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High Rents are Forcing New Yorkers into Buyers' Market, Brokers Say

By Amy Zimmer | March 2, 2012 6:57am
The living room of a 1 bedroom at 436 East 66th St. listed by the Heddings Property Group for $549,000.
The living room of a 1 bedroom at 436 East 66th St. listed by the Heddings Property Group for $549,000.
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Heddings Property Group

MANHATTAN —  For some real estate brokers, the busy spring buying season came early this year.

That's because high rents and low interest rates have nudged apartment hunters into a buyers' market — and even into full-scale bidding wars for small "starter" apartments.

"The spring season started Jan. 3 instead of March," said Doug Perlson, co-founder and CEO of online brokerage firm RealDirect.com.  "There’s definitely pent-up demand."

Skyrocketing rents are pushing many first time buyers into the market, he said, noting that he's had several recent clients who have had rent increases of between 10 and 20 percent.

He has seen clients in bidding wars for studios in Chelsea, Kips Bay and Gramercy, which was unheard of until recently.

"We haven’t seen that in a long time," Perlson said.

Nearly 19 percent more starter apartments went into contract this February compared to last year, according to the monthly Streeteasy report released Thursday. Family-sized apartments, on the other hand, fell by 8.2 percent. 

“I think people are feeling a little more confident about the economy, especially our local economy,” said Doug Heddings, founder and president of The Heddings Property Group.

Several brokers said that Downtown and the Upper West Side are so hot right now that appropriately priced properties are flying off the market.

"I was a little concerned at the beginning of the year," said Jacky Teplitzky, managing director of Prudential Douglas Elliman.

“I saw a lot of hesitation. I saw a lot of people looking, but not pulling the trigger. Now, I’m seeing more offers coming in. There’s more concrete action."

The buying market, however, has brokers concerned about drying up inventory.

"If you look around the Upper East Side and Upper West Side, you’re going to see few cranes," Teplitzky said. "There’s not enough product coming around."

Inventory has dipped 3 percent so far this year compared to last year, Streeteasy’s monthly reports found. Upper Manhattan saw the most dramatic decline, with a nearly 12 percent drop in inventory.

Buyers relocating here from other states with sluggish markets are getting a "wakeup call" when they see the limited inventory, Teplitzky said.

Foreign buyers — who still represent a strong segment of the market, with Brazilians now leading the pack — are competing with locals, as they come for short visits want to hurry and close on a condo in day, she said.

For some locals who have been waiting out the market by letting their condos while they rent cheaper apartments for themselves, Teplitzky has advised them it may now be a good time to sell.

"Sellers are still under the mindset that they don’t want to give their apartment away," said Karen Berman, vice president and director of sales and brokerage at Argo Real Estate.

"Prices won’t go up to where they used to be for a while, but at that point, interest rates will go up and they’ll lose buyers."

Besides the lower end of the market, Berman and other brokers said sales of high-end apartments, for more than $5 million, were also strong.

"Buyers have been sitting back, waiting," she said.

"They missed the lowest point. But the interest rates are so low [and] people are starting to feel better about the market in general. There are buyers out there."