how did $25,000 price drop do the trick for loft at 263 Ninth Avenue?

my fickle mistress
If there is one thing that I hope that regular readers of Manhattan Loft Guy have gotten from their reading is that “The Market” captures macro trends while the market value of individual properties are determined by individual sellers and individual buyers. Today’s case in point is the “1,701 sq ft” Manhattan loft #3E at 263 Ninth Avenue (The Heywood), which took 10 months to find a contract that ‘should’ have been available from the get-go. And my overall point is that this sort of thing happens more often than an efficient market theorist would like, or can explain.

This loft should have sold without having a cosmetic price drop, without a change in firms, and without delaying these sellers in their plan to pay rent. We know from this history that oft #3E was worth $1.74mm on December 2. We also ‘know’ (from overall market statistics and consensus ‘analysis’ by the Manhattan media division of the Real Estate Industrial Complex) that the residential real estate market was roughly flat over the year. Which means that loft #3E should have been worth about $1.74mm on November 2, September 2, July 2, etc, etc. This history suggests otherwise:

That clearing price was all of 5.95% off the first asking price and 4.66% off the last price. In other words, well within customary negotiating room. The sellers were stubborn about the ask, maintaining essentially the same price for 10 months before finding a contract. (It is possible that sellers rejected offers at/above $1.74mm early in 2011, but you’d think that anyone asking $X would take 94% of $X whenever it was available; if, instead, these sellers rejected such early offers and took 10 months to get beaten up by The Market, then this post misses the mark….)

Of course, if the loft was worth $1.74mm late in the year (that fact proves itself, no?) it should have been worth that same range throughout the year. If it was not worth around $1.74mm in (for example) April, it should not have found a willing buyer at that price 7 months later.

The exception to this tautological set is when market conditions are thin, when there is relatively little buyer activity (the it only takes one [buyer] problem, when there might be only one buyer). No such exception should apply in a year with the third highest sales volume:

The number of sales remained above the 10,000 sale threshold for the second consecutive year and for the fourth time in the decade. There were 10,161 sales in 2011, the third highest total of the decade.

That is from The Miller, of course, and his introduction to his ten-year report.

the corner helps, a lot
The “1,701 sq ft” floor plan has a single bedroom plus an office, but with large windows both north and west, the sorta square footprint has more flexibility than most 1-BR+office arrays. First, that office is large enough that the office function can coexist with the occasional-guest-room function; second, there is a natural place to add a real bedroom without unduly shrinking the volume, by using that window opposite the kitchen. Those west windows make all the difference.

Also not how much light gets in those windows, even from the 3rd floor. Looking north out over that public school (PS 33, Chelsea Prep) helps, a lot.

The #3E footprint is larger and more flexible than that of, for example, the “1,275 sq ft” #4A, which also has 1-BR+office. That line has only one wall of windows, but the bedroom windows there (at least) include a view of the Empire State Building. Loft #4A took only 10 days to find a contract, overlapping with #3E in the Spring, closing at $1.315mm, or essentially the same price as #3E on a dollar-per-foot basis ($1,031/ft vs. $1,023/ft).

the sore thumb at The Heywood
That #4A sale was the most recent closing in the building above the first floor, but that is because it took 5 months to close. The loft I hit in my July 30, 2011, why did 263 Ninth Avenue loft resale kick some serious butt?, closed two months before #4A, after going to contract a month later. As that title implies, I had trouble fitting that sale of loft #6C into the otherwise consistent building resale values; I still do. That sale at $1,312/ft and a gain-over-sponsor-price of 36% is still an outlier in this 2005 new development.

See that post for how other lofts in the building did on resale, compared to the sponsor prices. Loft #3E fits right into the trend excluding #6C, as it was originally bought for $1,578,287 in January 2006 and the recent resale realized a gain of 10.2%. (For the anal among you, that #4A sale was a smaller gain over the January 2006 sponsor price, 3.3%.)

To repeat: I still can’t figure out how that #6C sale fits.

One more post from The Heywood, about a sale that was remarkable in many ways, without even mentioning that it sold at a tiny premium to its sponsor sale. In my January 2, 2011, Heywood loft sale (263 Ninth Avenue) is candidate for strangest sale of the year, I marveled at this:

this loft had been on the market continuously since December 2008, had its only real price drop in February 2009, yet generated a contract as of September 2, 2010 at a 4% premium to the asking price.

moving downtown (way downtown) to sit on cash (a lot of cash)
I mentioned above that the 10 months it took for #3E to find a contract delayed the sellers plans to pocket some dough and pay some rent. Because of their notice address in the deed record, we know that these sellers are sitting out the condo market by renting this smaller loft in the troubled 2007 new development at the corner of Beaver and William Streets, probably for $6,000/mo.

The Property Shark record for loft #3E shows that these folks refinanced their original $1,000,000 mortgage down to the magic number of $729,000 in 2009. So they just pocketed nearly a million bucks after paying off that mortgage (with other miscellaneous expenses on the sale, of course). Assuming they got a 5% rate, their old housing costs were (pre-tax) about $7,000/mo for the “1,701 sq ft” loft #3E, compared to (probably) $6,000/mo for renting the “1,215 sq ft” high floor loft at The Beav.

Whatever else this move did for them financially, the sale after refinancing enabled them to take out nearly $400,000 that they did not start with in 2006. They held it long enough to avoid capital gains taxes on the gain, so this worked out well for them. In a strictly real estate sense, whether they continue to do well depends on how their bet to sit on the sidelines of ownership works out in the coming years.

So far, so good.

© Sandy Mattingly 2012