finding the right price at the right time for a Manhattan loft sometimes takes time
Asking $630,000 for the tiny (“600 sq ft”) Manhattan loft #B1507 at 250 Mercer Street was too high a price in 2013. Heck, even $599,000 was too high a price last year. But coming back to market at $690,000 this year, only five months after slinking off the market at $599,000 worked. If anyone asks you how the Manhattan residential real estate market is different from the market last year, you could point them to this one:
|April 12, 2013||new to market||$630,000|
|Dec 3||off market|
|May 9, 2014||change firms||$690,000|
(Two periods of hiatus in 2013 that total about 6 weeks, omitted.)
Would you have been bold enough to raise the price in May?
To restate the obvious, the May 2014 asking price was at least 15% higher than The Market had been demonstrably unable to provide at the end of 2013. Yet The Market loved the loft at that price, so much so that it goosed the clearing price up to $711,000 … 19% above the last impossible asking price of 2013.
In terms of the overall market, the StreetEasy Manhattan Condo Index was up only 5% from the last full month loft #B1507 was on the market in 2013 until May 2014 (from 217.06 to 228.83), so this loft performance was unusual. D’oh. (Up 9% to August 2014, the most recent month for which the Index has data.)
How likely is it that this mini-loft finally sold because The Market rose up around it? The StreetEasy Index suggests … not very likely. But The Numbers are The Numbers, right?
bloggers can show sympathy, though The Market never does
I have to sympathize with the first sales team. They did everything right from a marketing perspective, but The Market (irrationally, in clear retrospect) refused the offering. I mean that this bit of broker babble is rather terse, but enthusiastic and descriptive:
A mint loft like studio with fantastic wide open city views in move in condition. There are high 11.5 foot ceilings, oversized windows, newly renovated kitchen with full size stainless steel appliances and bathroom with a soaking tub.
And their photos are much better. Note especially the contrast between this photo in support of the “fantastic wide open city views” and the one from 2014 on StreetEasy in support of “unobstructed spellbinding views of Manhattan”:
(I can’t get the 2014 image to copy-and-paste, except as an unhelpful thumbnail, but compare the photo above to listing photo #6 from StreetEasy.)
The 2014 broker babble is a bit more descriptive, but not materially, IMHO:
This loft offers unobstructed spellbinding views of Manhattan and features industrial style attributes like dramatic 116 high ceilings and oversized windows, complemented with elegant beamed ceilings.The apartment has been gut renovated and offers a great use of space with dressing room, a sleeping loft as well as a spacious new chefs kitchen with stone countertops and ample storage space.
In other words, the mini-loft was professionally exposed to the market for 6 months at the end of 2013 without selling. The (eventual) selling price makes that a mystery. So does other activity in the building last year.
why this, but not that?
Remember: loft #B1507 was gut renovated, with a sleeping loft, and those “unobstructed spellbinding views of Manhattan”. You’d think it would have sold in the low $6s (or just a smidge under, to use a technical real estate term), and you’d think it would have sold in that range before others in the building of similar size on lower floors and/or not quite as well-dressed. How to explain the fact that the “600 sq ft” studio loft #B804 sold on September 4, 2013 at $599,000?
That babble suggested a bit lesser renovation than the “gut” in #B1507 (“updated kitchen has stainless steel appliances and a beautifully renovated bathroom in tumbled marble and slate”) and boasted of sun but not views. In a rational market, #B1507 would sell before #B804 during the months they competed head-to-head.
|May 10, 2013||new to market||$615,000|
It certain appears as though the units knew they were going head-to-head, with #B1507 dropping its price to within $5,000 of #B804 within 3 days of the latter hitting the market. Is it possible that the #B1507 seller stubbornly refused to drop from $619,000 until after #B804 not only went into contract, but until it sold? Possible … of course, but there was good reason to think that the higher floor and actual view should be worth at least $20,000 more.
Next consider the “600 sq ft” studio loft #C408, which also went head-to-head with the pair above, with fewer charms still. That babble was very restrained, with a hint of renovation to come and no bragging about finishes, or light, no photos of the kitchen and a photo showing a pedestrian bathroom. This marketing history also seems to be a reaction to #B804:
|May 31, 2013||new to market||$579,000|
This one was well inferior to #B804 (eventually acknowledged by the seller with the July 5 return to original pricing), and even more so to #B1507. Did this buyer, too, not make a play at #B1507?
The performance of the even smaller studio loft #B604 (“525 sq ft”) must have been even more confusing (infuriating!) for the #B1507 seller. That one was babbled much more enthusiastically than any of the others, but also asked for a significant premium. Grudging props to the agent for sliding the “as if” intro by at least some buyers:
As if pulled from the cover of Architectural Digest, this loft features industrial style attributes like the raw metal and concrete staircase which complement the dramatic 116″ high ceilings and oversized windows. The apartment was recently gut renovated by a professional designer and offers a great use of space with a sleeping den as well as a spacious new chefs kitchen with stone countertops and a large bathroom with Emprador dark marble.
Let’s assume better condition even than #B1507, but note that there’s no bragging about light, let alone views. This seller did not consider the loft to be in competition with the others, and The Market agreed:
|June 18, 2013||new to market||$750,000|
(I’ve ignored the StreetEasy second contract, as that appears to be a record-keeping revival of the listing, rather than a return to active marketing.)
This tiny beauty sold for at least $121,000 more than the trio above, which represented more than $200/ft. That is one hell of a premium.
buyer expectations and reactions don’t have to be rational
The failure of #B1507 to sell in 2013 really stands out in this crowd.
The 2013 buyer pool for tiny lofts in Greenwich Village saw these four neighbors, one of which was outstanding for having light and views (#B1507) and one of which was (apparently) outstanding for being nice enough to have appeared on a magazine cover, without actually having done that (#B604). The Market at the end of last year absorbed the best, and the two that were merely ‘okay’, but not #B1507, even though #B1507 was priced well below the best one, and only slightly above the two that were inferior to it.
In 2014, however, the response to #B1507 was completely different.
The Market in 2014 reacted to #B1507 as if the sales of #C408 and #B804 at $579,000 and $599,000 were simply not relevant; indeed, as though its own failure to sell in 2013 was irrelevant. The Market in 2014 reacted as though #B604 at $720,000 was the only relevant thing in these intertwining histories from 2013. And the conclusion drawn was that #B1507 was kinda sorta like #B604.
Keep in mind that this is not an explanation for what happened, but my best backwards facing rationalization, given what happened.
If this is right, the genius of the 2014 marketing campaign was in the (otherwise, to a data nerd) irrationally aggressive asking price, set by reference to #B604 and ignoring the former head-to-head comparisons with #C408 and #B804. The $699,000 asking price needed only 6 weeks in the Spring of 2014 to drive the clearing price within 4-figures of the super premium value achieved by #B604.
There is one intervening data point, relevant enough to extend this long post. Mini-loft #B1207 came to market 7 weeks after #B1507 vacated, and is an obvious attempt to build on the #B604 super premium sale. The same agent used much the same babbling (with the same “as if” intro), again to great effect. The now familiar verbal flourishes:
As if pulled from the cover of Architectural Digest, this loft features industrial style attributes like dramatic 116 high ceilings and oversized windows, complemented with elegant dark wooden beams. The apartment has been gut renovated by a professional designer and offers a great use of space with a sleeping loft as well as a spacious new chefs kitchen with stone countertops and ample storage space. The apartment has two Murphy tables. The wood blanks on either side of the TV unfold.
The (great) effect:
|Jan 30, 2014||new to market||$710,000|
Now the #B1507 owner had a new super premium comp, in addition to #B604. So, back to market it came, one month after the new comp went into contract.
You will sometimes hear the advice that a price can be ‘too low’ to attract the right buyers. I can’t remember seeing as good an example of that principle in the entry loft niche as this 2013 set of four studio lofts at 250 Mercer Street, with #B1507 as ‘too cheap’ in 2013 (inviting interest from buyers who only wanted ‘a deal’) and ‘just right’ in 2014 (attracting buyers who would pay for quality).