Townhouse buyers scarce

<i>High-end properties linger on market for nearly a year <br></i>

If developers think selling new condominiums in Manhattan is tough, they should try finding buyers for high-end townhouses.

Pricey, older townhouses appeal to a tiny percentage of buyers — by one broker’s estimate, just 3 percent of house hunters are looking for a townhouse — and as a result, they’ve always taken longer to sell than condominiums. But since the real estate market crashed, townhouses are proving even more difficult than usual to sell, and when properties do change hands, it’s only after steep price reductions.

“The townhouse market has been a little on the slow side,” said Anne Snee, a senior vice president at the Corcoran Group. “Townhouses are trickier to market. It’s taking longer than normal for everything to sell.”

Fewer buyers for high-end properties, combined with hard-to-get financing, are causing townhouses to languish on the market. According to data on closings from StreetEasy, 10 townhouses were sold in April, and the average length of time on the market was 54 weeks, compared to 100 new condominiums, which sold after an average of 28 weeks on the market.

Brokers who specialize in townhouses cautioned against drawing too many conclusions from townhouse sales data because of the small number of transactions.

Officials at StreetEasy said the numbers do not fully reflect the current market, which they describe as far more active than in the early months of 2009. Brokers interviewed by The Real Deal said that while they’re seeing much greater interest in the second quarter, townhouse buyers are looking for bargains, and sellers are not jumping at their offers. In some cases, sellers are reluctant to accept offers because they owe more on their mortgage than the property’s current value.

One of the hardest-hit areas is Harlem, which has a glut of townhouses for sale. Just four sales were recorded in April in Upper Manhattan, compared to 11 in April 2008, according to StreetEasy’s data.

A beautifully renovated three-family home in historic Hamilton Heights, originally listed at $2.6 million in July 2008, sold in February for $1.7 million, after three price cuts, said Brian Phillips, an associate broker with Prudential Douglas Elliman who specializes in Harlem townhouses. The buyer, an investor, paid cash for the house at 457 West 143rd Street.

Would-be buyers are finding apartments on the Upper West Side more affordable, which adds to the challenge of selling a townhouse in Harlem, Phillips said.

“I’m getting offers, but some sellers owe more than the properties are worth,” he said.

Still, the inventory of houses in all of Manhattan has dropped. The number of Manhattan townhouses on the market in April dipped 6.4 percent, to 539 houses, compared to 576 at the end of April 2008, according to Miller Samuel, the real estate appraisal and consulting firm. Meanwhile, the numbers of available co-ops and condos were each up 20 percent for the same period, said Jonathan Miller, the firm’s president and CEO.

Debby Solomon, a senior vice president with Elliman, sees more townhouses for rent and fewer for sale.

Owners are eager to make some rental income as they wait for prices to go up before putting their homes on the market, Solomon said.

“The listings for sale are limited,” she said. “I’ve been looking for clients from Los Angeles who want to rent a townhouse. There are tons to choose from for rent.”

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But some sellers are going to great lengths to close a sale, as was the case with a townhouse on West 69th Street that had been carved up into multiple apartments.

The townhouse sold last month for $4.4 million to a New York investment group, but only after a $500,000 price cut and months of complicated negotiations. The house took nearly a year to sell, said Edward Mermelstein, a real estate attorney whose firm was involved in the transaction. The deal went through because the seller provided the financing, he said.

Sales of townhouses above $5 million are rare in today’s market, he said.

“You’re having issues financing these properties,” Mermelstein said.

“On top of financing, the market itself has contracted,” he added. The people purchasing [high-end properties] are slowly disappearing. You’ve got bankers and hedge-fund guys who’ve lost their jobs and bonuses. Those were the targets of the townhouse market.”

Spring thaw

Still, some brokers are seeing a thaw after dealing with a dead market at the beginning of 2009.

Two townhouses on the Upper East Side are enticing house hunters, including one home with a garage on East 75th Street that attracted Madonna’s attention, said Don Correia, a senior vice president at Halstead Property. That home, originally listed at nearly $7 million, has an accepted offer.

There’s also a signed contract on a two-story townhouse at 75th Street and York Avenue that initially went on the market for $2 million.

“It was as dead as a doornail in January and February,” Correia said. “Things have turned around in the last month.”

Based on fresh interest among high-end buyers, Rachel Koenig of Prudential Douglas Elliman expects the second quarter to be much better for townhouse sales. One of her listings, a turn-of-the-century, six-story mansion at 11 East 74th Street, had been scheduled for an auction in May through Bid on the City, an online real estate trading venture, but the auction was canceled after a contract came in, Koenig said.

“The activity I’m seeing on the higher-end market has picked up,” Koenig said. “I’ve seen some houses go into contract in the last few weeks.”

That should be encouraging to Irish investor Derek Quinlan, who needs a wealthy buyer for his 13,000-square-foot limestone mansion at 20 East 64th Street, priced at $37 million, according to the New York Post. Built in 1857, the house has five bedrooms, two terraces, a gym, massage room, basement staff quarters and library.

According to the Post, Quinlan had been renting it out for $90,000 a month before putting it on the market.