We're in the "writing about Manhattan apartments" business here at the New Construction Manhattan blog, not in the "looking gift horses in the mouth" business. So while we've covered the recent boom in high-end Manhattan condo sales and New Yorkers' marked preference for new construction condominiums over luxury co-ops, we haven't really puzzled over the how's and why's of this particular state of affairs. The second quarter NYC apartment sales stats tell us that we're in the middle of a surging NYC condo sales market, so let's party -- or at least search Manhattan apartment listings -- right?Sure, if you want, but given how much of Manhattan's apartment stock is comprised of co-ops -- a whopping 75% -- the fact that Manhattan condo sales have so thoroughly outpaced Manhattan co-op sales is kind of surprising. Even more surprising is the fact that prices for NYC condos are still at buyer's market levels despite the recent boomlet of activity in the market. It's worth asking how this is all happening. Some of the answers are more obvious than others -- namely, that co-ops can be kind of a pain in the butt about sales and especially onerous about subletting, while condos offer notably more flexibility. But for a full-spectrum explanation of the state of affairs, we haven't read anything as lucid, convincing, or comprehensive as this explanation from attorney Ronald Gitter at Coopandcondo.com. It really is worth reading the whole thing, but here's Gitter's takeaway on the state of play at the moment: Housing sales activity is now at pre-crash levels. That being said, from my anecdotal research, pricing continues to be significantly depressed. There are years of condo inventory available at historically low prices per square foot. Looking out three to five years, and perhaps longer, there doesn’t seem to be any reason why pricing would change until the shadow inventory is dramatically reduced, in part, by increased absorption. To complicate matters for cooperatives, as Stout’s piece points out, a number of well-known pre-war rental buildings are now also converting to condos. If the above assumptions are correct, a question arises, at least in my mind: How long can co-ops continue restrictive purchase and subleasing policies in an economic environment that will favor condos for many, many years to come? At some point in the future, if condo sales continue to outpace co-op sales and possibly dominate the landscape, co-op Boards may be forced to revisit the sacred cow of co-op ownership: restrictions on sales and subleasing. Again, check the whole thing out. None of this means you shouldn't feel free to go crazy in New Construction Manhattan's NYC condo listings -- the market is both healthy and tilted in buyers' favor at the moment. It's just nice to come a little closer to understanding why and how all this has come to pass.
Condos, Absorption Rate and You: Understanding What's Behind The Boom in Manhattan Condominium Sales
Posted on Thu, 2010-07-15 17:33