ABO chief: Residential market is not immune to overheating

Real Estate Weekly, Sept 20, 2000 by Natalie Keith

When trying to predict the future of the residential market, real estate officials should look at the stock market, marketing expert Adrienne Albert recently told members of the Associated Builders and Owners of New York Inc.

"My crystal ball is always cloudy but, as Wall Street goes, so goes real estate," said Albert, President of the Marketing Directors.

Albert, the guest speaker at ABO's monthly luncheon held last week at the National Art Club, presented numerous statistics to demonstrate the strength of the New York residential market over the past year. She compared current statistics with those of the mid-1980s, when the industry was similarly abuzz with discussions of the overheating market.

"I began to worry in the 1980s when doormen were buying units as an investment and asking me for advice," Albert said. "Everybody knows the residential market is hot today, but how hot?"

She also addressed the question most in the real estate industry are asking, but few seem to be answering with confidence: How long will the good times last?

"We all remember the pain of the recession in the early 1990s and how long it took to recover," she said.

Albert presented statistics concerning the condominium market, details that must be publicly recorded. In the first half of 2000, 2,434 units were sold, compared with 2,369 units sold in the first half of 1999. In 1984, 2,500 units were sold, she said.

"We were grossly under-supplied then and we're grossly under-supplied now," she said.

The average asking price of a unit in the first six months of 1999 was about $550,000 versus an average asking price this year of $700,000. Over the same time period, however, the average size of a unit sold changed little from 1,104 square feet in 1999 to 1,123 square feet in 2000, she said.

Of the units sold in the first six months of 2000, 44 percent were one-bedroom units, 26 percent were two-bedroom units, 19 percent were studios, 9 percent were three-bedrooms, and 2 percent were four-bedrooms or larger, she said.

"Homeownership is in high demand all over Manhattan," Albert said. "There is no standing inventory in Manhattan today."

Among noteworthy sales this year were units at 200 Riverside Boulevard on the Upper West Side, which sold for an average price of $675,000, or $800 per square foot. The 353 units under construction in the Trump World Tower on the Upper East Side are being sold for prices starting from $750,000. The Midtown West and Chelsea neighborhoods have seen units rent for $50 per square foot or more and sold for $750 per square foot, she said.

"Activity will soar in this area," Albert said.

She also predicted that activity in the 42nd Street area and Downtown, including TriBeCa and Soho, will also be brisk. In the Roebling building, an average unit consisting of about 4,400 square feet is selling for $2.2 million, or $511 per square foot. At Loft Soho, an average unit consisting of about 4,300 square feet is selling for $3.2 million, or $735 per square foot, she said.

"For the most part, they are getting the prices they're asking," she said.

Future hot neighborhoods will be Alphabet City and Harlem, she said.

"Earning power is up, the population is stable and the demand for home ownership is high," she said.

In terms of the future, Albert predicts that demand will remain high but there will be no major changes in supply in the near future. This contrasts sharply with what happened in the 1980s, when 6,000 new units were built in 1986 and 19,000 in 1987.

"As long as they can afford it, they will chose Manhattan," she said.