neighborly competition / laggard at 144 West 18 Street closes off 15% since December

first one to $1.7mm wins
Two Manhattan lofts at 144 West 18 Street (known, not poetically, as the Chainworks Building) closed 6 months apart. You won’t be surprised to learn that the one that closed 6 months ago (#4N) closed higher than the one that closed last month (#3N), though I was surprised by the degree of fall-off. (I bet the June 2009 seller was really surprised.) Their remarkably similar tales demonstrate — again — the dangers (to sellers) posed by a thin market.

Both are "1,363 sq ft" and appear to be in very similar condition (unsurprising for a 2003 conversion). #4N did not brag about a lot: a "spa-like" master bath and a "spacious well laid out kitchen" is the extent of the puffery. #3N was similarly restrained: "a sleek, contemporary Arclinea kitchen and richly outfitted bathrooms".

very neighborly, very competitive (one ‘won’ easily)
The parallel histories to these two essentially identical Manhattan lofts are striking.
 

I have no information about the actual discussions that occurred between buyers and sellers, or between sellers and their agents, of course, but the basic facts scream out very different public positions for #4N and #3N. The #4N sellers challenged The Market to distinguish between the two units by starting at the same price as #3N 3 weeks after #3N had first been offered. After determining that The Market reaction to these two units at $19mm was "(yawn)", the #4N sellers then told The Market that they were serious sellers, by dropping $100k in 3 weeks and another $100k in another 4 weeks. They were rewarded with a contract in another month, for which they were able to hold very close to their last asking price.

The #3N sellers, in very stark contrast, were principled, or firm, or persistent, or stubborn, or hard-headed (add your favorite description here: ____). For which The Market hammered them. It took the #3N sellers two weeks after #4N went to contract off $1.7mm for the #3N sellers to drop the price at all, which they did by only $100k. (Stop the narrative here for a minute …. If The Market valued these two lofts at $1.675mm as of October 17, 2008 [as is proven by the contract for #4N], then it is reasonable for the #3N sellers to predict that they could attract a buyer willing to pay $1.675mm by offering #3N at $1.8mm. That is, this prediction is reasonable if and only if The Market is sufficiently liquid.)

how a reasonable prediction turned out to be wrong
This prediction (reasonable under certain circumstances) was wrong. It is obvious that no buyer appeared who was wiling to negotiate to pay anywhere near $1.675mm for #3N. Even after #4N closed on December 3, it took the #3N sellers another 2 weeks to drop — and then only to the last #4N asking price. Again they were principled, or firm, or persistent, or stubborn, or hard-headed (add your favorite description here: ____), taking 2 more months to accept that they were reasonable-but-wrong, by dropping to $1.55mm. And that price drop took still 2 more months to generate the contract that closed last week at $1.425mm — 15% off their upstairs (former) neighbors in #4N, who came to market 3 weeks after they did but who moved out 6 months before they did. (And those neighbors moved out a quarter of a million dollars ahead.)

It is difficult to imagine a better set of circumstances to illustrate how dangerous a thin market is to sellers: identical lofts, starting at identical prices, with the early bird getting the only worm out there.

comp value???
Going forward, how does one value another loft for which these two are good comps? Does this history prove that The Market for 6 year old lofts under 1,400 sq ft in southeast Chelsea dropped 15% in the first six months of 2009? I tend to think not, but that The Market over-reacted by punishing #3N so much for being so … (you remember) principled, or firm, or persistent, or stubborn, or hard-headed.

But the only way to tell what The Market thinks is to see what The Market does….

© Sandy Mattingly 2009