A slowdown in demand for high-end condos in Manhattan isn’t trickling down to the middle of the market, as buyers continue to flock toward units in the $1 million to $3 million range.
At 389 East 89th Street, Magnum Real Estate Group’s new condo conversion on the Upper East Side, developer Ben Shaoul said sales have already far exceeded initial estimates at the 156-unit project. The building, where units range in price from $880,000 to $3 million, is already on track to sell out before the end of the year, he said.
“The $1 million to $3 million market is very high velocity right now,” Shaoul told The Real Deal, citing the lack of homes for sale at that price point. “I can’t tell you the amount of traffic we’ve had to this building.”
The same is true for the Luminaire, Shaoul’s new Downtown project at 385 First Avenue, where units will be priced between $1.6 million and $5.25 million. Compass President Leonard Steinberg, whose firm is handling sales for Shaoul at the 103-unit building, said the developer has already received around 1,000 inquiries from prospective buyers despite having not yet launched sales.
And at 111 Murray Street, Steve Witkoff and Fisher Brothers’ Tribeca condo, where prices start at $2 million, sales have also been brisk, despite sluggishness on the high end of the market.
The number of middle-market homes for sale
isn’t likely to go up dramatically anytime soon.
In fact, Jonathan Miller, president and CEO of Miller Samuel, a real estate appraisal and consulting firm, said there has been absolutely “no sign” of the luxury market’s struggles spilling over into what he identifies as the $1 million to $4 million range, thanks to tight inventory.
“The most underserved market of them all is the $1 million to $4 million [range],” he noted.
The velocity in the middle of the market is likely welcome news for lenders and developers, amid concern that buyers across all segments of the market would be spooked by a slowdown in demand for luxury homes.
Brokers said a few buyers have been skittish about pulling the trigger on apartments after reading headlines about a dip in the condo market.
Jordan Sachs, CEO of Noho-based residential brokerage Bold New York, recalled how one prospective buyer recently called off his search for a one-bedroom pied-à-terre priced up to $2 million after receiving financial advice that he “absolutely needed to hold off from buying right now” and would be better served testing the market in another six months.
“I think that there is somewhat of a trickle-down effect happening from all the conversation we’re seeing about the high-end luxury market. It’s starting to play in the mindset of the $4-million-and-below purchaser,” Sachs told TRD.
It’s common for buyers to get a little antsy when there’s so much speculation in the market, but it doesn’t necessarily indicate a slowdown, Miller said.
Low levels of middle-market inventory, key to maintaining velocity in that segment of the market, aren’t likely to go up dramatically anytime soon, either. With land prices still relatively high, it’s still next to impossible to make that price point work from an economic perspective for developers, experts said.
Another factor working in the favor of the middle market: low interest rates.
“Those buyers who are buying right now are being very savvy,” Steinberg said. “If the market goes down 10 percent but interest rates go up 1.5 percent, it’s cheaper to buy now. The people who are buying now are capitalizing on the one thing that won’t last forever, and that’s low interest rates.”
Danny Hedaya, president of Financial District-based brokerage Platinum Properties, agreed. “Where interest rates are now, I’m advising buyers who are looking for longer-term plays to buy,” he said. “Manhattan is a pretty resilient marketplace. Even if it does have a correction, I think buyers are still going to be able to capitalize on low interest rates.”