Is NYC’s townhouse market undervalued?

Realty television interior design duo Cortney and Robert Novogratz paid $4.3 million for their nearly 7,200-square-foot townhouse in the West Village in 2007. They recently listed the home for $21.5 million, or just under $3,000 per square foot.

While that price may seem high, the Novogratzes, who had their own HGTV show, “Home by Novogratz,” previously listed the house, which is located at 400 West Street, in 2009 for $25 million to no avail. And yet, compared with prices for new development condos in the neighborhood, the property, which is being listed by Douglas Elliman broker Raphael De Niro, is a relative steal, according to some top brokers.

That relative bargain stems from the fact that the price spread between townhouses and condos is widening, thanks to the explosion of luxury condos in recent years.

Halstead Property’s Louise Phillips Forbes went a step further, saying that on a price-per-foot basis townhouses are significantly undervalued in New York City. Compared with the Novogratzes’ asking price of $3,000 a foot, nearby condos range from $3,750 to $4,450 a foot.

“What [my clients] can get in a co-op or condo is nowhere near what you can buy, on a square-footage basis, in a townhouse,” Forbes said.

“There’s been a run on our luxury market,” Forbes said. “These [condo] developments have captured massive numbers, and that market momentum has magnified these numbers in the differentials tremendously.”

Brown Harris Stevens’ Paula Del Nunzio, who said townhouses are a “fantastic bargain,” predicted that prices for single-family homes in Manhattan would continue to rise.

“There will come a time when a house will cost $100 million, or $5,000 a foot, and nobody will blink,” she said.

Still, the day for $100 million townhomes hasn’t quite arrived.

“We have not seen, ‘Put any number on it and it will sell,’ like the condo market,’ ” said Linda Melnick, a broker with Stribling & Associates.

Widening spreads

While townhouse prices are climbing, they are not rising nearly as fast as condo prices.

The median sales price for a townhouse in Manhattan was $3.59 million in 2013 versus $2.7 million in 2004, a 33 percent jump, according to appraisal firm Miller Samuel. However, median condo prices saw a far more dramatic rise, jumping from $804,418 in 2003 versus $1.25 million in 2013 — a massive 55 percent increase.

The average price per square foot of a townhouse — $1,144 — is less than the $1,484 condo average. But averages, of course, are often skewed by the astronomical sales that have been more readily defining the condo market.)

Sources do point out that comparing the two types of housing can be tricky, since townhouse measurements include exterior walls and common space, while condos do not. Condos also get more expensive as they get higher in the building, while townhouses obviously don’t have that advantage.

According to Jed Garfield, managing partner at townhouse specialist Leslie J. Garfield & Co., “there is an intrinsic difference in value.”

“With a condominium, you’re getting all the services that are associated with that,” Garfield said. “Some people will pay a premium for a condominium for just that reason.”

And that premium only seems to be increasing.

Garfield said that in Chelsea, the average condo can fetch upwards of $3,500 per square foot, while the average townhouse would likely average $3,000. A 15 percent-plus spread is typical in almost every Manhattan neighborhood, and it can be higher in certain areas, he said.

“Those spreads are very real,” Garfield added, who nonetheless noted that his office’s average sales are 20 percent higher on a per-square-foot basis this year than last.

The townhouse market represents just a sliver of the whole residential sector. Overall, it amounts to less than 2 percent of residential transactions, said Jonathan Miller, president of Miller Samuel.

In Manhattan, there were 436 townhouses listed in the second quarter, up 4.8 percent from a year ago. But even as inventory edged up, the number of transactions dropped to 59 in the second quarter, compared with 78 in the prior-year period.

According to Miller, the drop is a tapering off of last year’s frenzied buying, which he attributed to buyers’ pent-up demand.

Potential profits

All of this isn’t to say that well-priced townhouses aren’t going into bidding wars. Maura Jarach, chair of the townhouse division at Keller Williams NYC, said she’s seen plenty of those, too. But she’s also seen a buildup of overpriced listings, where the sellers are unrealistic about how much their townhouse is worth.

Others concurred. “[Townhouse] sellers are looking at the $90 million apartments and saying, ‘Oh my God, I have 6,000 square feet,’ ” said Stribling’s Melnick. “It’s like everyone’s child is gorgeous. You don’t see the flaws when it’s your own.”

In addition, unlike new construction condos, townhouses often require extensive renovations, which can be daunting given the age, and potential landmark status, of the 19th-century buildings that make up the majority of the city’s townhouse stock.

None of that matters for some buyers, especially those in brownstone Brooklyn.

“The bidding wars are still going on, and the outskirt areas that weren’t as popular five years ago are definitely getting much higher prices,” said Halstead’s Jackie Lew, who sold a townhouse in July at 66 Midwood Street in Prospect-Lefferts Gardens for $450,000 over the $1.9 million asking price.

“It was an exorbitant number,” said Lew, adding that new condo development hasn’t inhibited townhouse buyers. “If they’re looking for a townhouse, they are looking for a townhouse.”

Over the past few years, developers have recognized the potential profitability that the townhouse market offers and have given buyers the best of both worlds: new construction and newly renovated townhouses.

Developers throughout Manhattan and Brooklyn have added townhouse components to larger condos complexes — from Related Companies’ Townhouses at Superior Ink to Rudin Management’s Greenwich Lane project to Hamlin Ventures and Time Equities’ 23 townhouses in Boerum Hill, Brooklyn.

“There are people recognizing that they can make more money by building out the spaces and marketing to people who aren’t getting what they want in the co-op and condo market,” Forbes said.