Speaking at a New York District Council of the Urban Land Institute meeting this morning, Albert told a crowd of approximately 250 that--at this moment--smaller homes are hot. The coupling of low mortgage rates and high rental rates led to more people buying condominiums in the city, a large portion of which were one-bedroom units. Across all neighborhoods, one-bedroom condos sold for $500,000-600,000 or an average of $700 per sf. New two-bedroom condos sold for approximately $1.2 million, or an average—below 96th Street—of $700 to $1,000 per sf. Four-bedroom condos sold for an average of $2.5 million this year; however, they only accounted for 1.5% of the transactions in the market, she explained.
And as we look to the future, Albert said that a number of a new condo sites are planned for 2004 and 2005 but those will only bring 1,400 new units to the market—a proportionately small amount compared to the market size. This low level of inventory will lead to increased prices, she added.
As for the rental market, she explained that before Sept. 11, 2001 rents were averaging more than $50 per sf, with prime buildings averaging more than $55 per sf. However, the last couple of years have taken their toll on the rental market. "Over the last 24 months the rental market changed from a landlord market to a renters market," she explained, adding that incentives were used to draw in new residents. However, she anticipates approximately 2,000 new rental units coming on line in 2004 and approximately 3,500 new units in 2005. So for next year, assuming there are no more terrorist attacks, wars, or natural disasters, and if the economy continues to improve, the market is poised to soar, Albert said.
Financing activity seems to back that up. According to Steven Schnall, president and CEO of the New York Mortgage Co., despite the 1% increase in mortgage rates over the past few months, the rate is still low and residential mortgage activity will remain strong. Refinancing is a different story. "In the last few weeks the mortgage business has kind of dropped off a cliff," Schnall said, with a 30% reported decline. On the bright side, the decline has mostly been in refinancings and "the phone is still ringing and buyers are still buying," he added.
"And while the refinancing party may be over, or nearing an end," he said, purchasing is still high.
On the development side, zoning is the tool and many areas of the city are undergoing rezoning, such as the Brooklyn waterfront, Long Island City in Queens and in Manhattan there is a push to rezone manufacturing districts for residential use, according to Costas Kondylis, president of Costas Kondylis and Partners LLP Architects.
One area that is ready to take center stage in Manhattan, Kondylis contended, is Manhattan Landing. "Manhattan Landing is to the East Side what Battery Park City is to the West Side," he said. The area was rezoned for residential development more than 25 years ago and the city and state are just holding on to it, he explained, possibly until Battery Park City is full--and as point nears residential development in Manhattan Landing may become a reality soon.
But despite the rough seas over the past few years, there may be some good news in the marketplace, said Trevor Davis, chairman Davis & Partners. "Obviously the real estate market has changed very much over the years; however, we have all hung in there," he said. "The fundamentals have not changed and the lessons of the '80s still haunt us." Timing, location and double-digit returns are still a factor in development, he added.And though available land is becoming scarce in Manhattan, opportunities are cropping up in Brooklyn, Queens and New Jersey--especially with the increase in transportation.
"As long as there is a demand for housing, whether rental or condo, development will be done but the question is at what cost can it be delivered?" Davis said.
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