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This ain’t no bubble — Manhattan luxury is back with a vengeance

WELL, that didn’t take long. Whether you saw it as a bubble bursting or a dip or a slowdown, whatever it was that was afflicting the housing market in 2006 seems to be over.

No, the market hasn’t quite gone back to those halcyon days when people were making wild-eyed offers on overpriced closets. We haven’t heard any recent reports of buyers slugging it out at an Alphabet City open house. But the high-end market has taken off into a stratosphere never before seen, with buyers going gaga over properties that cost $3 million and up.

Yes, the madness has returned.

Let’s throw out the requisite disclaimers: Interest rates might rise. A recession would hit housing extremely hard. Areas like the Financial District and much of Brooklyn are seeing an incredible amount of new development that will need time to be absorbed.

But consider this: The current Manhattan frenzy feels a lot more solid than the last time the market went into heat. Many recent eye-popping transactions involve buyers paying all cash for co-ops. Such transactions, of course, mean there’s no chance of defaulting on a million-dollar mortgage.

“Seventy percent of the housing stock in New York are co-ops,” says Hall Willkie, president of Brown Harris Stevens. “Co-ops are some of the best buildings in the city and you don’t even know the names of them. Every co-op restricts financing. So what you have is people paying $20 million in cash for an apartment.”

And Willkie and numerous industry insiders we spoke to have seen high-end properties not just selling, but selling for way over their asking prices.

“I’d say it’s much more of a frenzy” now than it was two years ago, says Shaun Osher, CEO of Core Group Marketing.

Osher points to an apartment he sold on West 23rd Street that Core had listed for $6.5 million. “It had been on the market for 3 1/2 or four years with five different brokers,” Osher says.

But shortly after taking it over earlier this year, Core had multiple offers above the asking price. The property went to contract for just under $7 million.

“The difference between now and two years ago is that two years ago the frenzy existed on any property anywhere,” says Pam Liebman, president and CEO of the Corcoran Group. “Today, it’s more of a focused frenzy. It’s really if your property is special, if it offers something unique . . . But where the frenzy exists, it’s just as strong as it was two years ago, and several brokers have told me it’s stronger.”

In the last year, the Corcoran Group saw a 31 percent price increase on lofts larger than 2,500 square feet. Prudential Douglas Elliman saw the price for apartments with four or more bedrooms jump 24.8 percent to an astronomical $8,957,570. And Brown Harris Stevens saw the average price per square foot for apartments with four or more bedrooms soar to $2,208. Last year, it was $1,615.

And if what’s happened in the last few months is any indication, those numbers are moving even higher.

“In December and January . . . we started [telling clients], ‘You have to be prepared to go 5 percent above asking price to get what you want,’” says Frederick Peters, president of Warburg Realty. “Then, more recently, we’ve been saying you have to go 10 percent. Just in the last couple of weeks, a few things have been more like 15 percent.”

“I just won a bid at 158 Mercer,” says Dolly Lenz, vice chairman of Prudential Douglas Elliman. “And the people just had to have it. They said ‘Whatever it takes.’ It was going for $8.9 million, they made an offer of $10 million. They just wanted to be sure it was theirs.”

Sellers have felt free to chuck an accepted offer in favor of a better one. Or they have made lavish demands like a 30 percent down payment. Immediately. In cash. Getting half a million dollars or even $1 million over the asking price is not so unusual.

And new condos like French architect’s Jean Nouvel’s 100 11th Ave. in West Chelsea have started out of the gate asking for $2,000 per square foot. This should hardly come as a surprise; Nouvel’s SoHo building, 40 Mercer, sold out with many units going for significantly more than $2,000 per square foot.

“If you have a three-bedroom in SoHo or TriBeCa,” says broker Darren Sukenik, an executive vice president at Prudential Douglas Elliman, “you can just make up a price and it will sell.”

“My heart is breaking for this one couple I have who have lost so many bidding wars,” says broker Wendy Maitland, a senior vice president at Brown Harris Stevens. “Every single loft that’s a good family loft in the West Village they’ve bid on and they keep getting outbid.”

And the frenzy is hardly limited to the super-trendy neighborhoods. A 3,721-square-foot penthouse above 100th Street listed by the Corcoran Group’s Deanna Kory and Karen Kelley, in a building with no doorman, sold for $4.95 million after just three days on the market. Anecdotes aside, one can see this major uptick borne out by statistics.

According to real-estate appraiser Jonathan Miller of Miller Samuel, the average price per square foot of the top 10 percent of Manhattan apartments was $1,744 in the first quarter of this year — up 13 percent from the same quarter last year.

“The higher level of sales have really eaten into inventory,” says Miller, “especially at the high end of the market.”

And with less inventory, prices could continue to rise for a while.

How, exactly, did this happen? Part of it obviously has to do with the record $33 billion in bonuses on Wall Street last year. Another part has to do with how weak the dollar has been.

“There’s a ton of foreign money,” says Sukenik. “For Europeans, it’s like a 35-percent- off sale — a lot of these are foreign ego apartments.”

And Peters thinks it has something to with the fact that most potential buyers who stayed out of the market last year are simply tired of waiting around.

“No buyer wants to be the last person to pay a big price before the market goes south,” Peters says, “And people were apprehensive about how they were not going to be the last one to pay a lot. So you saw a lot of people sidelining themselves in ’06.”

But, Peters adds, “Successful people have only a limited tolerance for delayed gratification, and I think the tolerance was exhausted by the end of 2006. Maybe they got that big bonus and said, ‘You know what, we waited, the market didn’t go south and we’ve got to go on with our lives.’”

Also, it might have something to do with the fact that the suburbs are becoming a less attractive alternative for workaholic families.

“One of the things that’s really driven our boom has been the fact that moving to the suburbs was always predicated on a 9-to-5 work day,” says Peters. “Nobody has one of those anymore. If you’re working 9-to-8, adding a two-hour commute really affects the shape of your day, it affects spending time with your family, and I think that’s an influential factor for a lot of people to stay in the city.”

“People who used to buy in Armonk or Scarsdale or Greenwich . . . [now] want New York because it’s convenient for both parents,” says Sukenik.

Another part of the surge has been that despite all the new construction, there is surprisingly limited inventory for big apartments.

“There’s a really good supply of two-bedrooms that have been selling quickly, but developers didn’t want to develop too many large luxury products,” says Osher. “Basically, they didn’t want to put all their eggs in one basket. Luxury was kind of ignored by developers.”

“When we did the Time Warner Center and were offering 8,000-square-foot penthouses, people thought we were crazy,” says David Wine, vice chairman of the Related Companies. “But we saw the demand. You can get a tremendous amount of money from people with large families — well, wealthy families, not necessarily large. But they’re demanding the space.”

Does this mean that the era of the big buildings filled with small studios is coming to an end?

“We’ve thought about [designing bigger apartments], but we’re not sure if we’re going to do it,” says Elad Dror, director of residential property for the Moinian Group, developer of buildings like the Atelier, where buyers can use their American Express card for their down payment. (Think of the miles!) “There’s still a demand for more efficient-sized homes in the city ... If the market turns, we don’t want to be stuck with four-bedrooms. You’re better off with one-bedrooms.”

And Dror has seen why: If buyers can’t get a four-bedroom, they’ll just buy three apartments next to one another and build their own.

“I saw someone come into the Atelier and try to buy eight apartments — six two-bedrooms, and two one-bedrooms,” says Dror.

Despite the demand, developers like Related and Moinian aren’t rushing out to build complexes with 300 multimillion-dollar units. For many, this latest market move doesn’t feel like irrational exuberance. It feels more sustainable than what happened two years ago.

“I see right now a much more stable market,” says broker Jacky Teplitzky, an executive vice president at Prudential Douglas Elliman. “A crazy market is much more dangerous.”



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New York, NY 10013

Office: 212.727.6151

Mobile: 917.699.3229



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