Today we indulge in a little bit of the old schadenfreude – joy over the misfortune of others. The others, in this case, being those poor rich people who are now trying to unload high-end co-op and condo apartments in gilded New York City. Those unlucky souls are becoming acquainted with two of the dirtiest words in this real-estate-obsessed city: deep discount.
Consider the case of the actor Brian Kerwin, who purchased an 1880s Romanesque townhouse for less than $1 million in the early 1990s, then restored the property. When he decided to sell recently, the Wall Street Journal reports, he was hoping to get about $12 million, based on similar sales in the neighborhood. A broker told him he should price it at $8.5 million. He did, but no one was interested. After a year and several price cuts, the building is now in contract for $5.5 million.
“It’s like hitchhiking,” Kerwin says. “After standing there for 10 hours, you’ll take anything.”
Kerwin, like other high-end sellers in New York, faced the convergence of several potent economic forces: an oversupply of new condos, a drop in international buyers as some countries impose capital controls, changes to the tax law that cap state and local deductions, and rising interest rates.
“It’s a crazy Bermuda Triangle of forces that have lined up against people trying to sell and buy these properties,” says Lee J. Stahl of the design/build firm the Renovated Home. The Upper East Side luxury co-op market in particular, she adds, is “a train wreck.”
Case in point: River House, an old-line East Side co-op that once rejected application packages from Gloria Vanderbilt and Richard Nixon. How times have changed. The co-op board recently accepted the purchase by Uma Thurman – an actress! – of a 12-room apartment that had been discounted by $8.5 million, the New York Post reports.
But don’t let your schadendfreude run away with you. “What’s most significant about 2018 is that even the sub-$1 million market is slowing because of rising mortgage rates,” says appraiser Jonathan Miller. Rates for a 30-year mortgage averaged 4.81 percent in late November, up nearly a full percentage point from the beginning of the year. And that affects everyone – rich, poor, and in-between.
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