Nov. 30, 2008 - neighborly competition leads to neighborly mistakes? the laboratory at 24 East 22 Street

MLG went there before the NY Times
You may remember that the NY Times ran a piece about multiple apartments for sale in the same building back in August (August 10, Neighborly Competition). You may also recall that I used to talk about current listings, one of which involved competing Manhattan loft listings on the 4th and 5th floors at 24 East 22 Street. I just restored that February 9 post (‘rare’ open house duel at 24 E 22 / fighting about windows) because neither of those Manhattan lofts is an active listing by another firm. I was pretty stunned by the listing histories of the two lofts, leading to a rumination about how competing listings in a building impact each other, leading to this post.

It will take me a while to get to an answer (MLG is still wordy, wordy, wordy...), but here's the fun question: is it easier to make a mistake if someone else is already making one?

what will the neighbors think? what will The Market think??
The Times quoted a terrific Corcoran agent about one aspect of neighborly competition:
 

Of course, you can always find a point-counterpoint structure, and Teri Karush Rogers has no shortage of sources:

Yeah, putting an apartment on the market at the same time as a neighbor's can strain relationships within a building. But I wonder about the degree to which competing listings can lead sellers to over-value their apartments. Let's get back to 24 East 22 Street and the 4th and 5th floor Manhattan loft competition.

Here's what i said in my compare-and-contrast post on February 9:

Note that the two units were offered at $100,000 apart in February, after one had been on the market for 3 months already and the other for 8 months already (at $105k higher). Given the descriptions, it is hard to imagine that anyone who came across one of the two lofts would not also go to see the other; as I said, the preference would probably come down to simple preference about finishes (unless those additional west windows on the 5thfloor would be the key factor for some buyers).

Before I get into what actually happened to these competing listings, lets drag another quote from the NY Times.

'absurd' price competition, or Market pricing?
I LOVE this NY Times quote (you'll see why soon):

Perhaps especially in the context of The (current) Market, "absurdity" is in the eyes of the beholder, no?

painful history
Soon after my compare-and-contrast post, the 5th floor seller dropped the price to $2.695mm, but then took it off the market completely shortly later. Leaving the field entirely to the 4th floor.

The 4th floor sold, but it took ... a while, and what must have been serious pain.

very painful history
Before the 5thfloor dropped to $2.695mm, the 4th floor abandoned that position by dropping $245k, to $2.45mm on February 17, then another $200k, to $2.25mm on March 28 (is that the drop that killed all motivation on the 5ht floor??), then another $400k, to $1.85mm on April 25.

That's what I call evidence of motivation! In the space of 9 weeks, the price dropped $600k (about 25%), and $800k overall from the original asking price of $2.695mm in December 2007. That get the job done, with a contract signed as of June 12, and a deed transferred on July 16 at $1.8mm.

That is 8 months and a closing 33% off the original asking price

who could have predicted?
Retrospect brings clarity. Both sellers in this building (and their agents) mis-perceived The Market. One seller pushed on, to find The (actual) Market; the other dropped out still way above where The Market turned out to be.

I wonder how much that (eventually) successful seller (and agent) on the 4th floor was distracted by the competing price set by the 5th floor. Without that price (starting at $2.9mm in July 2007), might the 4t floor have started lower than $2.695mm in December -- when The Market was better for a seller than 7 months later? Without that high-but-false 'comp', might the 4th floor seller have dropped more quickly, more dramatically, but not quite to the one-third-off that it took to get the thing sold?

No way to know, of course. But fascinating. Let's go back to that last quote about "absurdity" from the NY Times.

That looks remarkably like the competition between the 4th and 5th floor lofts at 24 East 22 Street, doesn't it? The Market is The Market is The Market, right? By definition, that is real, not absurd, right? Painful, but real.

footnote to pain
In defense of the mistaken judgement evident in retrospect, the 5th floor unsuccessful-seller-in-2008 was a buyer-in-2004. Presumably they took it off the market in 2008 because they did not have to sell (to move to San Diego or for any other reason). They may have had a particularity acute reason for not matching the 4th floor listing history down below $2mm -- they paid $1.9mm in 2004.

© Sandy Mattingly 2008  

Nov. 26, 2008 - R I P Herbert Watnik 9.21.1921 to 11.25.2008

Personal note here, that feels appropriate to 'express' on *my* blog though this must surely violate someone's notions of etiquette ....

My father-in-law died last evening at 10:21 PM of (in my lay terms) complications from pneumonia after having been in Intensive Care since Halloween (seems hard to believe now that it was so long, but he never got out of ICU). His four children (with three spouses) were with him for the last few hours.

How rapid a development was The End, despite weeks of need-good-news-but-there-ain't-ever-no-good-news? I got a call from my wife at 3:51 PM, when I was 50 feet from turning into the Holland Tunnel to take my daughter to Newark Airport (we did not make that turn).

He leaves 8 grandchildren and one brother (and sister-in-law), having lost a sister only 10 weeks ago and his wife 12 years ago. Bunches of cousins, in several generations, survive.

As my brother-in-law said, "he had his issues, but he was a good guy". Is that such a bad thing? (hint: NO)

I am pulling together thoughts for a Friday eulogy; here's a start. (Isn't "blogging" another way to say "thinking out loud"?)

Like many men of his generation, he seemed more comfortable as a grandfather than as a father. But he *provided* for his family. Among many other things, he made sure my wife's cars had clean oil and fully inflated tires (she still gives me a hard time if our gas tank gets almost empty in winter). He uprooted his part of the family from the family compound in Queens when he thought his young teen (now my wife) needed a new environment. He was thrilled to provide a home for some grandchildren in a wonderful Long Island school district.

A veteran of World War II (he is the only person I know to have been through the Suez Canal), he chose college over minor league baseball, and the NYPD over a 'real job'. His 20 years in blue included being at a desk as a sergeant when the FALN exploded a bomb at his (the old) Police Headquarters. I well remember when we were able to take him and his wife to a grand steak dinner at Peter Luger's to celebrate his next (and final) retirement ('cut' that steak with a spoon; honest). He liked his food!

He was ... less than patient (an inherited trait, I see). Woe to the person between him and the front of the buffet line. And listening to him yell at the Mets bullpen (through the miracles of television) could be ... uh ... jarring. He could be VERY critical of things and people he cared about deeply. But he was loyal -- to the Mets, and to his family. He watched every Mets game (rooting, yelling, rooting, yelling, yelling, yelling ...) through the most bitter of ends (in baseball terms, at least). He spoke to his sister by phone every day, for years.

He did not often (or easily) speak of L O V E, and he responded to people and things that were most important to him on his own terms, of course -- but don't we all make such arrangements?

He lived in The Present, largely without complaint, to a degree that seems remarkable to me. Stuff that just didn't concern him today, just didn't concern him. (The wisdom of age? I am still waiting ....)

Whether that was whether This Family Member was talking to That Family Member, or whether "that procedure" he had on his colon years ago was cancer (it was, but he did not seem to care, or even recall) -- once it was 'done' and 'clean', he was done with it. His retina guy never could seem to restore vision to one eye, but he accepted that (though he kept going for treatments that were part of a hoped-for-but-never-achieved improvement) and used a huge magnifying glass to scour the many newspapers in his life. He was not a happy camper when we took the car keys away, but he acquiesced; I never heard a word of complaint about that.

He had food, shelter, health (largely excellent-for-his-age, until a month ago), and family. Why would he want more?? ("Because most people do" was irrelevant to him, I am sure without asking.)

He had many more than his biblical allotment of three-score-and-ten, but we shall miss him.

Thanks for listening. Perhaps I will update this as I continue to Think Out Loud....

Yes, the circle of life continues. We will host Thanksgiving tomorrow for 17, including one pregnant cousin. While not likely to be entirely celebratory, we are definitely looking forward to that celebration with family.

BE THANKFUL for what you have, people. Peace out.

© Sandy Mattingly 2008

Nov. 24, 2008 - Manhattan loft inventory as of November 23 = 859

Number of Manhattan lofts offered for sale as of Sunday night: 

This is down 11 in a week (the second slight decline in a row) but essentially flat over the last 2 months, while up 167 since my recorded low in mid-August.

See my May 19 post for what I am counting, and why it is difficult.

Nov. 24, 2008 - new Manhattan loft listings + closed sales in last 7 days

 
This is my fifty-sixth report on the number, price distribution and neighborhood distribution for Manhattan lofts reported as new to the market or as closed sales in the last 7 days.

The stats as of Sunday night:

• there were only 20 Manhattan lofts reported as new to the market in the last 7 days and (again) only 16 as sold (kind of a slow week)
• 15 of the 20 new ones are offered below $3mm, while 9 of the 16 closed sales were between $2mm and $4mm
• only 2 of the 20 new loft listings are in new development, while 7 of the 16 closed sales are in new development
  
  

  By price	New = 20	Sold = 16
  $500k to $999k	4	3
  $1mm to $1.99mm	6	4
  $2mm to $2.99mm	5	3
  $3mm to $3.99mm	1	6
  $4mm to $4.99mm	2
  $5mm+	2

  
  

  By neighborhood	New = 20	Sold = 16
  Battery Park City
  Chelsea	3	1
  Clinton
  East Village	1	1
  Financial District		1
  Flatiron	1	3
  Gramercy
  Greenwich Village	7	3
  Kips Bay		2
  Little Italy
  Lower East Side	1	1
  Morningside Heights
  Murray Hill
  Midtown East
  Midtown West
  SoHo	1
  Sutton Place
  Tribeca	5	1
  Turtle Bay
  Upper East Side
  Upper West Side		3
  West Village	1	1

• 
  
   
• New loft listings in new developments

• 34 Leonard Street	1
  1 York Street (One York)	1

   
• 
  
   
• Sold lofts in new developments 

  
  

  75 Ludlow Street (Ludlow Lofts)	1
  15 East 26 Street (Madison Square North)	2
  415 Greenwich Street (Tribeca Summit)	1
  243 West 60 Street (Adagio 60)	3

  
  For information about how I get this stuff and why I slice it as I do, see methodology for New + Sold in The Last Seven Days. For my most recent rant about how soft this data may be, see loft or not? caution: active ranting ahead.

Nov. 21, 2008 - picking on coop boards but in need of editing (NY Post)

it is their job, dammit

Why do people pick on Manhattan coop boards? Because it is easy and because they sometimes do dumb things that make the newspapers. And because they are an easy target on a site like Curbed, such as yesterday's Those Crazy Coop Boards, which riffed on yesterday's NY Post article Cuckoo for Coops. There is a lot of fodder in that article; I will chew on a good bit today, and may revisit this again soon (best laid plans??).

Having been president of a small Manhattan loft coop board for ten years I am confident that nearly all coop boards are trying to do their job when they review purchase applications: protecting their shareholder-neighbors. Granted, that in the case of the snooty-snoot coops along Fifth Avenue, Park Avenue, Central Park South or West "protecting" shareholders involves more obstacles and a folks-like-us approach, but those boards (easily caricatured) are hardly typical. Typical boards want simply to protect their own equity and living environment -- and that of their neighbors. (Of course there are the occasional individual board members who are nut jobs, but as a whole, boards are pretty rational.)

selling newspapers (or attracting website eyeballs)
Especially with the turmoil in the financial markets these days,everybodyis nervous, including coop owners and coop boards (aren't you??). And if their job is to protect shareholders, wouldn't you expect coop boards to change their approach when the world changes so dramatically? (Of course you would.) And you would expect that changed approach to generate some commentary, if not controversy.

but why is that NY Post article so poorly edited?
The Post talks about a number of things that have changed in how coops deal with purchase applications, most of which have been part of the coop board approach for years: (1) putting maintenance in escrow; (2) more frequent rejections; (3) "six months of financial records" instead of one or two months; (4) longer applications (40 pages was described as unprecedented); and (5) "some boards are requesting a second set of financials just before the signing of a contract to ensure that no nest egg or job has disappeared since the buyer initially made the offer".

Two things in particular in the Post article stand out to me. The last item I mentioned above (" some boards are requesting a second set of financials just before the signing of a contract to ensure that no nest egg or job has disappeared since the buyer initially made the offer") simply makes no sense. I find it hard to believe that Katherine Dykstra wrote it that way (she's been covering Manhattan real estate for a while), and harder still to believe that this sentence got through editing. The "some boards" noun in that sentence should be "some sellers" because boards don't get information until a contract has been signed. (A seller would get a buyer's financial information when an offer is made and may prudently ask that it be updated before signing a contract, but that is not what this article is about.)

If they mean that some boards require updated financial information before closing, that would be dramatic. And cumbersome. But it makes no sense as written, since no coop board gets any information from a buyer before a contract is signed. Simply absurd.

9 references; so what?
Then they hold up the poor Chattopadhyay family as the subject of (by implication) ridiculous scrutiny because each of the three had to get three references ("[w]hat makes this even more remarkable is that Chattopadhyay and her husband didn't take out a mortgage"). Nothing remarkable about this. The only thing different about a coop purchase application from a cash buyer is that there would be no mortgage application submitted, no mortgage commitment and no Aztec recognition agreement. If the application requires three personal references and two business references, they would be required for each purchaser. Here, apparently, there were three Chattopadhyay purchasers. Nothing unusual about that, at all.

more data in more perilous times; so?
The Post may be right that more coop boards now ask for more historical information from buyers. ("Boards now have less faith in the value of stock portfolios. In some cases, potential buyers are being asked for financial records that go back six months, rather than the month or two that was common a year ago.") I have not seen instances of this changed requirement, but am willing to believe that the Post is right. It is just not a big deal (and probably not so useful, but that's just my opinion).

In the old days (say, April 2008), some boards asked for "financial records" that went back only  a month or two, but other boards already asked for more history, if by "financial records" the Post means account statements. Many, many coop boards have long asked for two years or more of tax returns, but there is more diversity about how many months of bank and securities account statements have been required. In a more stable Dow Jones environment, additional monthly statements are irrelevant -- requiring older statements just makes it easier to find out if there has been a sudden infusion of cash or stock into a buyer's account (such as, from parents who park assets in an adult child's account for purposes of improving a purchase application; yes, it happens) -- because the value is the value is the value. Now, it may be more interesting to a board to see how an applicant's portfolio is doing over a longer term, without having simply the shorthand of Dow 11,000 to Dow 7,500.

But this is hardly dramatic, and hardly cumbersome, in a world in which most people can print most account statements from the web (and in which most coop boards accept web-generated statements). It may just be that boards are being better fiduciaries in perilous times.

coops v. condos / downpayment convergence
One point in the Post struck me as interesting, though they did not take it far enough. In thlnking about how coops may now be better "values" than condos (definitely a flip, if true), they point out that the down payment advantage that condos traditionally enjoyed may have vanished under changing lending standards. While most coops require at least 20% down, some condos required only 5% (the norm was 10% in my experience), so buyers used to be able to buy condos with less cash up front (ignoring the higher closing costs for a condo, but that gets more distracting).

While the Post says that "many condos are now requiring 20 percent down, just like a co-op would", I have not seen that (it could well be true). I have seen banks require 20% down in condo purchases, rather than 10%. But the Post's analysis leaves out the fact that coops will still require that a buyer have certain liquid assets left over after closing, while condos typically don't care. So a cash strapped buyer is still going to be more attractive to a condo than a coop (assuming they get a mortgage in the first place).

huh?
The Post ended with what looked like a favorable comparison of coops to condos, based on the notion that coops may now represent better"value" than coops. But can anyone follow the logic of the closing sequence here:

As Jorden Tepper, executive director of sales at Century 21 NY Metro, says, it's "basic supply and demand." More properties on the market should bring prices down, he notes.

"People in co-ops don't want to see their properties realize a depreciation in value," Tepper says.

So ultimately, those pesky boards will need to approve someone.

(1) Supply and demand should bring prices down, but (2) coop owners don't like "depreciation" (he means "declines" in values, right?), so (so??) (3) boards need to approve someone. Huh?

Fact is, coops don't "need" to approve "someone"; they should approve a qualified purchaser. Without a qualified purchaser, they should reject everyone. So (so!) that 'conclusion' is both wrong and illogical (it does not follow from the premises). Who is being nit picky now?

one final word
(This has dragged on, hasn't it?) In contrast to coops, of course, the only power that condos have in response to a complete application is the right of first refusal. That means that the condo seller who signs a contract is almost certain to sell (to the buyer or to the condo), as opposed to a coop seller, who goes back to square one if a buyer is rejected. Short term, that makes condos more valuable because they are more liquid than coops; longer term, I could make an argument that coop values should hold better because there is greater protection about new shareholders' finances, but that's for another day.

© Sandy Mattingly 2008  

Nov. 21, 2008 - too pushy ...?? thread / Soho edition

classic or uber?

These Manhattan loft candidates for the Goldilocks question are Soho neighbors in buildings that could hardly be more different. One is a brand spanking new uber-loft; the other is a classic loft. Let's play too pushy or just pushy enough??....

The uber-loft is newly for sale above $3,300/ft (I said uber, and I meant it). It was offered for sale pre-constrcution in 2005 and closed in 2007 $1,000/ft less than the current ask.

The classic neighbor is newly offered at about $1,800/ft. It was last sold four years ago (pre-renovation??) for (wait for it) ... under $800/ft. (These approximations assume the listing agent's square footage is correct; city records use a figure that is 80% of the agent's. In either event, the proportions should be the same.)

Interesting side question to this edition of this thread: will The Market react better in Soho to a brand spanking new uber-loft or to a classic loft? Stay tuned....

Nov. 20, 2008 - how big a discount for renovation? 64 West 15 Street closes with and without

how big a drag is a big job?
I've been thinking about the difficulties in this market of selling a Manhattan loft that needs a lot of work. Unit #2E at 64 West 15 Street is a recent example, as it just closed (deed filed November 3). At least in this instance, there was not as big a market discount for the fact that major renvaotion was needed as I would have thought. Let's explore....

more cash, greater income, more scrutiny
Anyone who buys a 'project' loft needs substantially more liquidity than the buyer of a fully renvoated / updated loft because the cost of the renovation (a) won't be folded into a first mortgage, (b) if financed, will be at higher rates than a first mortgage, and (c) will be subject to greater scutiny by the coop board and lender and will require higher income to support the appropriate debt-to-income ratio. Many coops will view a purchase application for a major renovation project as though the buyer will pay cash for the renovation, and judge the buyer's financial profile accordingly.

a strong stomach
Further, I find that there are fewer buyers out there with the appetite for a major renvoation than before. The buyer will need somewhere else to live for some months (and probably longer than originally planned). That means the buy will be paying for two living spaces for the duration of the renovation, or camping out with family or friends. (Buyers who need to sell another home in order to buy the to-be-renovated loft are particularly vulnerable here.) The buyer needs to have the courage and confidence that the renovation can be brought in close enough to budget to have the project make economic sense. Of course, the contractor version of Murphy's Law is a major concern here, as few major renovations seem to be brought in on time and on the money. Especially with lofts, there is a legitimate fear of the unknown -- while it can be exciting to see what is really behind some walls, not everyone has the stomach for such excitement.

Then there's the risk that the finished product will not match the buyer's dreams or architect/contractor's renderings. For many people, the certainty of buying the 'done' apartment warrants a premium over the hope that buying (and successfully completing) a project will result in the same level of finishes or pizzazz.

I will try to keep an eye out for examples to test how The Market reacts in these situations. 64 West 15 Street turned out better (for the seller of a project loft) than I would have expected.

point
Said to be "1,400 sq ft", #2E was marketed as a real project ("[t]he possibilities are endless, bring your imagination and start dreaming!"). With only two interior pix (one showing glass bricks, my form of 'carbon-dating' a loft renovation to 1980 or so), I will take the Smiling Blumsteins at their implied word that this unit needs a lot of work. The asking price of $1.299mm certainly offered some discount for the work to be done -- and it was manifestly enough of a discount, as confirmed by the fact that it did the job (contract within four weeks of coming to market on July 12 at the full asking price). Props to those Blumsteins and to the (happy, quick) seller.

counterpoint
In wonderful counterpoint, #2W closed recently, with a deed filed on August 26 for $2.3m, off an asking price of $2.395mm (reduced twice from $2.7mm since February). Based on lisings for other "W" units in the building, #2W looks to be "2,000 sq ft", so it sold for $1,150/ft in a "meticulously rebovated" condition. (The StreetEasy listing page is here.)

Compared to the meticulously renovated clearing price of $1,150/ft for #2W, the $928/ft for the endless possibilities of #2E matches just about exactly the notional ballpark figure of $200/ft for a major renovation (we established that ballpark about a year ago, in the December 10, 2007 need renovation stories / a reader writes for help), with hardly any wiggle room priced in for delay and the risk of the renovation working out. That surprises me a little.

Does anyone out there have another current example?

Nov. 19, 2008 - too pushy...?? thread Vol 3 / Tribeca build-out

reaching for a dream?

Am I getting carried away with this thread? Perhaps, but yet another candidate for the Goldilocks question came to market recently, raising the question of whether the seller is being too pushy about price in The (current) Market, or whether what looks to me as an aggressive price is just right. Time, as they say, will tell.

dashed dream?

Today's contestant is essentially a gut renovation opportunity for a large Manhattan loft that changed hands only this past Summer at about $900/ft. Something happened to make those Summer buyers November sellers (stock portfolio imploded, perhaps?), as the loft is again for sale as a major renovation challenge (opportunity). But now the opportunity is valued at about $1,075/ft. Hhhhmmmm....

I don't see Goldilocks springing for this near this asking price. Go ahead, somebody buy this thing and prove me wrong.

Nov. 17, 2008 - Manhattan loft inventory as of November 16 = 870

Number of Manhattan lofts offered for sale as of Sunday night: 

This is down 4 in a week but essentially flat over the last 4 weeks, while up 178 since my recorded low in mid-August.

See my May 19 post for what I am counting, and why it is difficult.

Nov. 16, 2008 - new Manhattan loft listings + closed sales in last 7 days

 
This is my fifty-fifth report on the number, price distribution and neighborhood distribution for Manhattan lofts reported as new to the market or as closed sales in the last 7 days.

The stats as of Sunday night:

• there were (again) 26 Manhattan lofts reported as new to the market in the last 7 days and only 16 as sold
• 13 of the 26 new ones are offered between $1mm and $3mm, while 8 of the 16 closed sales were below $2mm
• 5 of the 26 new loft listings are in new development, while 8 of the 16 closed sales are in new development
  
  

  By price	New = 26	Sold = 16
  $500k to $999k	1	5
  $1mm to $1.99mm	9	3
  $2mm to $2.99mm	4	2
  $3mm to $3.99mm	5	2
  $4mm to $4.99mm	5	1
  $5mm+	2	3

   

  By neighborhood	New = 26	Sold = 16
  Battery Park City
  Chelsea	4	3
  Clinton	1
  East Village	2	1
  Financial District	1
  Flatiron
  Gramercy
  Greenwich Village	1	3
  Kips Bay	4	3
  Little Italy
  Lower East Side
  Morningside Heights
  Murray Hill	1
  Midtown East
  Midtown West
  SoHo	5	2
  Sutton Place
  Tribeca	6	1
  Turtle Bay
  Upper East Side
  Upper West Side		2
  West Village	1	1

•