A little over six months ago, Barak Dunayer made headlines when his eponymous agency snagged the listing for William F. Buckley’s Park Avenue duplex. The asking price was $24.5 million, with more than $10,000 a month in maintenance fees.
Now, the four-bedroom apartment is still on the market. These days, Dunayer says just closing a $1 million deal is cause for celebration.
“The great majority of the deals we’ve done since October have been in the $300,000 to $700,000 range,” he told The Real Deal. “The luxury market has been pretty frozen.”
Indeed, New York City’s luxury market is in even more peril than the overall market. According to numbers compiled by StreetEasy, overall Manhattan sales in the fourth quarter of 2008 were down 24 percent from the year before. But the news was even worse for the highest echelon of the market — the top 10 percent of recorded sales — where volume fell 30 percent in the same time period.
“In terms of the luxury market, the number of closings dropped dramatically since a year ago,” said Sofia Kim, vice president of research at StreetEasy.
Meanwhile, New York Magazine recently reported that less expensive smaller apartments are faring better, relatively speaking, than larger units. The magazine noted that studios have seen larger price gains than other apartments in the last year, and have been selling at higher rates.
Kim confirmed that. “Studios and one-bedrooms are doing better than the rest of the market,” she said.
According to StreetEasy, in the fourth quarter of 2008, studios represented 13.77 percent of the total properties in contract, up from just 9.59 percent the year before. By contrast, properties with more than four bedrooms fell from 2.21 percent of the market to just 1.59 percent.
The numbers are even starker for the first two weeks of 2009, where studios represented 17.42 percent of new contracts and four-plus bedrooms just 0.56 percent.
Appraiser Jonathan Miller, president of Miller Samuel, reported that median luxury prices in Manhattan dropped in the fourth quarter of 2009, down 2.3 percent from the previous quarter. Miller’s report also showed that the number of days-on-market grew at about double the rate for luxury than for the rest of the market. Non-luxury co-ops were on the market 26 days longer and condos 21 days longer than they were in the third quarter of 2008, while luxury properties sat 50 days longer.
All in all, it is clearly not a good time for the high end.
Joseph Testone, an agent at Bellmarc Realty, said that the last big deal he did was in August, when he sold a two-bedroom at 45 Fifth Avenue for $2.5 million.
“Historically, the bulk of my deals have been between $750,000 and $2 million,” said Testone. “These days, I’m definitely seeing more action on the low end.”
Dr. Jeffrey Tanenbaum, a former surgeon who left his Texas medical practice in the late 1990s to get into New York real estate, has also seen his business change dramatically since last summer.
“I had a hedge fund guy all lined up to sign a contract on a $5 million Park Avenue property, but then Bear Stearns collapsed and the guy literally disappeared,” said Tanenbaum, now a broker at Barak. “Even his agent couldn’t find him.”
Tanenbaum said most of his deals last year were in the $2 to $5 million range. Now, they’re mostly far less than that.
“I have to be a chameleon,” he said. “I’m used to making good money, but you have to morph yourself into what the market is calling for.”
So instead of one or two big deals, he’s now trying to broker more deals in the $350,000 range to make up for the lost income.
The fact that the bottom end of the market is holding up better than the luxury market has surprised some in real estate. Even during 2006 and some of 2007, when the national housing market was cratering, it was Manhattan’s luxury market that was propping up the rest of the real estate market here. Now that paradigm has shifted.
“Conventional wisdom says that when it gets difficult, the bottom end falls apart and luxury stays secure, but it has been 180 degrees the other way,” the president of Warburg Realty, Frederick Peters, told The Real Deal earlier this year. “The transactions have been at the lower end, and there has been very little activity at the high end.
“At its height, the high-end pricing got too big even for the people who could afford it.”
Prices are, of course, adjusting. Testone said he recently closed a deal on a two-bedroom, two-bathroom Chelsea resale for $780,000 — about 20 percent below the initial $995,000 asking price.
The market’s sudden tilt toward the buyer means many agents are adjusting their sales and outreach tactics to cater to the lower end of the market. Needless to say, scouring the newspaper for IPO announcements is no longer the best way to find new clients.
Richard Grossman, the Downtown sales director for Halstead Property, said that some of his agents are switching sides, representing buyers instead of sellers, and that those agents sticking with sellers, particularly on the high end, are “having frank conversations” about dropping prices. His agents are also starting to get more clients through open houses, and are coming up with cheaper, more effective ways of marketing their offerings.
Halstead’s Lianne Graubart said her business has for the last few years been a mix of one-, two- and three-bedroom apartments. But, she said, with the market turning away from the finance types who bought with their big bonuses, she’s more focused on the first-time buyer who is looking in the $1 million range, and young families looking to trade up.
“I admit, I’ve read the wedding pages of the [New York] Times looking for potential clients. A lot of my clients are my age, 25 to 35, and they like working with someone who is a peer,” said Graubart, who has been in the business for six years.
Dunayer from Barak Realty said he repeatedly stresses to his agents how important the basics of brokering are, especially when dealing with buyers looking at the newly hot studio and one-bedroom market.
“Selling a $350,000 studio is more difficult than selling a $3 million apartment,” said Dunayer. “Luxury buyers have done this before. They’re ready to go for it. A first-time buyer needs more hand-holding.”
And, he said, working at the lower end of the market is simply a reality of this economy.
“If you want to do deals, you do what’s there,” he said. “Yes, it’s a smaller paycheck at the end of the day, but it’s not just us; it’s everybody. The whole economy is suffering. Be happy, be humble, and do what you need to do.”
