There were highs and lows for New York real estate this year. Sales records were broken, but the overall market hit the brakes, even as mortgage rates stayed low. Design took center stage in many new developments, and Hudson Yards opened to great fanfare.
No More Plain Vanilla
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Before putting a home on the market, sellers have traditionally been advised to make the space as plain as possible — avoiding bright colors, bold patterns and any sort of provocative furniture or art — to appeal to the largest possible pool of buyers. And developers have largely followed suit, creating model units with decidedly safe design schemes, awash in neutral colors.
Not anymore.
As new condominiums languish on the market, that thinking is beginning to change, and the past year has seen a number of developers hiring cutting-edge designers to create eye-catching model units that are anything but generic.
At One Manhattan Square, the developer Extell commissioned Anna Karlin, a trendsetting designer based on the Lower East Side, to design no less than 11 model units bursting with energetic hues and sculptural furniture.
One living room is coated in pink paint, with a curvaceous multi-armed sconce to match. Another has a glossy green ceiling. Yet another has a scalloped aqua credenza topped by an arched shelving unit filled with shapely, striped ceramics.
“People’s eyes are a lot more educated than they get given credit for,” Ms. Karlin said.
Her designs, she explained, are meant to reflect the lives of 11 individual characters: “I think people are excited to see spaces like that.”
For Extell, the goal was to create model units that would do more than merely look nice. “In this market, we have to do something that makes us stand out, because people are really shopping around,” said Christina Medina, the project’s sales director. “We want to be memorable. There’s nothing about any of these models that is ho-hum or ordinary.”
Just as unexpected was a model unit the designer Timothy Godbold created for Magnum Real Estate Group and Real Estate Equities Corporation at 196 Orchard Street. The walls of the master bedroom were lined with dark charcoal-brown Ultrasuede, and among the furnishings was a chunky brass-and-smoked-mirror credenza from the 1980s, so “you get that Tom Ford, Halston kind of luxe vibe,” Mr. Godbold said.
It was “the perfect opportunity to try something new,” he added, “rather than having people walk in and see the same thing.”
At 75 Kenmare Street, a condo with interiors by Lenny Kravitz’s firm Kravitz Design, DHA Capital directed the musician to create a no-holds-barred model unit. The resulting living room has a plush sofa with gold-and-black chevron-patterned upholstery, a graphic black-and-white wall mural by the artist Chris Wyrick and a rug that recalls leopard skin.
“It’s attention-grabbing, and it gets people to notice,” said John Gomes, an agent at Douglas Elliman Real Estate, who is leading sales for the project with Fredrik Eklund.
The idea is that in a sea of condo sameness, “you become memorable,” he said. “Even if it’s not to one’s particular style or taste, they can still appreciate the fact that it’s different and fresh.”
Daniel Hollander, the managing principal of DHA Capital, said he had no hesitation about offering buyers something distinctly different.
“In our case, the results speak for themselves, because we’re over 60 percent sold,” he said. “I don’t think plain vanilla cuts it anymore.”
The Biggest Sales in 2019
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The Real Estate Market Didn’t Change Much From 2018
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Manhattan’s housing market trudged through highs and lows in 2019. Records were shattered. Sales surged and stumbled. Long-awaited luxury high-rises opened.
Yet the market over all ended little changed from 2018.
For many real estate professionals, this wasn’t a bad thing. “Everybody was challenged by this market, but it turned out to be much better than I thought it was going to be at the beginning of the year,” said Steven James, the chief executive of Douglas Elliman Real Estate’s New York City Brokerage.
Andrew Wachtfogel, the head of research for Elliman’s development marketing, seemed encouraged, too. “The market is working through its inventory. Maybe it’s bottoming out.”
The past decade was marked by a construction boom. Luxury inventory alone (loosely defined as properties above $3 million) jumped around 20 percent from 10 years ago, according to the appraiser Jonathan J. Miller. As supply mounted, market sentiment shifted toward buyers, who in headier days, not long ago, were readily purchasing from floor plans and encountering bidding wars that drove up prices.
The urgency to buy remained largely absent in 2019, as it was the previous year. Listings continued to linger until sellers lowered prices or offered other incentives. Just over half of all properties sold below asking price, Mr. Miller’s data found, while only 6 percent exceeded the price. At the market’s peak, in 2015, nearly a third of all sales had sold above list price.
“We’ve had a bit of a correction, and prices are still correcting,” Bess Freedman, the chief executive of Brown Harris Stevens, said, adding that at all price points “buyers are looking for value and they’re almost insulted if you overpriced.”
For 2019, the average sale price for all Manhattan condominiums and co-ops was projected to rise slightly to $2.12 million from $2.07 million in 2018, according to a year-end report by CityRealty, which tracks apartment sales.
“There was nothing terribly different year over year,” said Daniel Levy, the chief executive of CityRealty, “2019 felt like 2018 all over again.”
But unlike 2018, there was a burst of activity in the second quarter (followed by a drop in the third), as luxury-home buyers rushed to avoid New York State’s higher “mansion tax” that took effect July 1. Among the dizzying number of transactions were three units purchased by Amazon’s founder, Jeff Bezos, at 212 Fifth Avenue for a total of $80 million.
For the year, closed transactions for all condos and co-ops was expected to reach 10,400, with sales totaling $21.2 billion, slightly lower than the 10,531 transactions in 2018 and $21.8 billion in sales, according to CityRealty. New-development sales edged higher, to a projected 1,225 totaling $5.8 billion, from 1,108 and $5.3 billion. Still, it was a far cry from the 1,848 sales totaling $8.9 billion in 2017.
Dominating the market was the newly opened 220 Central Park South. Seven of the city’s top 10 sales took place there, including the hedge fund manager Kenneth Griffin’s purchase of four full floors for nearly $240 million, a national record. He joined other well-heeled residents who closed on sales there over the past year. They included Gordon M. Sumner, a.k.a. Sting, who paid $65.75 million for a penthouse, and a buyer, believed to be Daniel Och, another hedge fund manager, who acquired a penthouse duplex for $92.7 million, the year’s second-highest sale in the city. (Many of these buyers had entered into sales contracts before the building was completed.)
The city’s townhouse market also posted a record. A double-wide house at 14-16 East 67th Street, once home to Bob Guccione, the founder of Penthouse magazine, sold for $77.1 million. The biggest co-op sale was a duplex at 834 Fifth Avenue, where the investment banker John Gutfreund had lived; it sold for $53 million, less than half the initial $120 million asking price.
Pamela Leibman, the chief executive of the Corcoran Group, was cautiously optimistic about 2020, although she acknowledged that the upcoming presidential election could temporarily sideline some buyers.
“Sellers are finally adjusting prices to the market,” she said, “and buyers are finding good values out there, combined with low interest rates. It’s a no-brainer.”
Mortgages Rates Stayed Low for Another Year
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In the mortgage realm, it was the year of More of the Same. Interest rates stayed low, defying experts’ predictions that 2019, finally, would be the year the 30-year fixed rate would take off for 5 percent and beyond.
In fact, rates went in the opposite direction, riding in the new year at a national average of around 4.5 percent, dipping below 4 by Memorial Day, and then staying there through the holiday season, according to data from Freddie Mac.
As of December 19, the 30-year fixed averaged 3.73, the 15-year was at 3.19, and a 5/1 adjustable rate mortgage was 3.37.
“It was one of the saving graces we had in the New York market this year,” said Jason Haber, an associate broker with Warburg Realty. “The market got kicked in the teeth at the federal and state policy levels, so the one thing we did have going for us was a very low mortgage rate environment.”
And yet, for the most part, the falling interest rates seemed to have little motivating impact on buyers.
“It didn’t really create a boost in the market,” said Michael J. Franco, an associate broker with Compass. “Those who are buying are in a relatively down market in New York, and that is more of a driving force. The interest rates are more like icing on the cake.”
Because rates have mostly stayed under 5 percent for so long now — nearly 10 years — consumers seem to have come to expect that’s where they will always be.
“We’ve been a little spoiled by the rates being low for so long — there’s no fear of missing out,” said Peter Grabel, a managing director with Luxury Mortgage Corp., in Stamford, Conn. “The rate just isn’t determining the decision to buy a house.”
That’s especially true at the higher end, he said. Say a buyer of a $1 million property were to miss out on a 3.75 rate before applying for a mortgage, and wind up with a rate 0.75 higher — with 20 percent down, the difference in the monthly mortgage payment would be about $350, not a lot at that income level, he said.
Factors that weighed more heavily in buying decisions this year, agents said, were property tax levels, the trajectory of property values, the buy-vs.-rent calculus, and the $10,000 federal limit on state and local tax deductions.
The drop in rates in the second half of the year did, however, help drive more refinancing activity among homeowners carrying mortgages with rates above 4.5 percent, as well as a flurry of renovation loans, said Mark Yecies, a co-founder of SunQuest Funding, in Cranford, N.J.
But otherwise, he said, “it didn’t impact the market at all. Rates have been in the same place for years.”
An expansion in nontraditional mortgage products did dramatically increase access to financing for self-employed buyers and investors in 2019, Mr. Grabel said.
Mr. Franco said he had worked with several investors over the course of the year who were able to get interest-only loans that made it feasible for each to purchase a condo in Manhattan.
“They had to put down at least 30 percent in each case, but they got interest-only loans for seven years at or under three percent,” he said. Rent from the condos more than covers the owners’ carrying costs, he said. And each is betting that at the end of the seven-year term, values will have risen enough to sell at a profit.
Looking ahead, Mr. Haber is hoping for a continuation of low rates, given the buyer uncertainty that will undoubtedly accompany a tense and polarized presidential election year.
“The real estate market will need every boost it can get,” he said. “I’ve had a number of people say to me, call me on the second Wednesday in November and we’ll think about buying then. Or not.”
Hudson Yards: Year One
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After a Grand Opening, Much More to Come
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Hudson Yards, the 28-acre luxury development on the Far West Side of Manhattan and the largest mixed-use private real estate project in the country, opened nine months ago to throngs of curious visitors and a ribbon-cutting ceremony with Big Bird.
In some ways, the hype has paid off. Three new skyscrapers totaling 5.7 million square feet of office space have been fully leased to tenants, including L’Oréal USA, Wells Fargo and Facebook. A seven-story shopping center chockablock with luxury brands like Coach and Rolex is almost fully leased, and the first of two luxury residential towers, where the median asking price is almost $7.5 million, has begun move-ins. And tourists still flock to the shiny 150-foot staircase called “the Vessel,” where wait time can exceed an hour.
But the $25 billion “city within a city” is still far from complete and subject to the same market headwinds found elsewhere in Manhattan.
On a Friday afternoon, two weeks before Christmas, many shops were empty. The longest lines were for the burger joint Shake Shack, the ubiquitous H & M, and the taxi queue outside. (The well-reviewed Spanish market, Mercado Little Spain, was closed for a private event.)
“It’s a place where I can do all my work,” because it’s so quiet, said Claudia Milena Otero, a premedical student and actress, who was sitting in a mostly empty cluster of tables around noon. Ms. Otero, who lives in a nearby rental building, said the shops were often quiet on weekday afternoons, especially compared to the chaos of the Herald Square Macy’s in Midtown.
On the wisdom of filling the shops with a large number of expensive brands, “the jury is still out,” said Harrison Abramowitz, a director at Newmark Knight Frank’s retail division. “There are so many other pockets for tourists to be shopping” in the city, he said, and a growing share of sales are made online.
The developers Related Companies and Oxford Properties Group have had clearer success in luring big-name companies to an area once known as Death Avenue, a reference to the dangerous rail tracks that once cut through the industrial zone. This is thanks in large part to tax breaks and other public incentives for businesses to move there: In all, government assistance totaled nearly $6 billion, according to an analysis by the New School.
The project is anticipated to contribute close to $19 billion a year to the city’s gross domestic product, and there are already 13,000 office workers in the new neighborhood, a spokeswoman said.
“We definitely shifted the gravity of the commercial district of Manhattan west,” said Jay Cross, the president of Related Hudson Yards, who noted that office tenants were paying at least $100 a square foot. Around 2012, commercial rents in the area were just $31 a square foot, according to the commercial brokerage CBRE.
Luxury condos have been a harder sell. At 15 Hudson Yards, the glassy 914-foot residential tower with a fluted top, just 54 percent, or 155 of 285 apartments, have sold since sales began in 2016, according to StreetEasy. Prices now range from about $3.4 million for a one-bedroom to $32 million for a four-bedroom penthouse.
Mr. Cross said more than 60 percent of apartments at 15 Hudson Yards had sold, including some units that were in contract. A second residential tower, 35 Hudson Yards, which includes an Equinox hotel and some office and retail space, has not yet begun closings.
“The condo towers in Hudson Yards — which might have seemed novel and unique when they were first designed — now have to compete with high-end offerings from Billionaires Row through TriBeCa,” said Grant Long, the senior economist with StreetEasy.
At least a quarter of New York condos built since 2013 were unsold in September, and Midtown West, which includes Hudson Yards, had the second highest share of unsold inventory, with 45 percent.
“Maybe they didn’t do as well as they hoped for,” said Kael Goodman, the founder of Marketproof, a real-estate data company in Brooklyn. The condos at 15 Hudson Yards have sold for an average $2,785 a square foot, a 7 percent discount from peak pricing in 2017, when they asked for more than $3,000 a square foot, according to Marketproof. Related maintains, though, that the building has sold at an average $2,900 a square foot.
There were certainly less successful buildings that began closings this year, he said, but the project still has a large share of unsold units more than three years later. And next year could bring more obstacles to the condo market, including political uncertainly and recent tax changes.
There are still about 13 acres of land to be developed in the second phase of the project, which will likely include several new residential buildings, an office complex and a public school, much of it to be built on top of a platform over the rail yards. Construction was planned to be completed by 2024, but Related is no longer providing a timetable for its completion.
“The issue is that the consumer feels the market is going to decline further,” said Pierre E. Debbas, a managing partner at Romer Debbas, a real-estate law firm that has represented condo buyers in Hudson Yards.
“What’s going to create urgency? A reduction in pricing or concessions,” he said. “That’s it.”
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