Downtown Manhattan, long a cultural epicenter of the United States, comes with one of the steepest barriers of entry thanks to a real estate market that has seen an ever-increasing price creep since the 1990s. Still, the disruption caused by the effects of COVID-19 has created opportunities in the market, particularly for co-ops and condos in pockets below 14th Street.
According to a report from John Walkup of UrbanDigs, the market for Downtown Manhattan co-ops priced between $2 million and $4 million has been among the slowest-recovering segments in New York City. Listing discounts for co-ops over $2 million have hovered around 15%, measured by original price to last asking price for units in contract, while the average discount in other downtown neighborhoods over the last six months has been about 9%.
To some, this might suggest that a surplus of units in the $2-$4 million range has created a soft spot for buyers; however, UrbanDigs notes that down payments and fees often limit the buyer pool for the limited supply below 14th Street.
When it comes to the Downtown Manhattan market, big discounts often come with significant hurdles for potential homebuyers. Some co-ops in the area require as much as a 50% downpayment on properties. Add on post-closing liquidity requirements and the potential buyer pool becomes even more limited, even with a significant discount to the asking price.
“Cooperatives downtown, with down payment requirements that range anywhere from 25%-50%, are likely experiencing higher discounts because it is challenging for buyers to have that kind of cash downpayment in-hand,” said Susan Abrams of Warburg Realty.
Abrams also noted that even if the buyers have the cash, historically low mortgage rates leave little incentive not to finance. But in cases where money isn’t an issue, it’s still the best opportunity to buy in Lower Manhattan at a discount.
“If you can afford the down payment, post-closing liquidity requirements, and the costs of renovations, a buyer may have a great opportunity to purchase an apartment in a great location downtown at a favorable price,” Abrams said.
Interest outside of New York City
Warburg Realty broker Gerard Splendore, whose firm has an office in the coveted Tribeca area, said that low interest rates and high barriers of entry have some would-be Lower Manhattan homebuyers looking elsewhere.
“Low interest rates are allowing buyers to stretch their financing options and help them to actualize aspirations they may have to buy bigger, better homes,” Splendore said. “However, without the requisite down payment or the post-closing liquidity, there are other, more affordable areas in which they can purchase homes — such as the multitude of options available in Brooklyn, or in parts of upstate New York or New Jersey.”
Splendore noted that some potential homebuyers may prioritize amenities, space, and even parking over the status of living downtown.
“For a similar purchase price, buyers can move to the Hamptons and purchase luxury real estate without a board’s review,” he said. “Real estate in the Hamptons is perceived as healthier, and comes with the added bonus of parking — something which is always at a premium in Manhattan.”