With a budget of about $1 million, Patricia Marx began looking for a two-bedroom, two-bath apartment in Manhattan last fall. She soon realized just how limited her options were.
“For a while, we were determined to acquire the large two-bedroom in the back of a building on Fifth Avenue,” said Ms. Marx, a staff writer at The New Yorker who is looking for a larger space with her boyfriend, Paul Roossin, a scientist and tech entrepreneur. “The apartment’s asking price was within my range, $995, but the board required you to have amassed three times as much money in your bank account as the purchase price.
“In other words,” she said, “you had to demonstrate that you were someone who would never want the apartment you claimed to want.”
The couple found a charming five-story walk-up in Gramercy, but the second bedroom “required scaling what was more ladder than staircase,” she said. “It is the perfect apartment for Heidi or for someone who plans never to leave.”
Then there was the chic one-bedroom, two-bathroom in the Flatiron district. “I went to check it out but it was taken before I got off the subway,” she said.
As Ms. Marx quickly learned, rising prices and an ongoing scarcity of listings mean that buyers in the million-dollar price range are increasingly out of luck or forced to make major compromises.
Low inventory, high demand and a shift toward larger units in new luxury developments pushed the median sale price for a Manhattan apartment to $972,428 in the first quarter of the year, up 18.5 percent over the same period last year, according to a report by the Douglas Elliman brokerage firm.
That’s just 5 percent below the peak of $1,025,000 in the second quarter of 2008 — the only time the median has crossed the $1 million threshold.
Eventually, Ms. Marx went into contract on a two-bedroom, two-bath with a lovely view in the Sutton Place area that was listed for $995,000. “The apartment is a wreck,” she said, noting a crumbling bathroom, gaping holes covered with blue tarp and a vintage oven. With an impending renovation, she expects to pay at least $1.2 million in all. “I convinced myself I was dealing with play money,” said Ms. Marx, who recently listed her current home, a gracious one-bedroom corner unit on East 88th Street in Carnegie Hill for $975,000. “A million dollars to me still seems like an unfathomable amount of money.”
Part of the problem for buyers is that new supply isn’t growing fast enough to meet the demand for apartments priced at $1 million or less.
“Below a million is like a dying breed,” said Jonathan J. Miller, the author of Elliman’s report and the president of the appraisal firm Miller Samuel.
Apartments for $1 million or less still make up the bulk of the Manhattan market, but that piece of the pie has shrunk significantly. About 52 percent of sales in Manhattan in the first quarter were below $1 million, compared with 60 percent for the same period a year ago, according to Mr. Miller. A decade ago, 71 percent of all Manhattan sales were below $1 million.
In the first three months of the year, 4,692 apartments were for sale for $1 million or less, down about 20 percent from the same period last year, according to Streeteasy, which tracks the listings of most Manhattan brokerage firms. Three years ago, 8,014 units were on the market for $1 million or less in the first quarter.
This turn of events is disappointing buyers with a nest egg that would buy a mansion in many parts of the country. The national median sale price, which tends to be a more stable measure of market prices than the average price, is $194,400, according to data from Zillow.
Just how tough is it to find something for $1 million or less in Manhattan right now? Consider a snapshot of apartments in that price range taken earlier this month by Streeteasy.
The neighborhoods with the most apartments for $1 million or less were the Upper West Side, which had 167 listings; Yorkville, 140; Lenox Hill, 126; the Upper East Side, 115; and Murray Hill, 112. Of those, the majority were studios and one-bedrooms. The studios ranged from a compact but nicely staged studio in an elevator building with a doorman, 205 East 78th Street, No. 4E, listed by Corcoran for $395,000; to a pristine studio listed by Stribling at 3 Gramercy Park West for $995,000. (The price includes a coveted key to the park, directly across the street.)
Moving up in size, an “estate condition” one-bedroom, 565 West End Avenue, No. 7E, was listed for $899,000 by Jay Overbye and Caroline Freedman of Halstead Property.
Practically nothing was available for $1 million or less in hot neighborhoods like NoLIta (2), TriBeCa (4), Central Park South (5), Flatiron (16), SoHo (17) or the West Village (23).
Sure, those who search hard enough may find gems, but they tend to be snapped up quickly, attract bidding wars or come with major financial constraints. A one-bedroom with a fireplace, a washer/dryer and a lovely bi-level garden listed by Halstead Property is available for $995,000 at 353 East 50th Street. “We had offers but it ended up that an all-cash purchase is preferred,” said Wigder Frota, the listing broker.
Central Harlem had the most two-bedrooms of any neighborhood, 45 earlier this month, according to Streeteasy. Two-bedrooms below 96th were often in need of major renovation or involved compromises.
For instance, a move-in condition two-bedroom in Turtle Bay is listed for $995,000 with Danica Cordell-Reeh of Halstead Property. Pros include central air-conditioning, capacious closets and a view of the Chrysler Building from one of the bedrooms. The con: The living room and kitchen look out on a brick wall.
With few exceptions, said Alan Lightfeldt, a data analyst with Streeteasy, “you won’t find anything bigger than a two-bedroom below 96th Street.” Buyers in search of three-bedrooms, he said, found the most in Central Harlem (14) and Washington Heights (13).
But be prepared for competition. Kim Martin-Shah, an agent with Douglas Elliman, recently listed a three-bedroom, two-and-half bath at 2292 Frederick Douglass Boulevard for $975,000. Eighty-seven prospective buyers came to the first open house earlier this month, not counting people who chose not to sign in.
“It was madness,” Ms. Martin-Shah said. Brokers huddled in corners, strategizing with clients while a woman with an iPhone showed the apartment to her spouse via video chat and a family traded off a crying child in order to tour the space. “We had multiple offers by the next day,” she said.
“It’s deflating,” said Audra Tuskes, a design executive for a hotel company with a young daughter who began searching for a two-bedroom, two-bath with a $1 million budget about six months ago.
“A two-bedroom in the areas I’m looking at in all of downtown is virtually non-existent,” she said, pointing out a recent search on Streeteasy that yielded just 40 properties below 23rd Street.
Refining that search to neighborhoods with schools to which she might send her daughter, like TriBeCa, the financial district, Battery Park City and the Fulton/Seaport area, the number dropped to just four properties — some of which were in contract. “That’s the situation,” she said. “That’s why it’s so difficult.”
After considering an estate sale and a place with pink granite floors, she decided she didn’t want to take on a two-bedroom in need of a full-tilt renovation. Ms. Tuskes, who is working with Corlie Ohl of Citi Habitats, dialed back her expectations.
“Frankly,” Ms. Tuskes said, “I’m looking at a decent space without legal bedrooms — something with decent sleeping space but not what one could technically market as a bedroom.”
She recently placed a bid on a financial district condo but lost to a buyer who waived all financing contingencies, a risk Ms. Tuskes was not willing to take. Days later she placed an offer on a West Village one-bedroom. “The list price was in the low $900,000 range,” Ms. Tuskes said. “I bid significantly above ask. The accepted offer was apparently over $1 million, cash.”
Indeed, buyers in Ms. Tuskes’s price range often have competition from investors looking to park their money in Manhattan real estate who can pay cash. Sellers, wielding the upper hand, often insist that buyers waive mortgage contingencies, risking the return of their deposit if financing falls through. This puts buyers without a lot of money to burn in a tricky position.
If you waive the contingency on a $1 million apartment and you can’t secure a mortgage, said Loretta Bricchi Lee, a broker at Citi Habitats, “the only way you back out from that contract is you lose $100,000. That’s a lot of money.” Many people, she said, “don’t want to risk it.”
It doesn’t help that land prices remain high, encouraging developers to continue to build for the upper-upper-echelon to justify the cost of building. Just 85 units in new Manhattan developments were listed for $1 million or less at the end of the first quarter, according to the Corcoran Sunshine Marketing Group. That’s down more than 50 percent from the same period last year, when 203 units were available for $1 million or less.
After one disappointment after another, some buyers are turning to off-market deals drummed up by ambitious brokers. Charles Keane, a sales engineering manager in the data security industry who is relocating from Boston, has been bested six times by higher offers or all-cash deals — including a one-bedroom with a den that he visited after driving eight hours in a snowstorm so as to be the first in the door at the open house.
“That was heartbreaking,” Mr. Keane said. “You’re basically in competition with the world elite in terms of finances.”
Now, Mr. Keane has his fingers crossed. His broker, Neil Laurine of the Corcoran Group, came up with a potential whisper deal by writing letters to owners in financial district buildings asking if they would be interested in selling. “I’m very hopeful going into this,” Mr. Keane said. “I try to stay as positive as I can.”
Sunday, April 20, 2014