The Numbers Say It’s Becoming Condo City

Jonathan Miller really knows his stuff. Look at his most recent research and you’ll see that by some important measures, condominiums have moved to the forefront in the New York City market which has long been dominated by co-ops.
And that’s a very big deal in a market where only 20% of the inventory is condo.
There are a multitude of reasons for the comparative increase in condo sales. Here are some biggies:

  • The number of new developments as well as the number of condo conversions is greatly increasing condo inventory.
  • As prices have increased market-wide, it becomes increasingly difficult for some buyers to meet the financial requirements of many co-op boards, making the condo the only option for some (i.e. a condo requires 10% and sometimes less of a downpayment while co-ops generally require 20%-50% down and some insist on all cash).
  • I deal with condo buyers all the time who also like the anonymity of living in a condo and prefer to not disclose their complete financial picture to a co-op board.

I owned a co-op and was a member of its board for three years, but I live in a condo now. The way I see it is that co-op living tends to be more intimate, with more interaction among neighbors and everyone taking a greater interest in the quality of life in the building. Condo living is definitely more anonymous as the buildings tend to have more transiency than co-ops. The apartment next door to us has had three or four tenants in the past three years: hardly time for the kids to make new friends. Our previous co-op is made up of mostly the same people who lived their with their families for a decade or longer.
My clients who are looking for condos in today’s market are doing so because of the ease of purchase, absence of financial intrusion, and the ability to refinance, renovate, and rent their property to whom they choose with little or no need to seek approval. Not to mention all of the amenities and bells and whistles that many new developments and conversions are offering!
For the record, condos aren’t like the wild west with no “sherriff.” The Board of Managers acts on behalf of unit owners to develop building policy, review applications for purchase, lease, and renovation and determine what is best for the building and its unit owners. The major difference is that Condo Boards do not have the omnipotence that a co-op board has and should a condo board ever deny a sale or lease, the building must then pay your contract price for your unit (this is called exercising their “Right of First Refusal.”)
All of that said, it comes down to the supply of available apartments and personal preference that determines whether someone buys a condo or a co-op.

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4 Responses to The Numbers Say It’s Becoming Condo City

  1. Thanks Doug. Good stuff. If the pace of condo development continues (admittedly optomistic), we could see the condo housing stock equal coop housing stock in our lifetime. At 25% of the market now, 50% doesn’t seem out of reach. Until there is a motivation for developers to flip the switch back to building rentals, condos seem to have some momentum on their side. Land and construction costs are simply to high right now for the rental economic model to make financial sense.

  2. That’s a very interesting scenario Jonathan as brokers in the NYC market, myself included, have always felt that the large co-op inventory gave us an edge above other markets across the country as the co-op application process can be daunting and most everyone wants a broker to assist them with that.
    I’m very curous Jonathan to know how you perceive some of the big developers’, articularly Related’s, creation of hybrid buildings that include both rentals and condos. Seems like a hedge to me. Your thoughts?

  3. Doug – I agree – its absolutely a hedge and its a possible way for developers to reduces costs by receiving tax incentives for below market rentals. Of course its depends on the location. For example, the hybrid One Carnegie Hill on East 96th Street makes a lot of sense since the area is a strong rental market but also benefits from the gentrification moving northword from the Upper East Side. Also – on the co-op advantage for brokers. Its still an advantage from a service standpoint. The co-op housing stock is not diminishing, its simply stagnant unless some economic or legal influence changes that (which seems unlikely).

  4. avatar mary lou joseph says:

    Best of luck, Doug—you deserve the best success! We were so pleased with your assistance in buying our condo and consider you “our agent” if future purchase/sales situations come up. Best to you and your family. Mary Lou Joseph

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