Jed Garfield expected 2007 to be a bad year for townhouse sales in Manhattan.
Garfield, managing partner at townhouse specialist brokerage Leslie J. Garfield & Co., had plenty of reasons to feel jittery. In 2006, the rarefied, top-tier market cooled in the fourth quarter, with only 35 one- to four-family townhouses sold — a 5 percent dip from the year-earlier quarter. The sluggish Manhattan residential market and buyers’ nervousness about the New York economy further fueled Garfield’s pessimism.
“I certainly would have expected that the market would have tailed off,” says Garfield. “[But] it seems the upper end of the market is surprisingly strong.”
After the first three months of this year, Garfield has company among fellow brokers who are reporting a strong year in townhouse sales. Fifty-two townhouses were sold in the quarter, a 37 percent jump in sales volume, says Gregory Heym, chief economist at Halstead Property. The increase, on a percentage basis, outstrips the 26 percent gain for condo and co-op apartment sales for the three-month period compared to a year ago. Second quarter data wasn’t available as of press time.
“I think the buyers in general are feeling a lot more confident in the market than they did a year ago,” says Heym. “People are not afraid to jump in.”
Buyers are also willing to pay up for properties at coveted addresses, as long as the townhouses are in good shape. Price appreciation has made this year a good one, even for brokers whose unit volumes are dipping a bit. According to public records, a buzzed-about late 2006 deal for 11 West 10th Street closed for $33.1 million this spring — shy of its $37 million asking price, which would have set a Downtown record. After an extensive redo, this spring 12 East 73rd Street sold for $23 million, a 35 percent premium over its 2006 sale price of $17 million. Another noteworthy sale that shows the upward movement in the market this year is 130 East 70th Street, which closed in May for $13.8 million after a renovation, more than double its $6.5 million sale price last year.
“People will pay a premium for something completely renovated and ready to move in,” says Toni Simon, an associate broker at Halstead.
They are even stepping up for Seagram heir Matthew Bronfman’s renovated townhouse at 7 East 67th Street. According to sources who asked not to be named, there is a $33 million signed contract for that property, as The Real Deal reported on its daily Web site last month. Broker Sami Hassoumi of Brown Harris Stevens, who has been quietly marketing the townhouse for several years, did not respond to requests for comment. The property has been on the market since 2002; the six-level, 25-room property boasts a glass-enclosed, four-story atrium, a double-height paneled library, six bedrooms, eight baths and “generous staff quarters.” The new owner can also ward off chills with six wood-burning fireplaces.
Manhattan’s supply of only 5,643 townhouses compared to the growing number of luxury condo apartments is a major reason for the townhouse market’s unexpected strength. The ongoing stock market rally, relatively low interest rates and New York City’s declining unemployment rate are also fueling buyer demand. In addition, brokers say, the weak dollar is inspiring more foreign buyers to make deals.
Garfield’s e-mail inbox shows evidence of the international demand for Manhattan townhouses. He has long heard other brokers boast of doing huge business over the Web, but this spring, for the first time in his career, he has been receiving serious e-mail inquiries from Paris, London and even Tokyo. At press time, he had a $17 million contract out for a townhouse for a buyer from London.
“A lot of these bankers move from London to New York, and the prices look reasonable,” says Garfield.
That demand means Garfield’s projected sales of 23 townhouses this year will top his 2006 dollar volume, even though he moved 27 properties last year. Despite the slower sales volume, he expects a 20 percent gain in gross revenues. Garfield attributes the higher prices in part to the ripple effect of last year’s highly publicized, record-breaking townhouse sales: 4 East 75th Street, which fetched $53 million in October, and 1009 Fifth Avenue, which commanded $40 million in January of 2006.
Despite the positive results so far this year, the townhouse market does face challenges. A substantial stock market plunge or other serious blows to the economy could curtail demand. And while prices are up dramatically for some townhouses, overall the annual median price rose just 5.4 percent last year to $4.1 million, substantially slower than the 10.7 percent gain in the annual median sales price of co-ops and condos, to $830,000, according to appraisal firm Miller Samuel.
In addition, the strong start to 2007 has been helped, in part, by easy comparisons, since last year was somewhat slow. According to Halstead’s Heym, in 2006 there were 172 townhouse sales, down from 227 in 2005. This year’s results will beat that figure easily if there are strong sales during the second and third quarters, which are traditionally busier than the first quarter. “If we just stayed at this level we’d have about 200 sales,” says Heym. “Assuming the second quarter and third quarter are faster – which typically they are — it’s conceivable.”