there are no guarantees in Manhattan residential real estate, of course, of course
Timing may not be the proverbial “everything” when it comes to Manhattan lofts, but it surely helps to have it on your side. The “1,164 sq ft” East Village loft #8A at 114 East 13 Street (the American Felt Building) is noteworthy for having a long string of history (StreetEasy goes back six sales, to 1996, and I’ve added a seventh to my Master List off Manhattan loft sales from the Corcoran listings system, from 1993), the more so because each sale is at a higher price than the one before it. I expect that if I find another Manhattan loft with an unbroken string like this it will catch my eye.
Don’t be fooled, kids: not everyone makes money in Manhattan residential real estate! If there is a single question asked by my buyer clients more often than any other, it is “will this loft increase in value?“. The structure of my unfailing response is too often viewed as unhelpful, as I always flip the question to talk about the likelihood of the loft holding its place in the market, such that if the overall market goes down, the loft is more or less (I specify) likely to go down by a similar degree, or if the overall market goes up, the loft is more or less (I specify) likely to go up by a similar degree.
Not to get too distracted, but the more or less part depends on whether the loft is in a fully mature market (therefore, very likely to match the overall market) or is in a developing market that has greater upside and therefore greater downside than the overall market. And, still avoiding (much) distraction, I caution buyers about projecting gains without considering how long they expect to own, as it is usually difficult to realize a significant gain if you only plan to own for a short time.
I’m not going to try to reassess whether the (near) East Village loft market was more ‘mature’ or more ‘developing’ at each of these stages by comparing market niche numbers to the overall market, but these numbers show stable increases in value, though there is at least one long-ish period in which the loft was not tested against the market (and we know what happened in that intervening period):
|June 21, 2017||$2.2mm|
|July 16, 2015||$2.05mm|
|April 25, 2006||$1.33mm|
|Sept 12, 2003||$944,500|
|Feb 26, 1999||$540k|
|Nov 15, 1996||$335k|
|May 4, 1993||$254k|
The first step (or two) in that string is unknown, except that somebody bought this loft in the original offering (1984, from our listings system) and that original owner either held it for nine years or sold it to the 1993 seller in between. If the string had no additional steps after starting in 1984, the seven owners held on to the loft for nine, three, three, four, three, nine, and two years, or not quite five years on average.
For fun, let’s show this table with the percentage increase in value for loft #8A and with the index value from the StreetEasy Price Index for the month of each sale (I’d really love to use December 1984 as the baseline, but I don’t have a price for the original purchaser and the StreetEasy Price Index only goes back to January 1995), and then the percentage change in the StreetEasy Price Index, from one #8A sale to the next:
|#8A increase||Index value||Index increase|
(*April 2017 is most recent Index value)
So many winners here! Note that there are more winners on the #8A side, as all owners but one out-performed the overall Manhattan residential real estate market, at least as measured by the StreetEasy Price Index. Two sets of owners outperformed the market by a factor of two,: the folks who bought in 1996 and sold in 1999 and their successors-plus-one who bought in April 2006 and sold in July 2015.
To be precise, the recent sellers also outperformed the market by a factor of two, but the scale is small enough (and the time frame short enough) that there’s likely a fair amount of ‘noise’ in that math (though 7.3% is just a hair less than twice 3.7%).
I started this exercise without knowing how it would turn out, and I must say the numbers are fascinating; this exercise was so much fun I need a cigarette.
On a long-term basis, looking only at the ‘objective’ market facts (clearing prices) since 1996 compared to the Index values, the overall Manhattan market is up nearly four-fold ($1,000,791 is 3.95 times $253,603) while the market value of #8A from 1996 to the present is up … (wait for it) … more than 6.5 times. In other
words numbers, loft #8A has outperformed the market over the last 20 years by more than 50%. Remember my comment above the first table wondering whether the (near) East Village loft market was more a ‘mature’ or more a ‘developing’ market? Over 20 years, this single loft is consistent with a ‘developing’ market. As I say, this is just for fun … or else I’d have to consider why the second largest period of ‘over-performance’ by loft #8A was more recent than I’d have expected for the (near) East Village loft market to still be ‘developing’ (2006 to 2015).
Enough playing around ….
but but but (informed Manhattan Loft Guy readers are sputtering), the recent sellers didn’t really make money
If you’ve stayed with me this far, and if you’ve read “profit” posts before, you see the problem with the recent sellers having sold for $2.2mm what they bought for $2.05mm 23 months earlier. That apparent gain of $150,000 was reduced by expenses before they considered their tax bill. We show the listing fee was 6%, so that’s $132,000 off … city and state ‘transfer taxes’ take another 1.825% (or $40,150) and they paid the so-called ‘mansion tax’ on the front end (1% = $20,500).
Big Picture expenses reduce that $150,000 apparent gain to a loss of $42,650. Remember my other admonition to buyer clients? (Hint: it is usually difficult to realize a significant gain if you only plan to own for a short time.) Here’s another demonstration of that, with a loft that appreciated at twice the rate of the overall market, but over too short a time to avoid red ink.
That tells me that something happened to this 2015-buyer-turned-2017-seller (change of job or family status, return to Canada??) because he apparently was willing to lose even more money (his ask was $2.15mm, only $100,000 more than he paid). At this price point, I’d expect most owners to be loss-averse, and willing to hold on to a loft more than two years rather than sell it and realize a loss. Stuff (life!) happens, and then we die. Or, then we sell a Manhattan loft. Sellers don’t have to answer to me, though they may be second-guessed in a (benign?) trying-to-figure-out-what-happened way. No harm in that, I hope.
a lovely loft, with many plusses, nets over $1,800/ft on a block that is more convenient than charming
I’m impressed that this loft sold at this price on this block. I bike this block quite often and (no offense, but …) this is far from the most charming block just east of Broadway. But it is hard by the subways at Union Square (and the other stuff at Union Square), plus the restaurants in the (central) East Village, in the Village proper (University Place), and in lower Flatiron. Great location! Just not a great block.
But the space exceeds expectations. Small for a loft at just under 1,200 sq ft, the sense of space is enhanced by “[s]oaring 12′ ceilings and enormous south and east-facing windows … [with] unobstructed city views and clear blue sky”, as the broker would babble. The kitchen is big enough for a loft twice this size, at 12+ ft x 8+ ft. The finishes are many and well done: including “open chef’s kitchen with Miele, Sub-Zero and Viking appliances”, “custom wood cabinetry, 12 inch baseboard moldings, refinished rich hardwood floors, … a large chef’s pantry and wall of closets in the bedroom”, an “en-suite Waterworks bathroom with a steam shower and Japanese soaking tub can be accessed from both the bedroom and a second doorway just for guests” (well, if you live there you can use that doorway, I hope).
All of the foregoing has been present for a while (at least since 2003, per our listing system, and possibly longer), while these are claimed to be both “[b]rand new upgrades [and] to the highest standard”:
custom sun shades, motorized blackout shades, sunshield protective UV coating on every window, custom A/C covers, aluminum grill radiator covers powder coated to match wall color, recessed lighting with dimmers and built in speakers throughout.
(Add the cost of the new upgrades to the net loss, alas.)
The photos are consistent with quality; as usual, the kitchen provides the money shot:
Let’s count the balcony as worth 50% of the value of the interior space. That gets us to $1,827/ft for the entire loft.
Pretty nice package, especially on this block, no?
the hazards of over-zealous babbling
This is more than a quibble: with a lovely loft like this, overstatement can be a turn-off. Hard to figure that happened with a buyer who paid $50,000 over ask, but still … this is not a loft that “can easily be reconfigured to suit your needs to include a home office, another bedroom or bathroom, additional closets and more” (my bold).
That laundry corner could be a bath, but more likely a powder room than a full bath, unless you went overboard and re-did the other bath as well to accommodate ($$$$$). You can click on the alternate floor plan yourself, but if you add that bedroom, you (a) close off the kitchen from the loft and from that window, (b) reduce the (formerly) ‘great room’ by a third, squeezing dining, seating, and balcony access into 300 sq ft, and (c) and reduce the appreciation of ‘space’ on entry into the loft by more than a couple of steps. Then look at the lovely bathroom, sacrificed on the altar of the alternative floor plan to add a second full bath (there goes the Japanese soaking [or any other] tub). $$$$$!
Buy it and do what you want, of course. But you’ll ruin it so much that if you really need two bedrooms … buy another loft. (The additional bathroom is more a money issue than a loft aesthetic issue; go ahed and burn your bucks if you have ’em.) My free advice (you get what you pay for!): if you need to put that second bedroom in, take down the wall before you re-sell, or you may just break the streak of owners-who-sold-for-more-than-they-paid. In the meantime, buy an armoire.