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Manhattan Co-Op Prices Fall as Buyers Favor Condos (Update2)

By Sharon L. Crenson

July 3 (Bloomberg) -- Manhattan co-operative apartment prices fell in the second quarter, the first decline in four years, as buyers favored condominiums that are free of resale and sublet restrictions.

The median price of a co-op declined 3.7 percent to $695,000 in the period ending June 30, according to a report today by appraiser Miller Samuel Inc. and broker Prudential Douglas Elliman Real Estate. The median price for a condo climbed 5.1 percent to $1.04 million. About two-thirds of the borough's apartments are co-ops.

Buyers are turning to condominiums as developers including Toll Brothers Inc. and Related Cos. LP build new developments from Harlem to Battery Park City. Overall, Manhattan apartment prices rose 1.7 percent from a year earlier, the second consecutive quarter that price growth was less than 2 percent.

``Certainly the market is moving upward, but it's not like 2004 again,'' said Jonathan Miller, head of Miller Samuel Inc., a Manhattan-based appraisal firm. ``We don't seem to be facing the tidal wave of pessimism that we were a year ago, when people were facing the question of whether to rent or buy.''

Nationally, the median price for a condo outside New York City fell 0.4 percent in May to $228,200, said Lawrence Yun, senior economist for the Chicago-based National Association of Realtors.

``The rest of the country is complaining about price drops and New York just seems to be in suspended animation,'' said Steven Knobel, co-founder of Manhattan appraiser Mitchell, Maxwell & Jackson Inc.

No Manhattan Slump

Even as Manhattan gains slow, the local real estate market continues to be driven by the city's robust economy and Wall Street bonus money, said Gregory J. Heym, chief economist for Terra Holdings, the company that owns brokers Brown Harris Stevens and Halstead Property. Foreign buyers also are bolstering demand, Miller said.

Manhattan is showing few signs of the U.S. housing slump that has dragged down prices nationwide and spurred the National Association of Realtors to forecast declines in sales and prices this year.

Sales of previously owned homes probably will tumble 4.6 percent to 6.18 million and the U.S. median home price likely will fall 1.3 percent to $219,100, the group said in a forecast last month. Should overall U.S. prices drop, it will be the first time since the Great Depression.

Sales of Manhattan apartments doubled from the same quarter a year earlier, when many buyers waited to see if New York's housing market would decline along with the rest of the nation.

`Good' Volume

``Sales volume is good,'' said Paul Purcell, a partner in the Manhattan real estate consulting firm Braddock & Purcell. ``I only get nervous when people are afraid to buy or sell.''

Miller Samuel recorded 3,939 sales last quarter compared with 1,934 in the same period last year. Condos accounted for 60 percent of sales, though they only comprise about one-third of the city's apartment stock.

Condominiums are attracting interest because they offer buyers an opportunity to live in a new building and hold the deed to real estate. Co-operatives tend to be in older buildings, and they evaluate potential buyers by requiring board approval and only allow residents to own shares in the corporation that owns the property.

``Many people don't want to put themselves through that,'' said Braddock & Purcell partner Kathy Braddock. Many co-operatives demand down payments of 25 percent and some require all cash, which turns off some buyers, she said.

Amenities

Condominiums have less rigorous financial requirements, allowing people who couldn't otherwise enter the market to buy, said Pamela Liebman, chief executive officer of the Corcoran Group, which is owned by Apollo Management LP. Condos are also getting the edge by offering amenities such as lap pools.

``If you can get into the first day of the opening of a new condo, it's like getting a swag bag from the Oscars,'' Liebman said.

For co-ops and condos combined, the median price reached an all-time record of $895,000, according to Miller Samuel.

On the Upper East Side, $875,000 fetches about 885 square feet of space in a luxury building with amenities including a 50- foot swimming pool, barbecue space and a concierge.

The new 215 E. 96th Street, built by Stephen M. Ross's Related Cos., includes a 26th-floor ``junior four,'' a one-bedroom apartment with dining alcove that can be converted into a second bedroom. New York Jets linebacker Eric Barton just sold it through Citi Habitats' broker Paul Anand. The building also has its own pet groomer.

Two Bedrooms Fall

The biggest decline in co-op prices was in two-bedroom units, with the average price falling 6.8 percent.

Across Manhattan, the average price of studio and two-bedroom apartments dipped slightly less than 2 percent. One-bedrooms rose 2.3 percent, three-bedrooms climbed 17.6 percent and apartments with four or more bedrooms gained 36.2 percent.

The declines in co-op prices may be partly because so few large ones are for sale.

``I don't see any problem whatsoever in the co-op market. Just go out and try to buy a classic six,'' Liebman said, referring to apartments with two bedrooms, a living room, dining room, kitchen and maid's room. ``Your broker is going to cry because they are not going to have much to show you.''

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