How to Make Sense of New York’s Confusing Luxury Home Market - Kanebridge News
Share Button

How to Make Sense of New York’s Confusing Luxury Home Market

From where the big deals are happening to new condo inventory, here’s everything you need to know about what’s happening at the high end

By KATHERINE CLARKE
Thu, Mar 21, 2024 9:17amGrey Clock 9 min

On Central Park South, retired entrepreneur Ron Pobuda has relisted his two-bedroom apartment for $8.95 million, a dramatic 40% reduction from its first asking price in Sept. 2020. Twenty blocks north, on the Upper East Side, real-estate agent James Morgan found a buyer for an $18 million penthouse before he could even get the property listed online.

In the wake of the Covid pandemic and interest-rate hikes—and amid an AI-driven stock market climb—buyers and sellers are having a hard time deciphering the New York City luxury real-estate market.

Ask a broker in Miami and they’ll say New York is dead. Ask a residential tower developer in New York, they’ll say that is nonsense. Ask a local real-estate agent, and he’ll say the market has rarely felt so hit-or-miss.

“It’s a mixed bag. Some things sell in two days. Other things sit there for two years,” said Leonard Steinberg, a luxury real-estate agent with Compass .

The Manhattan numbers point to a post-Covid luxury market that likely bottomed out in 2023, said appraiser Jonathan Miller . A report he prepared for brokerage Douglas Elliman shows that, in the fourth quarter of 2023, sales of luxury Manhattan homes (defined by the report as the top 10% of all sales were down by 5.9% compared with the same period a year prior.

It seems to be improving. So far in 2024, luxury contract activity has ticked up incrementally, according to local agents, who cite a decrease in inventory and a rising stock market. Liquidity pace, a measure of the rolling previous 30 days of signed-contract volume, was up by 9% so far in 2024 through Feb. 26 for apartments priced at $5 million and up, compared with the same period last year, according to real-estate data firm UrbanDigs.

“It looks like 2024 will be better, but it won’t be a boom,” Miller said.

Thanks to higher interest rates, all-cash deals are dominating the market, with roughly 68% of all Manhattan transactions unfinanced in the fourth quarter, according to Miller. That is up from the usual average of around 50%, Miller said.

Here’s a closer look at New York’s contrary, confusing high-end property market.

Where the sales are

The sale of a roughly 12,000-square-foot Greenwich Village mansion owned by Dexter Goei , the former chief executive of telecommunications company Altice USA , set a new price record for Downtown Manhattan. (NYC brokers define Downtown as south of 34th Street. It is more commonly defined as south of 14th Street.) It traded off market for $72.5 million in January. The price was more than double the $30.9 million that Goei paid for it in 2016, records show.

A West Village townhouse recently set a Downtown record when it sold for $72.5 million. PHOTO: MARCY AYRES/THE WALL STREET JOURNAL

The deal added to a string of major Downtown transactions that propped up the Manhattan market in 2023. In July, a penthouse at 150 Charles Street, a successful West Village condominium project, sold for $52 million . The seller was a company tied to former Credit Suisse executive Robert Shafir . In June, a Soho penthouse tied to Stefan Kaluzny, managing director of the private-equity firm Sycamore Partners, sold for $50 million , one of the largest deals ever recorded in Soho.

Clayton Orrigo, who worked on the $72.5 million Greenwich Village deal, said his team at Compass has closed or signed contracts on more than $500 million in real estate since the beginning of the year, with about 80% located south of 30th Street, and he expects the Goei property to be the first of a handful of major house sales in the neighbourhood. Other major Downtown properties that have been shopped for sale at similarly ambitious price points in recent years include financier Steve Cohen’s fortresslike, single-family mansion on Perry Street, which is said to have asked around $150 million in off-market conversations.

“I do believe that it’s a pioneer,” Orrigo said of the $72.5 million deal, declining to confirm the identity of his clients. “I don’t think it’s the last and I don’t think it will be the most expensive.”

Orrigo attributed the rise of Downtown prices to a lack of available inventory. Sought-after Downtown neighbourhoods like Greenwich Village, the West Village and Tribeca don’t see the same levels of new development as other Manhattan neighbourhoods, thanks in large part to height restrictions tied to their designations as historic districts. He said many of his moneyed clients who visit the city eventually look to buy pieds-a-terre in the area because they are unsatisfied with the hotel offerings. Airbnb listings in New York City have also all but disappeared as the city cracks down on short-term rentals .

In addition to the city’s stepped-up enforcement of short-term rental rules, many condo and co-op boards don’t allow owners to rent their properties at all, even if the rental wouldn’t be subject to the city’s short-term rental regulations. “When they realise how hard it is, they end up buying,” Orrigo said.

Orrigo said the buyer pool is made up of tech titans and “the nepo community,” meaning the children of wealthy individuals. “We’re seeing a tremendous amount of inherited wealth,” he said.

Luxury agent Sarah Williams of Societe Real Estate said she recently had a client sign a $41,000 a month, long-term rental deal when they couldn’t find a home that met their criteria in the West Village or Tribeca.

“There’s this widespread misunderstanding about New York, that it’s struggling,” she said. “New York is so sought after, it’s just that people cannot get what they want.”

One of the most successful new condos of 2023 was also located Downtown at 450 Washington Street. A rental-to-condo conversion by the Related Companies, it posted roughly $240 million in sales across 85 transactions in 2023, the developer said. Units were priced between $1 million to $15 million for studio to four-bedroom homes. Bruce A. Beal Jr., Related’s president, said the project had the “right pricing” and that buyers, the majority of whom were local, “understood the product.”

Where it’s still tough to sell

While Downtown is thriving, Midtown has been hobbled by excess inventory, remote work and a decline in foreign buyers, who have historically gravitated toward Midtown apartments, agents said.

When Pobuda, the entrepreneur with the Central Park South apartment, listed his longtime unit, a sprawling two-bedroom with a large terrace overlooking the park, in late 2020, he first asked $15 million. While ambitious, the price reflected the property’s trophy views and location, next door to 220 Central Park South , the most expensive building in the city. He got no offers.

“It was really obvious very quickly that nothing was going to happen, so I said, ‘Let’s just pull it off the market.’ ” Pobuda said.

The new asking price is a reflection of how the market has moved in response to interest rates and is strategically pegged just under $10 million to put it in a different bracket for New York’s mansion tax, said Peter McLean of the Corcoran Group, who is listing Pobuda’s unit. “We’re throwing as many incentives to the buyers as possible,” McLean said. (The tax, paid by the buyer, starts at 1% beginning with properties of $1 million or more and gradually increases to a maximum of 3.9% for properties purchased for $25 million or more.)

Pobuda’s story is typical of Midtown sellers, many of whom have had to slash prices on luxury properties to make a deal. Compass agent James Morgan said he recently lost a listing for a three-bedroom apartment at Museum Tower on West 53rd Street after the seller refused to consider reducing the $4.25 million price. Meanwhile, his high-end listings on the more inventory-constrained Upper East Side, such as the $18 million sale of a penthouse at 135 East 79th Street, are moving quickly.

“We’re still dealing with the Covid effect in Midtown,” he said. “People are working from home and they want to be in areas that are considered more neighbourhoody.”

Midtown also has the largest concentration of high-end, unsold new development units in Manhattan. Much of the unsold inventory is on the Billionaires’ Row strip south of Central Park. It sits in buildings such as Extell Development’s Central Park Tower, the 1,550-foot-tall glassy behemoth at 217 West 57th Street, which launched sales in 2018 and has roughly 77 unsold units priced at $5 million and up as of late February, according to real-estate data and analytics company MarketProof. While 53w53, the Jean Nouvel-designed tower next to the Museum of Modern Art, which has struggled to find buyers since launching in 2015, has about 65 units remaining priced at $5 million and up as of late February, as per MarketProof.

Units at both towers are routinely selling for significant discounts. A roughly 3,700-square-foot two-bedroom unit at 53w53 recently sold for $7.85 million, 32% less than its original $11.5 million asking price in 2016, records show.

Sales hobbled by rules

While the condo and townhouse markets are generally showing signs of life, agents say the city’s co-op market remains muted. Many of them blame antiquated co-op board rules that restrict a resident’s ability to sublet their units or renovate them. Some posh buildings insist on approving contractors, for instance, or fine residents if their renovations take too long, said luxury agent Donna Olshan.

Anne Hendricks Bass in 2010 PHOTO: MIMI RITZEN CRAWFORD FOR THE WALL STREET JOURNAL

The subletting rules seem particularly egregious post-Covid, said Williams, the luxury agent, since many high-net-worth individuals moved to Florida and want more flexibility to use their units as pieds-a-terre.

“They want to live in Miami, they want to live in London. They don’t want to be tied down,” she said.

Some of the city’s priciest co-ops have seen their prices reduced in recent months. A Manhattan apartment long owned by the late pharmaceutical executive Martin Howard Solomon is now asking $45 million, down from the original $55 million when it listed in 2022. The longtime Fifth Avenue home of the late oil heiress and philanthropist Anne Hendricks Bass also got a $10 million price chop to $60 million in November. Both remain on the market as of March 18.

“Even the best of these addresses are going for ridiculously low prices,” Olshan said “It’s amazing that the shareholders don’t file activist lawsuits to try to motivate their boards to change.”

A new development drought

For the past few years, the Manhattan market has suffered from a serious oversupply problem, appraiser Miller said. For now, overall inventory remains high outside of a few select neighbourhoods, but that likely won’t last. That is because filings for new luxury condos have plummeted.

Plans approved by the New York Attorney General’s office for units priced $5 million and up peaked in the mid-2010s and have dropped since 2020, according to MarketProof. In 2015, offering plans were approved for 952 units at that price point. In contrast, there were just 57 approved in 2023.

“In the years since Covid, so many things stood in the way of new inventory,” said Kael Goodman, co-founder of MarketProof. “There was supply chain, Covid shutdowns, a perception of oversupply and a high cost of capital. There was also an attention shift from New York to Miami.”

As of the close of February in Manhattan, there were close to 1,400 developer-owned units for sale at prices over $5 million, with an average asking price per square foot of $3,820, according to analytics firm MarketProof.

Outside of Midtown, neighbourhoods with significant new development inventory at that price range include West Chelsea, Lincoln Square and the Financial District. Again, that is thanks to a handful of mega projects, including Chelsea’s One High Line and Macklowe Properties’ One Wall Street.

After a slow start marred by controversy, One High Line was among the top-selling buildings of 2023. It posted 35 closings with an average price per square foot of around $3,000, according to a spokeswoman for the developer. That brought the total number of sales to around 80, she said. Formerly known as the XI, the 235-unit condo project first launched sales in 2018, but the original developer, HFZ Capital Group, faced financial distress and the project stalled. Witkoff and Access Industries took over the project in 2022 and rebranded it.

Meanwhile, industry sources say sales have been slow at One Wall Street, the former headquarters of the Irving Trust Company bank. Sales launched at the 566-unit building in September 2021 and there were still 467 units remaining as of late February, according to MarketProof. A spokeswoman for the project didn’t respond to a request for comment.

Gary Barnett of Extell Development, the firm behind Central Park Tower, said that while “inventory is gradually getting eaten up” across the city, his company is now being “very careful to pick the right projects.”

“You don’t want to be in a situation where your cost basis is so high that you have to make $6,000 or $7,000 a foot to make money,” he said.

While he has plenty of inventory remaining on Billionaires’ Row, another of the company’s projects, 50 West 66th Street, a roughly 125-unit project off Central Park on the Upper West Side, is close to 50% sold without having even formally launched sales, he said.

Barnett pointed to the project as evidence that “if you have the right product in the right location, you can still get very real and serious prices.”



MOST POPULAR

What a quarter-million dollars gets you in the western capital.

Alexandre de Betak and his wife are focusing on their most personal project yet.

Related Stories
Property
The Party’s Over for Coachella’s Glitziest Rental Mansions
By NANCY KEATES 13/04/2024
Property
Live in a WWII-Era U.S. Embassy in London for £21.5 Million
By LIZ LUCKING 11/04/2024
Property
A Megamansion in Dubai’s Swanky Emirates Hills Community Sells for $40.2 Million
By LIZ LUCKING 09/04/2024

This year, demand for high-end festival event rentals is down amid a glut of inventory, a shifting party scene and what some are calling a lacklustre lineup

By NANCY KEATES
Sat, Apr 13, 2024 9 min

Kristina Morrison’s journey to a parallel universe started on a bus that navigated hot, dusty, desert roads, crossed through a gated community with drab cookie-cutter houses and stopped in front of an enormous, white Mediterranean-style mansion.

She walked through an archway dripping with silver beads that revealed a crystal clear blue swimming pool lined with palm trees, bright red flowers and large rocks. Beautiful people played putt-putt, danced to live DJs and drank lime-green margaritas on a vast green lawn decorated with stacks of pink and silver balls.

“Everything was so chic and elegant,” says Morrison, a model, actress and influencer, about the Clinique-hosted event that took place last April in Indio, Calif., during the first weekend of the Coachella Valley Music and Arts Festival.

The party was at an 8,900-square-foot custom-designed estate called Zenda, which rents for around $300,000 an event during the festival. Its owner, Miles Warner, who lives 140 miles away in Santa Monica, was initially going to buy a smaller place to rent out as an Airbnb when he wasn’t there golfing, but when he saw the prices Coachella events, which include parties and overnight guests, were commanding, he bought the nine-acre property in February 2022 for $5.8 million. He then invested around $700,000 to add bedrooms and convert a barn into a party space.

One Coachella weekend event can cover the estate’s expenses for a year, he says. “I’m just lucky it’s working. If it stopped working, it would get expensive quickly,” he says.

There has been a bloom of such rental mansions in Southern California’s Coachella Valley over the past few years. The annual festival, which will take place over the weekends of April 12-14 and April 19-21, brings roughly 120,000 people, most of them to an area that covers nine cities, including Palm Springs, Desert Hot Springs, Indio, Indian Wells, La Quinta, Coachella, Palm Desert, Rancho Mirage and Cathedral City, as well as unincorporated communities in Riverside County like Thermal and Bermuda Dunes.

But this year, rentals of these mansions are slowing down, causing some to reduce prices, according Kaylee Ricciardi, an LA-based luxury rental real-estate agent with AKG | Christie’s who represents a number of mansions. Current demand for all short-term rentals in the Coachella Valley is down 12% year over year for the first concert weekend, the most popular time span. Last year, 75% of demand for both weeks of the Coachella festival were already booked at this point, according to AirDNA.

This doesn’t bode well considering all that goes into these weekends. On the festival’s sidelines, companies hold invitation-only parties called “activations” to draw in influencers, some of whom are paid to attend. The goal is to create memorable moments, or “branded experiences” to ensure their products show up on TikTok and Instagram feeds. These swag-laden events take months to plan and involve elaborate sets and celebrity appearances. Mansions with amenities like lazy rivers, pickleball courts and infinity pools make for good backdrops.

As a result, the income brought in by all short-term rentals in the valley during the Coachella festival has grown significantly—up 30% in 2023 compared with 2019, according to an exclusive data analysis by short-term rental-analytics firm AirDNA. In the areas where many of these rental mansions are located, the growth over just the past year has been explosive: up 44% in Coachella and up 38% in Thermal.

The slowdown in bookings, some say, is due to a glut that is coming on the market, as more investors are buying, building and renovating massive properties to rent out. “There’s going to be empty houses this year,” says Zenda’s owner Warner. He says the “secret” (that there’s a lot of money to be made renting large estates for activations during Coachella) is out—and now it’s just a question of supply and demand. Zenda, where the Clinique party took place, finally rented out this year, months later than usual, and for a significantly lower rate since it’s just a group of festival goers and not for an event.

Some owners speculate that companies are cutting back because of the economy, but the production companies that are managing the activations say the festival is important. “It’s absolutely critical for brands,” says Zev Norotsky, whose L.A-based event planning company Enter is managing several parties this year.

Others attribute it to a lacklustre festival lineup, which features Lana Del Rey, the Creator, and Doja Cat. “It’s not Beyoncé,” (who headlined the festival in 2018) says Sean Breuner, the founder and CEO of a luxury-property management company AvantStay, which manages several of the large estates in the area, along with luxury homes across the country. Rumours continue to swirl that Taylor Swift will be there to support Del Rey, a good friend, and that she could even perform.

Breuner bought his own rental mansion, a 5,000-square-foot estate called Buena Vista on 38 acres, with partners for $5.25 million in 2021. He spent over a million dollars renovating it and adding amenities like a tennis court, a large pool and a lake with paddle boats and kayaks. As it did last year during Coachella, Buena Vista will again this year host an event for Kourtney Kardashian’s lifestyle brand Poosh—an adult sleep-away camp and party. The property rents for more than $150,000 for an event at this time, according to rental agents.

Tony Schubert, owner of Event Eleven, an LA-based event-production company, says prices for these rental mansions have become so high that he realised it would be more cost effective to just build his own compound. For the past two years his company rented an 8,500-square-foot Mediterranean-style mansion on 19 acres with a man-made lake, an infinity pool and a 4-acre polo field called Cavallo Ranch, which rents out for around $300,000, where he runs an event called Nylon House, hosted by Nylon Magazine.

A few months ago he bought a 20-acre date farm in Thermal, part of Riverside County close to the festival, with two dilapidated houses for $850,000. He plans to build a 4,000-square-foot house, a lazy river and six A-frame sleeping villas that should be ready for next year’s festival. “I was looking at estates for clients and couldn’t believe how much money they were getting,” he says.

The Madrid, which spans 10,000 square feet, has eight bedrooms, three guest casitas, a poolside bar, an airplane hangar, a tennis court and two pickleball courts, is part of a whole rental mansion gated subdivision, complete with a guard, in Bermuda Dunes, created by Rick Kay, who runs a San Clemente, Calif.-based ball-bearing manufacturing company. Kay initially bought a single 10,000-square-foot home for $1.6 million in a subdivision in 2006, but when he ran into an issue renting short term, he decided to buy up the other 10 lots and build individual 10,000-square-foot houses, at a cost of $5 million to $8 million each. “Everyone has vacation rentals but no one else has a vacation village,” says Kay.

These side events held during Coachella are crucial to the local economy, particularly in the more remote areas like Thermal, which doesn’t have many hotels and restaurants to reap the benefits from the festival, says Mark Tadros,. He rents out the packhouse, traditionally where the dates are packed, on the property of his date farm, Aziz Farms, for as high as $150,000 per event during Coachella.

Last year an event called Oasis in partnership with Liquid I.V. (an El Segundo, Calif.-based hydration drink company) took place at the packhouse, but this year, the packhouse isn’t rented. “We are taking a different approach,” says Kyle Nolan, the executive producer at Sturdy, a L.A.-based design studio and creative agency that runs the Oasis event and says he isn’t doing any events off the festival grounds this year.

“I certainly hope this isn’t the new normal. I just think it’s an off year,” says Tadros, who also sits on a community council in Riverside County that approves or denies permits for special events in parts of the unincorporated areas. He says the permitting process has become much stricter in recent years.

This year Indio “clarified” its definition of a “large event,” requiring a permit for any party with over 40 attendees held at an estate with overnight guests because some property owners weren’t compliant, says Indio marketing and public information officer Jessica Mediano. Indio also doesn’t allow properties within 1,000 feet of the festival grounds during a major music festival event (i.e. Coachella) to hold events.

One of the more renowned events, sponsored by online fashion retailer Revolve , is also cutting back this year, holding its party on just one day instead of two and opting for a Palm Springs hotel instead of a private mansion as in previous years. A Revolve spokesperson says it will “still host the same amount of guests, we have just simply changed the format to keep things fresh, exciting and elevated.”

Last year the Revolve affair was held at the Emerson Estate, an over 8,000-square-foot mansion on 20 acres in Indio that rents for $30,000 for weddings and goes up to the six figure range for events. Emerson Estate owner Diana Lazzarini says she put a lot of money into her property getting ready for the Revolve party, such as putting in gates and an area for VIP parking, in hopes that they would return. She says she had a few lowball offers, but her estate isn’t booked for the first weekend of Coachella this year because it wasn’t worth accepting the lower prices people were offering. “It’s a lot of liability, headache and risk,” she says.

The Madrid House, advertised by its owner Rick Kay as “the house that never sleeps,” is also changing course. Instead of big parties on Friday and Saturday nights, there will be private daytime events run by Enter around the pool featuring pickleball and fitness classes with partners like Paper Magazine, True Religion, Saint James Iced Tea and LaCroix. Kay says he thinks he could charge as much as $200,000 for big events, but he prefers the smaller sized parties, which pay around $40,000 for the Madrid, because they are less of a hassle. The lower price played a role in why he chose the Madrid, says Enter’s Norotsky.

Instead of building one big estate on multiple acres for big events, some investors are now building multiple individual ultraluxury homes where headliner musicians can stay and companies can host influencers at smaller parties that don’t require permits.

David Corso, whose Corso Marketing Group manages a Coachella event estate called Zenyara, just finished building his own rental mansion property he named Villa Rosa. Designed by the CEO of RH, Gary Friedman (a friend), the very modern, polished concrete and balsa wood house will host Coachella musicians and guests in a quieter, more intimate environment for $10,000 to $30,000 a night, depending on the season he says.

Claudio Bravo is taking a similar path. The luxury mansion rental company magnate just finished building a $50 million project with 16 short-term rental mansions. Each spans 6,500 square feet. They are right next to each other in a gated community on a 10-acre property in Indio, near the festival site, called Bravo Collection in Indio. This year 13 of the homes, which rent for around $100,000 apiece for a week during Coachella, will be rented by Guess Inc.

Jen and Chris Baldivid’s Folsom, Calif.-based Walker Land Company owns the Old Polo Estate, a former date farm on five acres they bought in 2017 for $925,000 and added a pool, pond, volleyball and pickleball courts and a two-hole golf course. They rent it out for $50,000-$400,000 for events that attract as many as 3,000 attendees during Coachella’s first weekend. Last year’s activation was sponsored by clothing company Darc Sport and included a 40-foot long tunnel with plastic skulls embedded into foam walls. It’s not rented for the first weekend of Coachella this year.

Starting this year, the Balvadids have a different sort of mansion that is almost fully booked until summer, including during Coachella, with smaller events, like dinners, and guests staying over. It’s well known in the architectural community because it was designed in 1959 by Midcentury Modernist Walter S. White. The structure of the house, including the metal parabolic roof that floats over the angular white structure, is untouched, but they knocked down a wall to make it more open, added three sleeping casitas, put in a pool that mimics the shape of the house and turned a carport into an outdoor entertainment area.

While demand for short-term rentals has slowed for the first weekend of the Coachella festival, it is higher this year for what’s called Stagecoach—the country music festival held the weekend after the two Coachella festival weekends, this year April 26-28. Demand is up 39% year-over-year, according to AirDNA. That is giving mansion owners hope that there will be expanding opportunities for event rentals beyond Coachella.

There are still more event mansions on the horizon. Drew MacLurg owns the Stallion Estate, a 7,000 square foot home on 5 acres he bought for $4 million in March 2022. He charges around $200,000 for an event for the first weekend of Coachella, but he didn’t get any interest for that this year so he is renting it to a private group for three nights for around $18,000, he says.

MacLurg put in about $1.6 million adding a 60-foot long pool with a waterslide, a decked-out game barn, a pickleball court and a nine-hole mini golf course. He is currently building a 7,000-square-foot house nearby that will have a lazy river and a bowling alley for event use.

Another is the Pond Estate, a 12,700-square-foot Hacienda-style mansion with indoor and outdoor swimming pools and two guesthouses (4,000 square feet and 2,000 square feet) on over 12 acres in South Palm Springs. Tom Ryan, the president and CEO of streaming at Paramount, bought the property, near a house he owned, for $8.38 million in June 2021 after stumbling on it with his wife. He says he was blown away by the beauty and history and is putting in a couple million dollars renovating and redecorating it, including creating a game room and entertaining spaces out of former garages, each 3,000 square feet. He plans to rent it out for weddings, private parties and during Coachella for events.

Ryan says he didn’t buy it as an investment to make as much profit as possible—he sees the event business more as helping offset costs for a property his family will own for generations. “It felt like a once in a lifetime opportunity,” says Ryan.