Studios sell as rentals rise.
"The rentals are so astronomical they are rethinking the purchase," said Carmen Lee Shue, president of Lee Shue Realty, Inc., who has begun canvassing for studio sales she would have never bothered with previously. Plus, she is getting a quick turnover and bidding wars. "Years ago, I couldn't give them away," she added.
Many buyers got caught up in the 1980's real estate market as thousands of rentals turned co-op. Some people moved from building to building, getting insider pricing and then flipping the units. Other buyers just wanted a place to live and bought tiny apartments for large sums of money.
When the market crashed and banks tightened lending requirements on both the partially sold buildings and end loans, many people ended up with units they could not sell, even as their own lifestyle changed.
"Five or six years ago, we all questioned whether there would be a studio market ever again," said Diane Ramirez, president of Halstead Property.
But now, with sales prices up across the board, rentals priced higher than many coop/condo maintenance bills, and Fannie Mae waivers available for financially stable buildings with high pro ratas or unsold shares, sellers are discovering they can move on with their lives.
"It's a good time to flip," agreed Tina Eichenholz, a broker with the Corcoran Group who handles Manhattan sales.
Downtown Manhattan prices are driving the average studio sale price up, as are West Side co-op sales.
For year-end 1998, the latest figures available, the average price of a studio market-wide was $134,000, up 7 percent from 1997. Upper East Side co-ops were up 3 percent to $112,000, while condominiums were down 2 percent to $161,000.
The Upper West Side, however, had coop studios selling for an average of $129,000, up 11 percent, while West Side condo prices averaged $175,000, the same as a year ago.
Downtown, year-end numbers were averaging $115,000, up 13 percent for co-ops, while condominiums were up 20 percent to $167,000.
Studios historically lag behind the rest of the market, and now the numbers are catching up.
The Corcoran Group had up-to-date numbers run on June 11th for this article. These show average studio sale prices up in all categories. For both co-op and condos, the average sale price is $146,000, up 14 percent over the first six months of last year.
East Side co-ops are averaging $125,000, with condo studios at $177,000. The average on the West Side is $135,000 for coops, while condo studios are averaging $214,000. The newer buildings are also driving up prices.
Downtown, co-op studios are averaging $127,000, with a $183,000 average for condos. No lofts are included in this pricing.
The condos demand higher sales prices because they can be rented out, and the market is not as sensitive to pre-war features as it is in the larger apartments, said Ramirez.
Eichenholz recently sold an alcove studio on the Upper East Side for $135,000 that has a maintenance of $600. Altogether, the buyer will now spend $1,350 a month, less than her previous rent of $1,600.
Robert Sussman, an executive managing director with S. Goodstein Realty, says he's suddenly getting queries about studios, too. And he hasn't even looked at them in years.
The prices are not that much different from the end of the Eighties, said Reba Miller, president RP Miller & Associates. "They are going from $80,000 to $125,000 to $140,000 on an alcove, which is pretty comparable to the Eighties. People are getting out of anything they want to get out of now." Even so, she agreed, "If it's too highly priced, it won't move."
Because the city is safer, Miller says people want to have some place to stay overnight. "If the husband works in the city and will use it four days out of the week, that's a good candidate to buy a studio," she said.
Those needing a pied a terre or first apartment because they've been accepted at an area college or are starting a new job, will find some studios priced more than competitively with the high market rentals.
Etienne Lafayem, a broker with Stribling & Associates, just sold a studio on 49th Street near the Waldorf Astoria between Lexington and Third avenues to a Westerner who had tired of staying in hotels, and decided to buy a pied a terre.
"It's right underneath the penthouse, faces West, gets lots of light, and he paid $62,000," relayed Lafayem. "It's the lowest sale at Stribling for the year and the maintenance is under $600."
Lee Shue just completed a sale on a studio apartment in Tudor City. The unit measured about 300 square feet and had maintenance charges under $350. Her seller had purchased at the top of the Eighties' market for about $70,000, and had it listed for two months. Now, with sudden interest from several buyers, it sold for just over $80,000 to someone who had already been outbid on two other units.
"I could have even played two buyers against each other," said Lee Shue, who observed a sudden surge towards studios in the last few months as the new grads started looking.
This buyer, too, just graduated from college and is starting his job in July. "He said the rentals are too outrageous," recalled Lee Shue. "He found it's better to buy than rent."
Halstead "sells them as quick as they come in," said Ramirez. An alcove studio in the 700 square-foot range came on the market last week, and while it is priced in the higher $170,000 range, its size generated immediate interest.
Speaking at the Young Men's/Women's Real Estate Association meeting last week, owner/developer Bernard Mendik worried that there is overbuilding of $2,000 a month apartments, and no government program in place to subsidize enough affordable housing.
Renters stymied by the high rents are finding more affordable apartments by ferreting out the forgotten studios.
In Queens, the co-op apartment complexes that have low owner occupancy and few sold units often now have good cash-flows because of the increase in the rental market, new holders of unsold shares or new cheaper underlying financing.
Individual buildings can work with lenders to obtain a so-called "Fannie Mae waiver" of the mortgage repurchaser's usual requirements, thus providing financing for end loans. Some of those buildings are now generating sales in all units for the first time in nearly a decade, at prices that range upwards from about $20,000 for studios.
Although rents in the boroughs seem to top out in the $800 to $1,200 range in the most luxurious buildings, in Manhattan, the ability to decontrol the rents on apartments that are renting for $2,000 by those with $175,000 in income for two years running, has left many renters wanting to regain control over their housing costs.
"Since we've had the decontrol laws in place, owning is the safer bet," said Miller. "If all of a sudden the market jumps more, the owner of the building can raise the rent. If you own that studio, you are in control."
Because the studios are the smallest and usually the lowest priced units in buildings, brokers say they provide an entree to both apartment ownership and tax deductions for young professionals.
Eichenholz says building boards are very exacting in their income requirements, and many young people also won't qualify for larger apartments that are much more expensive.
"The studios are so hot because the boards are very difficult, and if the buyer is making under $50,000, such as someone recently out of college, it's very difficult to purchase anything larger than a studio," she noted.
For singles that make between $65,000 and $130,000 a year and are tired of paying high rent, apartment ownership provides a tax deduction.
"They buy condominiums because they are also encouraged by the fact that if they are sent out of state or out of the country, they know they can rent," said Lafayem, who observed that co-op buyers are mostly couples.
He isn't worried that people will be "stuck" at the top of the market. "There is a market for studios and first buyers, and I don't see the market changing for three years," he predicted. "New York is an attractive place for international buyers and a world financial center."
With crime way down and tourism up thanks to Mayor Rudy Giuliani touting New York City as the Capital of the World, Lafayem may be right. After all, in the last market downturn, it was foreign buyers that kept coming in to park their money in New York real estate.
One Halstead broker is once again working with a customer who was in the market five years ago, and grappled over buying a studio or a fancy car.
"They bought the Jaguar and now they said they made a mistake, and the car is not worth anywhere near what the apartment would be worth today," Ramirez relayed. "Now they're buying an apartment."
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|Title Annotation:||residential studios|
|Publication:||Real Estate Weekly|
|Date:||Jun 16, 1999|
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