By E.B. Solomont | February 2, 2015
A key piece in a broker’s toolbox these days is an architect’s business card.
Buoyed in some cases by fat Wall Street bonuses, buyers are increasingly willing to consider condos and co-ops that need work. That’s a marked difference from a few months ago, when homes that needed renovations were often considered too risky. The resurgent interest in the resale market is partly a result of sky-high prices for new development condos.
Warburg Realty agent Lisa Larson said some of her clients who are looking in the resale market have been priced out of new developments. “New developments are sexy and people love talking about them,” she said. But increasingly, clients seeing new construction price tags say they’ll look at the apartments that need some work.
In fact, so many are considering apartments that could use an update, Larson has been referring her architect to prospects who need help envisioning a renovation. “A lot of people are afraid of the unknown,” she said. “I’ll say, ‘Let me bring in my architect. Let’s get a rough idea of what can be done with the space and what it will cost you.’”
For many buyers, the resale market is a value play, said Town Residential’s Jarrod Guy Randolph. “Typically, you can buy something that needs to be renovated or combined for a 15 percent discount,” he said.
Randolph has a client who was searching for a four-bedroom condo in a new development for under $8 million. “It was nearly impossible to find,” he said. Now, the client is considering units in new-ish buildings (circa 1990s or 2000s) that can be renovated. “Every time I send them something, I send the plans to the architect and ask, ‘Will we be able to work with this plan?’” he said.
Randolph said the trend reflects the market’s limited inventory. “Because there’s not enough resale inventory and new developments are so expensive, buyers are starting to look at alternatives,” he said. “One choice is a renovation to get a great space and neighborhood that’s not $2,000 per square foot.”
Overall, Manhattan’s median sales price rose to $980,000 during the 2014 fourth quarter, up 14.6 percent from the prior year, according to appraisal firm Miller Samuel.
While new development prices were higher, resale prices showed larger gains. The median price for resale apartments rose 8.1 percent to $888,000, compared with the median price for new development apartments, which rose 3.5 percent to $1.8 million.
New development price spikes pulled the resale market up, said Brown Harris Stevens’ Wendy Richardson. “But there’s still a big gap. It’s apples and oranges.”
Richardson identified two distinct types of buyers. “Your buyers looking at new development, they want new, incredible trophy apartments. That’s a different person than someone who’s buying there to really live in it,” she said.
Larson said some buyers, particularly those who work in finance, are newly emboldened by expections for a good bonus season.
For example, one client — with a budget of $5 million — has been searching for a year. After getting a promotion, the client is willing to invest in a renovation. Larson is now showing the client apartments slightly under $5 million that need work. According to a recent CityRealty report, resales showed significant price gains last year: Condos bought in 2013 and resold a year later averaged a 23.6 percent price gain.
Roy Silber, an agent at Citi Habitats, said demand for resales is strongest among New Yorkers looking for a primary residence. “The increase in price per square foot is not as crazy as the new developments,” he said. That’s why he’s seeing multple bids on regular apartments.
Silber recently put Unit 6E, a 950- square-foot apartment at 44 East 12th Street, under contract for above the asking price of $1.625 million. Three months ago, a similar apartment on the fourth floor sold for $1.4 million. “When we priced the apartment, we added a premium,” he said. “We had multiple offers and we took the highest one. … I was able to get $200,000 more than what [the fourth-floor seller] got.”
Silber said high demand and low inventory led to multiple bids on the unit, a junior four configured as a two-bedroom. “People don’t have good choices. [They can pay] $3,000 per square foot for new development, and most buyers can’t afford that,” he said. By comparison, the apartment on East 12th sold for $1,710 per square foot. “That’s why they’re looking at this type of property.”
To be sure, renovated apartments still sell faster, Warburg’s Larson said. “But when you’ve got still-chronic inventory shortage,” she said, “the people that really want to buy are looking at things that need work.”