In New York City, two bedrooms can be a reach for most buyers, but thanks to the overextended luxury market, prices are finally down a bit.
Credit…Stefano Ukmar for The New York Times
By most measures, it would be absurd to call $1,515,000 for four walls of Sheetrock a bargain.
In Manhattan’s flagging real estate market, that was the median sale price of a two-bedroom apartment last quarter — an 8 percent drop from the same period last year, and the largest discount among studio to three-bedroom co-ops and condos, according to the brokerage Douglas Elliman. Only the four-bedroom-and-up market fell further, with a 17 percent drop.
After years of softness at the top, it is finally becoming a buyers’ market for people who intend to actually live and work in New York. Case in point: deep bargains across the wide spectrum of two-bedrooms, the most common apartment for sale in the city.
Median Sales Price by Size
Manhattan’s two-bedroom market had the largest discount among studio to three-bedroom co-ops and condos last quarter.
Source: Douglas Elliman
By The New York Times
Yes, prices are still out of reach for many New Yorkers, but there are increasing options for first-time and move-up buyers at far lower prices than the median sales price suggests. Coupled with historically low interest rates, two-bedroom buyers are stretching their dollars further with everything from income-restricted co-ops to shiny new condos.
Since the city’s real estate sales market peaked around 2016, observers have focused on the shrinking price tags of ultraluxury three- and four-bedroom apartments, thousands of which remain vacant and unsold. The causes are many: investor speculation, oversupply, shrinking tax breaks, rising transfer taxes, economic uncertainty and downright hubris.
The current declining prices in smaller apartments, though, represents a significant shift and the return of more reasonable pricing. Two-bedrooms made up 31.5 percent of Manhattan’s for-sale inventory last quarter, the most of any category, according to the Elliman report, and has long been the bread-and-butter of both developers and agents. The two-bedroom market accounted for half of all sales at one point in the 1990s, but in more recent years, the ultraluxury condo boom in Manhattan has prompted a move to bigger and more lavish apartments — many of which were targeted to investors and second-home buyers, said Jonathan Miller, the president of Miller Samuel Real Estate Appraisers & Consultants and author of the report.
Still, upgrading from a smaller apartment to a two-bedroom remains cost prohibitive for many New Yorkers, Mr. Miller said. Last quarter, it cost a median $685,000 more to move up from a one-bedroom to a two-bedroom in Manhattan.
Those forces — too expensive for many move-up buyers, too small for the affluent jet set — have squeezed the two-bedroom market into an awkward position for many sellers, said Tyler Whitman, an agent with Triplemint and cast member on the reality series “Million Dollar Listing.”
“Twenty-five hundred options in the city is a lot of options,” he said, referring to an estimate of how many two-bedrooms are listed in Manhattan. Owners of standard cookie-cutter two-bedrooms would face the toughest challenge, he said.
Of course, the lower prices may be discounts without distinction for many New Yorkers. The median household income in Manhattan was $79,781 in 2017. Assuming a 20 percent down payment and spending 35 percent of their monthly income on a mortgage and additional housing costs, such a buyer could comfortably afford a $358,896 apartment, according to StreetEasy. Citywide, the household income was $57,782, enough for a $259,933 home.
To highlight potential bargains across the extensive two-bedroom market, we looked at income-restricted units for first-time buyers, prewar co-ops with deep discounts, new condos with back-end sweeteners, and options beyond Manhattan.
A Prewar Two-Bedroom on Sutton Place
Stefano Ukmar for The New York Times
Elsewhere, new projects are offering far more than closing cost rebates. At One Manhattan Square, a new 815-unit skyscraper south of Chinatown, the developer Extell recently offered to pay for seven years of common charges on the purchase of a two-bedroom apartment. Two-beds make up about 40 percent of the inventory and prices for those now start around $2.1 million, which would mean more than $100,000 of forgiven common charges, paid for by the developer.
That promotion is no longer being offered, said Raizy Haas, a senior vice president with Extell, but “the truth is, we’re reasonable.” The developer is now testing a rarely seen model in luxury condos: rent-to-own plans, in which a tenant can apply the rent toward the purchase of the unit.
As of Oct 24., there were 209 closed sales at the building, or about a quarter of the total inventory, according to an updated StreetEasy analysis. Ms. Haas said there were “hundreds more that have not yet closed.”
How a discount is derived can vary, but increasingly, it’s becoming the rule in new development, said Mr. Peters of Warburg Realty.
“There’s practically nowhere where you can’t negotiate the price, and the transfer taxes, and the mansion tax, and the legal fees, and who knows what else,” he said. Where to draw the line in the sand is another thing.
“I can’t count how many times I’ve heard a client say ‘O.K., if I drop the price, can you guarantee me a quick sale?’ And my response is no,” he said. “All I can guarantee you is no sale, if you don’t.”
For weekly email updates on residential real estate news, sign up here. Follow us on Twitter: @nytrealestate.