Wonder if anyone in real estate would ever say a $1 million one-bedroom might be a bad thing? Then you might want to listen to Paul Purcell.
Purcell, co-founder of real estate consultancy Braddock + Purcell, spoke frankly about what he sees as the absurd asking prices for some New York City apartments, the amount of business the average agent is likely to see, and the perception of the industry in general during a recent audio podcast interview with The Real Deal.
Having left Douglas Elliman, after becoming its president in the late 1990s, Purcell now heads a firm that acts as an adviser to buyers, connecting them with vetted brokers that, in turn, give Braddock + Purcell a referral fee.
Some excerpts from the interview, which can be heard in its entirety in the Audio Interviews section of TheRealDeal.net:
THE REAL DEAL: Can you compare the market today to any other point in recent history?
PAUL PURCELL: That’s an interesting question and the answer is no. The example I would give is that people are trying to compare us to the late ’80s. We had a very specific event that occurred on Wall Street in 1987 that affected real estate. But real estate itself does not move like Wall Street does. The next day you can’t have a 20 percent drop in property values. I would think it takes six months for someone to even start to feel the effects of certain other events. We also overbuilt in the late ’80s.
TRD: What do you mean, just too many condos?
PP: There are only 10,000 units that are sold in Manhattan in a year. Think about that not a lot, and it’s consistent. In ’88, ’89, I can think of a three-block radius where we almost brought 2,000 units to marketplace on First Avenue in the East 30s the Corinthian, Manhattan Place, and the Horizon. Those three condominiums represented almost 20 percent of our saleable market coupled with the fact that we had something happening on Wall Street, jobs being cut, interest rates higher than they are today we couldn’t absorb it.
TRD: In regard to new projects today, is there too much coming on the market?
PP: Well it certainly is being absorbed very quickly. People are paying more than they have ever paid for property and for product, but I think there’s still a limit. There is something at work here in Manhattan that frightens me a little bit.
TRD: What’s that?
PP: It is our pricing. It is scary to me when a young person is making $150,000 and they can’t afford to buy anything. We are a city of rental apartments, quite frankly unlike any place in the United States. You may not want to throw away money on rent, but you just may not be able to afford to buy.
TRD: When do you think that point is going to be reached when people just will not pay the price that’s being asked?
PP: I am nervous that we could be perilously close to a point like that. The average price of an apartment is well over $1 million! We think that’s a really great, cool thing to say I think it’s a scary thing to say.