‘Big Apple’ Takes Big Bite in Housing Cost : New York Apartment Market Considered Rich, Even by Los Angeles Standards

NEW YORK â€”  One man’s wisteria-covered cottage with a white picket fence is another man’s high-security co-op with maid service.

And few places in the world can match this city of wall-to-wall people for the tenacity, and money, required to maintain what passes as a cottage “in town�--free of the subway/train commuting hassle to New York’s suburbs. No matter how gilt-edged the suburb, it’s still a commuting hassle.

And in few residential real estate markets is data about the market more frustrating to pin down.

“It’s difficult because as a market it’s not very well documented or reported,� according to Clark P. Halstead Jr., president of the Halstead Property Co. which specializes, almost exclusively, in residential real estate--condominiums, cooperative apartments and town houses.

‘Flying Blind All the Time’

“About 85% of the market, though, is in co-ops and sales are actually sales of stock in the building, and aren’t reported as a conventional real estate sale is. So, we’ve got a large percentage of the housing market changing hands without any information on prices. We’re sort of flying blind all of the time.�

And not improving the complexity situation any is the fact that Manhattan has no multiple listing service and, thus, no free exchange of information among brokers on what is available at any given time.

“The local custom, when you get ready to sell, is to list your place with two or three, or more, brokers,� Halstead said. And possibly each broker ending up with a different asking price as a means of testing the market. With 70 full-time brokers and two offices, one on upper Madison Avenue, and the other on the Upper West Side, Halstead is unusually well equipped to keep tabs on the otherwise badly fragmented residential real estate market here.

Through a sophisticated computer program that tracks both the company’s own sales, and other sales that come to its attention, Halstead is able to detect trends in the market block by block, and reports on them in its quarterly publication: “Halstead’s New York.�

Rich Manhattan Market

And despite a recent softening in the residential market--a drop of about 11% in the average asking price for apartments--the Manhattan market, even by heady Southern California standards, is rich stuff.

In northwest Los Angeles County, for instance (generally, the San Fernando Valley), the latest study published by the Real Estate Research Council of Southern California puts the average price for an existing three-bedroom, 1,600-square-foot home at $135,000.

Which is almost exactly the price a room in Manhattan for what is described as a “small, two-bedroom� apartment (4 1/2 rooms or less). Average selling price in the last quarter of 1985: $387,972.

While some areas obviously remain “better� than others in the prestige department, Halstead added, “real New Yorkers today are a lot more ambivalent about where they live than they used to be because virtually all areas are good.�

‘Best Address in World’

Still, the Upper East Side still commands top dollar and, Halstead said, “the area off 5h Avenue continues to be the best address in the world. The most dramatic change, though, has been in the once-down-at-the-heels Upper West Side which, in the last 10 years has become extremely fashionable. The prices, and rents, are higher over there than they are here on Madison in the East 80s (streets).�

Little remains, today, as a reminder of the weak New York residential market that existed 10 years ago.

“The city was really seeing hard times . . . was bankrupt, in fact . . . and apartment prices reflected it,� Halstead said. “I sold an apartment building with a good, 5th Avenue address for the owner in the late ‘70s and, recently, had occasion to sell it again. I can’t give you the figures, but I can tell you that the price I sold it for in the ‘70s was less than the commission that I received on this last sale.�

New York Asking Prices

As opposed to the average resale price for a three-bedroom home in the seven Southern California counties in the last quarter of 1985, as reported by the Real Estate Research Council--$142,735--here are the average apartment asking prices prevailing at the same time in New York City:

Studio $156,109

One-bedroom $254,755

Small two-bedroom $387,972

Large two-bedroom $630,640

More than 2 bedrooms $1,525,089

Town houses $2,337,123

“The Trump Tower condominiums at 56th Street and 5th Avenue came on the market about three years ago and it was supposed to be the most prestigious address in the world at the time,� Halstead said. “And the sales price in the $600-to-$700-a-square-foot range reflected it. Actually, some of the older co-ops along Central Park and 5th Avenue are selling in the mid-$600 range, too, and the Trump Tower condominiums have become a sort of senior citizen home.�

The 61-story Trump Tower--a $190-million, mixed-use complex--incorporates 266 apartments on its upper floors, of which 251 have been sold for a total of $277 million, or an average price of $1.1 million apiece.

Robust, Healthy Market

“The whole city,� Halstead said, “is a robust, healthy market. Every time you’ve got a good stock market--because so many people sell securities to buy an apartment--it makes people optimistic, and buying an apartment is really an emotional experience. Interest rates are low, about 10 3/4, and the dollar has changed relative to other currencies, so we’re seeing a lot of foreign money coming into the apartment market. There’s a tremendous pent-up demand.�

One major threat that hung over the New York apartment market a year ago has pretty well dissipated, he said. That was the fear that proposed tax reforms would sharply limit, or eliminate, the interest deductibility on second homes. And few cities on earth, it is generally conceded, have as high a percentage of pied-a-terre --part-time homes--as New York.

“Anyone who can possibly manage it,� Halstead said, “maintains a primary residence somewhere else, even though their apartment here is really their home. Now this tax problem seems to have receded.�

Slowly, but surely, the apartment rental market in Manhattan is drying up. “We’ve still got the old rent-controlled apartments, of course,� Halstead said, “and the second layer of that, those under rent stabilization--which is more liberal for landlords than straight controls--and the free market.

Conversion to Rentals

“A few years ago, there was the strategy of converting rentals to co-ops or condominiums by getting a large percentage of the renters to agree to buy their units and then forcing the others out,� Halstead added.

“That’s pretty well non-existent now. It’s all voluntary, and the short supply has made conversion relatively easy, and an awful lot of prime rentals have gone that way so there’s really not too much left in the way of rentals--I’d guess that they’re less than 10% of the entire residential market today.�

Certainly, making conversion more attractive--from the tenant’s standpoint, at least--have been the skyrocketing rents on “free-market� apartments, increasingly a bigger percentage of the shrinking rental supply.

“In relatively new buildings--2 years old, perhaps,� Halstead continued, “you’ve got studio apartments renting for about $1,100 to $1,500 a month, one-bedrooms going for $1,400 to $1,800 and two-bedrooms renting for $2,000 to $2,500 a month.�

And in some new, deluxe, buildings, another source close to the rental market said, rentals are expressed in dollars-per-square-foot-a-year, just as commercial property is, and at comparable Midtown rates--$30 to $40 a square foot.

On which basis, that “average� Southern Californian home of 1,600-square-feet used by the Real Estate Research Council in its latest study of the residential market here, would come with a rental price tag of between $4,000 and $5,300 a month.