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Are Nervous Co-op Boards Driving Down Apartment Prices?

New York City

Co-op Rejections
Jan. 7, 2019

It’s no secret that buyers pushed sellers out of the driver’s seat during the cooling New York City housing market of 2018. Many factors have driven the market downturn, but here’s one you probably haven’t considered: co-op boards, responding to the gyrations of the stock market, are more likely to reject potential apartment buyers, putting added downward pressure on the price of apartments.

"Boards become particularly concerned about liquidity and overall assets in a down market, especially one which is accompanied by gyrations in both the Nasdaq and the S&P 500," says Frederick Peters, Warburg Realty CEO, in the firm's fourth quarter New York City market report. "As a result, the market has experienced a rash of board turndowns, frequently incomprehensible to the observer, at a time when these negative decisions have a particularly tough impact on sellers."

The report found that any apartment that receives a board rejection likely will remain on the market for a couple of months and sell for a lower price than that at which the first deal was struck.

The Warburg market survey, reported by Crain’s, shows that sale prices in October and November were 10 to 20 percent lower than peak levels during the overheated summer of 2015. According to the survey of 2,505 listings, 49 percent of co-ops, 45 percent of condos, and 5 percent of townhouses had price cuts. 

"Every day in our office, multiple price-reduction announcements pour in via email,” Peters says. “Sometimes it takes two or even three such reductions before a property enters the salability zone.” 

Peters adds that while the city’s real estate market may not have much farther to fall, it may take at least six months before it stabilizes. Much of this depends on the behavior of erratic stock markets, the shut-down federal government – and nervous co-op boards.

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