150 Nassau Street mini-loft sells at about 2004 pricing

off 14% from 2007, 9% from 2005
You know that I love to talk about where a recent loft sale fits on the calendar, meaning whether a recent loft sale was at par with a past resale in, for example, 2007. (E.g., my January 3, transformed 7 Bond Street loft sells 8% above 2007, and the continuing collection accessible in my September 27, is the Manhattan loft market back to (up to) 2007? 61 repeat sales say “probably”, “a bit”.) Obviously, these data tell me that the loft niche of the Manhattan market in 2011 was back to 2007 pricing, more or less.

Manhattan loft sales that fall far from a trend line are Bright Shiny Objects, guaranteed to get my attention. Readers, meet the “692 sq ft” mini-loft #3D at 150 Nassau Street; #3D, meet my readers. To call a price “crazy” is to imply that prices are (should be) rational. This 2003 new development loft has a crazy price history:

• Dec 8, 2011 $665,000
• Sept 21, 2007 $770,000
• June 23, 2005 $731,000
• Nov 10, 2003 $530,000
• April 7, 2002 $351,500

Between the November 2003 flip by the original owner and the next resale on June 2005, loft #3D gained $210,000 in value, or $10,500/mo if you assume the gain was linear. On that trend line, the most recent resale price last month would have fallen in December 2004. Crazy as that hypothetical 7 year parity of values in 2004 to 2011 is, that is not the craziest spread: in the 27 months between June 2005 and the next (near Peak) resale in September 2007, loft #3D gained only $39,000, or $1,444/mo. Yet those 27 months included nearly all of the froth in the overall Manhattan residential real estate market.

the 2007 comp
This Manhattan loft is now the 79th with paired 2007 and 2011 market values, on the spreadsheet associated with that September 27 post. (Note to self: do an update of that post when the books on 2011 finally close, in about 6-8 weeks.) Of those 79 paired resale Manhattan lofts, only 20 show losses in market value of more than 5% from 2007 to 2011 (40 show gains of more than 5%), and (excluding 2007 new developments) only 3 sow greater declines than mini-loft #3D at 13.6%. In other words, #3D shows a relatively large decline from 2007, but it is not the most extreme example of market decline in my canvass of Manhattan lofts.

My eye keeps coming back to that June 2005 value, a 38% gain over November 2003. I can’t recall off-hand a similar gain in that same time frame for any other loft sale in Manhattan. While this mini-loft may be a poster child for the coming froth (an early canary in the coal mine, captioned Is There A Bubble In Manhattan Real Estate?), it significantly lost pricing momentum just as the rest of The Market was picking up the most steam.

A Bright Shiny Object, indeed.

how can a price be irrational?
I am pretty confident that in that 5-sale price history above, the value that is the most difficult to reconcile with the overall market is that 6 year old $731,000. The slope of appreciation from 2003 is ‘too high’ and the slope of appreciation to 2007 is ‘too low’. Yet it was the apparent product of a willing buyer and a willing seller, both analyzing value in their own interests. In other words, The Market established that loft #3D was worth $731,000 in June 2005.

While that is true (tautology can be truth), it is no less true that this June 2005 market value was out of line in the overall Manhattan residential real estate market. And comparing this June 2005 market value to the overall market and to the November 2003 value and to the September 2007 value, that June 2005 buyer overpaid. No ifs, ands, or buts.

NTS, redux
I have long had in mind to write a post about ‘wrong’ prices, and how the potential for these outliers makes it difficult to overstate the significance of a paired resale analysis. There is a lot to wrestle with there, at least conceptually, before I will be confident enough to write this out. Note to self: when I do that analysis, use this Financial District mini-loft sale history as an example; then find others.

A Bright Shiny Object, indeed.

a Manhattan Loft Guy favorite, of late
Fans of the beautiful loft conversion at 150 Nassau Street will want to read my other posts about the building, two of which are quite recent:

• December 28, 2011, did your attorney use The Google for due diligence? would help at 150 Nassau Street
• December 14, 2011, private sale of 150 Nassau Street loft with high-floor premium or neighborly extortion
• November 28, 2010, bass ackwards at 150 Nassau Street?? as lofts are sold low + bought high, with an agency twist

© Sandy Mattingly 2012