had a price chop of nearly 28 percent. The biggest fire-sale award in Lower Manhattan goes to Five Nine John Lofts, where the sponsor is pushing the last unsold apartment, an Andres Escobar-designed penthouse, for $1.6 million, 37 percent less than the original asking price over three years ago. At that discount, Beverly Sonnenborn, a vice president of Sotheby's International Realty, said it's a "good buy." Soho/Tribeca Go to Soho/Tribeca chart The area comprising Soho, Tribeca, Little Italy and Nolita is the highest-priced of the 12 districts in Manhattan, with a median listing price of $2.95 million. It also contains a zip code ranked by Forbes as the most "overpriced" in the nation, determined by comparing prices to factors like earnings and rents, which generates the same outsized ratios that Goldman Sachs predicted would mean a bigger price drop to come. Sofia Kim, vice president of research for StreetEasy, noted, "The recent price gains and increased inventory in this area have been driven by luxury new developments. Current inventory levels are 57 percent higher than they were a year ago today." Sotheby's Sonnenborn predicted that new developments, of which there are two dozen in this district, are going to see the biggest price cuts. "A lot of the stuff that comes on the market is just sort of ho-hum property. You're one of 50 of those properties that are on the market." But even truly unique apartments have their troubles. A one-bedroom in the former Beaux Arts police headquarters on Centre Street, with its dramatic domed great room, has been cut 29 percent to $5 million since it first debuted last March. A 6,600-square-foot pad in the former gymnasium of the same building, however, hasn't budged on its price tag of $30 million. While Miller said the police building is one of his favorites in Lower Manhattan, he said with current market conditions, the gymnasium conversion should be reduced by at least a third. So far, the current listing with the biggest price cut is a quaint duplex co-op marked down 37.7 percent over the past two years, to $1.495 million. Sonnenborn, who is marketing the property, said the biggest issues have been its lack of a second bathroom, restrictions against using it as a pied-à-terre and the co-op board, which rejected a buyer over some "he said, she said" issue. >West Village/Greenwich Village Go to West Village/Greenwich Village chart Several brokers pegged the picturesque, heavily landmarked neighborhoods, Greenwich Village and the West Village, as among the more secure in the city. But the area did see a median sales price decline over the past year, and the current median listing price of $1.4 million would need to fall a staggering 42 percent to meet the prices apartments actually sold for in the last quarter. The Village has always maintained its value better than other areas," said Sonnenborn, adding the shops, foot traffic and tree-lined streets give it a warm, neighborhood feel. "Yes, things went down in price [already], but not as much as the other areas." Friends of Hudson River Park, an advocacy group for the waterfront park that stretches from Midtown East to Battery Park City, released a study last year showing that home values in Greenwich and West Village have tripled since the park plan was announced in 1990, far exceeding the Manhattan average over the same period. And the area is a favorite among celebrities such as Gisele Bundchen, Heather Mills, Philip Seymour Hoffman and Susan Sarandon. Artist and filmmaker Julian Schnabel created a lavish condo, the Palazzo Chupi, there near the West Side Highway. Two of the unsold units — a duplex, discounted 35 percent to $19 million, and the penthouse triplex, discounted 31 percent to $22 million — can now be purchased together for $41 million. "The eclectic finishes and design would not appeal to most people," said Kim, adding that the closest comparable sale, a triplex in Richard Meier's Perry Street South Tower a few blocks away, had almost a third the price per square foot. That unit sold in November for $21 million, a $12 million discount from its original listing price. >Lower East Side/East Village Go to Lower East Side/East Village chart The district comprising the East Village, Lower East Side, Chinatown and Noho has seen a 17 percent median sales price decline in the past year, to $612,500, yet the median listing price is $875,000, likely because of all the new luxury apartments waiting to be sold. Kim said there are 40 percent more listings on the market today than a year ago, adding, "It's an area where people would prefer to rent than to own simply because it's cheaper." The biggest discount is a two-bedroom walk-up on East Houston Street at Eldridge, a noisy intersection at the edge of the Lower East Side. Corcoran broker Timothy Scott said the co-op has been reduced from $650,000 to $412,000 since November because "we based it on the wrong size. And when we discovered what the real size was, it was basically about the time the financial crash started to hit." Scott said they now have an offer "very close to asking price," but in general, buyers are starting negotiations by offering 20 to 25 percent less. Core Group Marketing broker Mark Lynch agreed "lowball" offers are common nowadays, even on fire-sale prices. "I'm trying to shift my paradigm [from representing sellers] to renters and buyers," he said. "The pendulum has shifted to the renters' and buyers' side." He's marketing a one-bedroom condo at Ian Schrager's "ultra-luxe" Noho project 40 Bond, which has been discounted $1 million, or 29 percent, since it came to market in November 2007. Of the developer lowering the price, he said, "There was a willingness, based on just a lack of interest." Another frustrated broker said the failure of luxury real estate here would be appropriate karma. "Developers pushed out the immigrants and artists who made this a vibrant neighborhood, hoping to replace them with rich people. Maybe now those people who were pushed out can afford to move back." Murray Hill/Gramercy Park Go to Murray Hill/Gramercy Park chart The district comprising Murray Hill, Gramercy Park, Midtown South, Kips Bay and Flatiron is one of the few in Manhattan where the current median listing price is not far above the median sales price of last quarter — only 10 percent. Still, Gollinger, who has been tracking the status of perilous new developments, said, "A sudden release of shadow inventory [unlisted apartments in new residential projects] would significantly alter what is otherwise likely to be an average price correction." For example, Tempo in Gramercy Park has 103 apartments, with only one in contract and just 15 listed on the market, thus distorting the actual inventory. There are 17 new projects currently being marketed in the district, according to StreetEasy, not including those that have turned rental or have suspended sales. "This area has a very strong rental market," Kim added. "So, if units need to move, prices need to be compelling for people to buy rather than rent." Some towers have pushed the boundaries of what once had been thought a good location for luxury housing, rising up next to a cluster of hospitals including Bellevue and a methadone clinic. One such building, Gramercy Starck, has sold most of its 207 apartments and recently discounted roughly a dozen remaining ones, including the penthouse for 21 percent off. The nearby Tempo, on the other hand, made the odd choice of raising prices. Karen Berman, vice president of Argo Residential, is marketing a co-op in a 1960s Flatiron building discounted nearly 40 percent. She said the boards often make it difficult to slash prices, feeling it undercuts the value of their own home. "I've gotten calls from board presidents saying, 'How could you price like this? How could you do this?'" said Berman. "If they don't read the papers, they need to be told what the current pricing is." Chelsea Go to Chelsea chart Chelsea has experienced a steady increase in median sales price, from $780,000 in the fourth quarter of 2006 to $1.15 million in the fourth quarter of last year. The median listing price of $1.5 million would need to fall 23 percent to meet last quarter's sales prices. Gollinger said the 31 new developments being marketed in this small district indicates "price adjustment in Chelsea will likely exceed the city average." Art galleries, a vibrant nightlife (an issue for some new residents trying to sleep) and the High Line, a park under construction on an abandoned elevated railway, have added value and cachet to the neighborhood. But Gollinger said negatives, like nearby body shops and public housing, "may change the acceptance of the high-end product being delivered in a struggling economy, particularly if the High Line is delayed." The decreasing pool of high-end buyers now has many towers to choose from; the rest must lower prices to sell. Advertised as a short sale, Chelsea's biggest discount is a loft-like, three-bedroom condo marked down 37 percent to $1.25 million, less than the $1.875 million the apartment was purchased for three years ago. Appraiser Miller noted that based on the price per square foot, the property is priced 23 percent below other listings in the building, "which is a reasonable discount for ground-floor space. It's not clear whether any further adjustment in price has to be made until it is tested in the upcoming spring market." Miller said at least a 30 percent price adjustment is in order for Chelsea's most expensive residential property, the $16.49 million penthouse atop the Yves Chelsea, a name its developer told The Real Deal was inspired by famous Yveses, like Yves Saint Laurent and pop artist Yves Klein. Midtown West Go to Midtown West chart Significant redevelopment plans for the Hudson Yards and the Javits Center promised an elevating effect on property values in Midtown West, which includes Times Square, Clinton and Hell's Kitchen. While those plans are tabled, an experiment recently announced by Mayor Bloomberg to make sections of Broadway in Times Square and Herald Square car-free could at least lend some class to those crowded tourist hubs. Midtown West's median sales price had a strong showing last quarter at $1 million — up from $745,000 during the fourth quarter of 2007 — and the median listing price is not far off at $1.1 million. Also, according to StreetEasy, only 11 new projects are currently listed for sale, a good sign these days. However, Gollinger warned that while "inventory is average, this location may do worse than others since its pricing may need to adjust enough to retain a discount to more established neighborhoods, unless the development of Hudson Yards is accelerated." Prudential Douglas Elliman broker Brian Meier is marketing the most discounted property here: a one-bedroom co-op reduced 34 percent to $365,000. The sellers "are fearful of where the market is heading right now, they're fearful the market is going to drop another 10, 20 percent," he said. "They don't want to hold out for more money … they don't think they're going to get it." In general, he's recently been getting offers up to 40 percent below asking price, and in this market Meier said sellers have to consider them. As for new towers, he said most in Midtown West are nearly sold out, so developers aren't as likely to offer steep discounts. But in markets like Harlem and the Financial District, while not advertised, developers are negotiating huge deals, he said. Midtown East Go to Midtown East chart Midtown East, which includes Sutton Place, Beekman, Turtle Bay and Central Park South, has been one of the "sweet spots" for foreign investors, helping to elevate the market here in recent years, said Miller. "[But] that's not as contributing a factor now as it has been because the economies where those buyers originated from are having their own economic problems. There was a tremendous amount of demand from Europe," he said, "and I think every country in the European Union is having financial difficulties right now." The median sales price plummeted 22 percent since its peak of $1.04 million during the first quarter of 2008, to $757,225 this past quarter. The median listing price of $1.2 million would have to fall 37 percent to meet that figure. Gollinger said he's not currently looking at new developments marketed here, of which StreetEasy only lists nine, and predicted the price adjustment would be more in line with the citywide average. Still, there are steep discounts on even this district's most affluent strip, Central Park South. The Plaza Hotel's "Astor Suite" has been marked down 31 percent to $38 million, and an 11,000-square-foot apartment facing Central Park, currently used for offices, has been discounted 17 percent, to $24.9 million. Midtown East's second biggest fire-sale price is at the Centria, where one of the last remaining sponsor units has been marked down 38 percent to $780,000. Kim said, "This is a 600-square-foot studio on a low floor in Midtown. She added, "$1,300 per square foot is too high for the current market. This should be priced at $650,000." Upper West Side Go to Upper West Side chart Real estate headlines for the Upper West Side have been dominated by 15 Central Park West, considered Manhattan's most successful real estate venture in years, with brisk sales and nearly seven dozen apartments closing above $10 million. One was even promptly re-listed for a massive markup at $80 million, now discounted to $47.5 million. Such a discount from an obviously speculative listing could hardly be counted as a legitimate fire sale, but it should be noted there are four other relatively modestly priced apartments in the Robert A.M. Stern building that have been discounted between 13 and 23 percent, which would still turn a profit for the ones being flipped. Counter to the example of this outlier, the overall median sales price on the Upper West Side declined nearly 20 percent since its peak the first quarter of last year, from $1.04 million to $832,500. Kim of StreetEasy noted the current median listing price is still 10 percent higher than the peak, signaling something of a distance to the bottom. But other sources predicted that the draws of Central Park and Riverside Park, coupled with a relatively small amount of new construction, could help insulate the market. The largest percentage price cut is for a two-bedroom co-op, which for a time was marketed with its neighboring apartment. Individually, it was knowingly listed for an unrealistic figure of $1.76 million, said listing broker Jim Testa of Prudential Douglas Elliman. "I guess there was a very special odd possibility ... but they never expected they would see that number," he said. After a series of price cuts "before the stock market bit the dust," Testa said the sellers had a contract signed for $1.2 million. "Then [the buyers] walked away from their contract." The apartment is now listed for $995,000. Upper East Side Go to Upper East Side chart The Upper East Side, home to some of the city's wealthiest residents — including Mayor Michael Bloomberg and the notorious Ponzi-scheme mastermind Bernard Madoff — has long been considered one of the safest real estate markets in the city. The median sales price has steadily increased since the fourth quarter of 2006, from $686,250 to $975,000 in the fourth quarter of last year. But those familiar with the market agree that prices need to take a hit here just like everywhere else, particularly considering the slew of unsold new apartments weighing down the market. More than 2,200 listings are active in this district, which includes Yorkville, Carnegie Hill and Lenox Hill. Since developers only list a select number of units at once, even more "shadow inventory" is on the way, sources warned. One prominent local broker, who asked not to be named, said, "I would advise sellers to price their property as close to 20 percent lower than comparable peak sales," calculating a premium or discount for factors like view and renovations. Just looking at the median listing price today versus the median sales price last quarter, that's a huge drop of 45 percent. Even the duplex of late philanthropist Brooke Astor, an apartment designed in 1931 by celebrated architect Rosario Candela, had its price reduced to $29 million last month, $17 million less than its original asking price. Because prices are dropping so rapidly, contract holders are organizing revolts against developers, often on blogs and StreetEasy's chat forums, to either get price reductions themselves or their deposits back. Attorney Adam Leitman Bailey said he has groups of contract holders at the Manhattan House in the Lenox Hill section of this district and at the Brompton in Yorkville, among "many other buildings" in the city, seeking to terminate their contracts. Uptown Go to Uptown chart Unlike several other fledging Manhattan real estate markets, the median sales price from the northernmost tip of Manhattan down to 156th Street has ticked up over the past three years, from $349,000 in the fourth quarter of 2006 to $396,000 in the fourth quarter of last year. Inwood and Washington Heights have been known to woo buyers with their heavily discounted real estate, stunning western waterfront views and ribbons of parks — including the city's last primeval forest, Inwood Park. Still, with a median listing price 25 percent higher than last year's median sales price and a long commute to central Manhattan, a decline is expected. Plus, the vast majority of residents are still renters. Kim noted that 39 percent more listings are on the market today than a year ago, and that's with several new buildings shuttering their sales offices. "The location of the area is neither central nor convenient and [the] housing stock is old," she said. Melvin Caro, a broker for Nest Seekers and co-developer of three townhouses, said he expects many unsold units to be remarketed to renters — already 90 percent of the residents — and for unfinished projects to save money by downgrading amenities and finishes. His planned townhouses at 203 Cabrini Boulevard, each with its own elevator, are the area's three priciest residences at $2.95 million each, and also the most discounted — they were originally marketed in 2005 at $4.8 million. Caro said the project became entangled in convicted attorney Anthony Bellettieri's money laundering scheme. "Then, we resolved the issue with the lost money, but the bank [Chevy Chase Bank] is still refusing to allow us to pull any money out of the construction loan." Now that Capital One Financial Corp. purchased the bank, Caro said he hopes to finally get the financing necessary to pour the foundation. Harlem Go to Harlem chart Harlem, including Hamilton Heights, Manhattanville and Morningside Heights, has historically been shaped by boom-and-bust cycles. Speculative developers typically overbuild high-end housing at the height of the market, and then are forced to drop prices once it crashes. Experts agree that the same thing will happen this time. There are 44 new projects currently being marketed here, according to StreetEasy, the highest of any district in Manhattan. It is "a perfect storm of increasing prices, diminishing market demand, and too much development pipeline," said Gollinger. "This neighborhood will likely experience price adjustment on the upper end of the range." The median sales price in these neighborhoods has been steadily dropping since its peak in the second quarter of 2007, from $712,919 to $496,500 the fourth quarter of last year. Miller said this area, together with the Uptown market, has seen the highest decrease between recent signed contracts and contracts signed for similar properties a year earlier. The most expensive listing is a luxurious duplex penthouse listed at $14.5 million three years ago at 1200 Fifth Avenue, a newly renovated prewar building across from Central Park and Mt. Sinai Hospital. Only a third of the apartments in 1200 Fifth have been sold. A well-placed source said there are a dozen investors in the building and only half have agreed to start discounting apartments. "We're just waiting on the other half," said the source. Tamir Shemesh, managing director of Prudential Douglas Elliman, marketed a Harlem property that backed out of the market early, turning into a hostel. "The Lotta Condo was priced very well," said Shemesh. "The problem is we launched in a grim economic [climate]. Most of the buyers in Harlem are not cash buyers. They rely heavily on bank financing, and that's just not available." [less]