Lost in the Super Market

When the family that owned the nine-room co-op, smack in the middle of the investment-banker promised land that is Park Avenue in the Seventies, decided to pull up stakes last summer, they put their price at $3.6 million. That was in August, and the number was a bit exuberant, given that it had been a slow year so far and the family had lived there for 40 years; the place was more Sister Parrish than Peter Marino.

The bids came in at $3.2 million. “There was resistance” among buyers to paying more, admits Stribling Private Brokerage president Kirk Henckels—especially after the family increased the price 10 percent in September. “But we broke through it.”

Did they ever. After the board rejected one bidder, the apartment went back on the block for $4.25 million in January, where it garnered multiple $4.1 million bids. “That 28 percent increase in five months,” Henckels says, is “as freestanding an increase as you can find.” And thus the bear market—such as it was—is ended.

If you were looking to make a deal, or just wanted some time to make up your mind, you should’ve bought last summer. Or better yet, last spring, right around the time everybody got nervous about Iraq. That was the last time property stayed on the market for a while and sellers were negotiable. Now, thanks largely to the resurgent stock market and the subsequent bonuses, the madness has resumed. So much inventory has been sucked up that half as many apartments are available right now than there were a year ago. Meanwhile, rentals continue to languish—it’s routine, these days, for lease-signers to get a month or two for free—as tenants rush to buy before the interest rates go up, and the glut of late-nineties rental construction keeps demand from catching up.

“It was unbelievable,” says composer Edward Bilous, who bought a $2.6 million live-and-work space in Chelsea with his wife and their new child in January. “We met with a lot of Realtors, and they would put us in their Rolodex. And as soon as something would come available, five or six would call us within half an hour.”

You should’ve bought last summer. Or better yet, last spring—the last time property stayed on the market and prices were negotiable.

“We’re awfully close to the peak of the market,” says Henckels, by which he means apartment prices have escalated to levels not seen since the turn of the millennium. “This co-op market is so overheated right now it’s a little scary.”

Not that there was ever a bust, exactly. The city has largely been tamed for real-estate speculation, the empty lots filled in, warehouses converted, brownstone details regilded, barrios refitted with bistros. Plans to rezone vast industrial tracts on Manhattan’s West Side, in Williamsburg, and along Fourth Avenue in Brooklyn (the ragged western edge of Park Slope) are afoot, to allow bourgeois high-rise settlement. And now Frank Gehry’s coming to Atlantic Avenue. “Boundaries continue to disappear,” says Corcoran Group CEO Pam Liebman. “People are starting to talk about Washington Heights. There are a lot of theater people talking about Inwood,” the panhandle at the top of Manhattan that was, until recently, never brought up in polite real-estate conversation.

According to the Douglas Elliman Manhattan Market Overview, the average price of an apartment in the last quarter of 2003 was $903,259—up 11.7 percent from the year before. As Ron Tardanico, sales manager of Bellmarc Realty’s East Side office, puts it, “I don’t see things slowing down at all, unless something happens which I don’t want to think about.” He estimates that his average sale price has gone up more than 30 percent since October.

As a result, consensual real-estate reality (what’s it worth?) is hard to pin down, and appraisers are having a tough time keeping up. Take ImClone founder Sam Waksal’s 7,000-square-foot triplex penthouse at 150 Thompson Street, which he no longer needs, since he’s downsized to a jail cell. It sold in January for $6.9 million—more than its appraisal—after a four-way bidding war. The brokers just couldn’t wait: According to Dolly Lenz, the Douglas Elliman dealmaker who sold it, two brokers actually “paid off the guy in the building to let them in.”

So it’s getting desperate. “People bring their kids along and try to get them to charm you,” says Michele Kleier, president of Gumley Haft Kleier. “It’s like you have this awful power that will change their lives. And I don’t want it. I have never seen it to this extent.”

But keep in mind that most of what drives the market is a herd mentality. Want to get more for your money? Buy in an unevocative white-brick postwar building. Look in an area that never gets mentioned in “Page Six” or seems dowdy, like the East Fifties. Bellmarc recently did a study pricing a hypothetical 750-square-foot, one-bedroom co-op in different parts of Manhattan. What it found showed how hype has driven reality: “Being on 17th Street and Eighth Avenue was $100,000 more than being on Central Park West and 79th Street,” says Neil Binder, principal of Bellmarc. “That’s incredible.” And, to the wise buyer, a hint.

Lost in the Super Market