The following comment appeared in the comments section and I was interested in what you all had to say about it:
Friday is a historic day in Harlem. 2 Major Developments where at both Harlemites were harassed with intent to evict. The Investors could not evict enough long time residents and destable apartments in the process. They tried, they speculated, they failed.
The downside is this depreciates the value of all Harlem developments. Sorry, if you bought an apartment in ’06 or ’07 you cannot sell it today for anywhere close to what you paid. Corcoran closed shop in Harlem for a reason. There is a TON of unsold inventory in Harlem, with no hopes to be sold going forward. The Bloodbath is slow, it’s gradual, but Harlem values will decline 30%-40% by mid 2010.
(1) The ownership of the 1,230 unit Riverton Houses in Harlem is being thrown into question as a Friday auction by the $25 million mezzanine noteholder, Realty Finance Group, is unlikely to attract private operators. Loans on the property total $225 million, but the site was reappraised at $190 million. It was bought in 2005 for $131 million.
(2) The former Delano Village, now known as Savoy Park, is another Harlem development in financial hot water. The 1,802-unit project was purchased in 2006 by Apollo Real Estate Advisors and Vantage Properties for $175 million. It was soon refinanced and now has debt of $367.5 million, with a high default risk, according to ratings agency Realpoint. Default date is on Friday.
Timmy
February 24, 2009
ManhattanKid, Forester is precisely right in the way a stopped clock is right twice a day. He’s been peddling this same line on Curbed for years. He writes with a certainty that only a person who cherry picks data can have – selecting failures while ignoring all the successful developments. He ignores the reasons behind why the Anchor developments were priced the way they were. He doesn’t mention that the home ownership rate in Harlem has skyrocketed in the past ten years. Because he ignores this last bit he doesn’t have to mention that Harlem’s neighborhoods are much more stable over the long term than they have been in decades.
Nobody is arguing that real estate is not softening in Harlem. Guess what, we’re at the start of a deep recession and real estate is horrible across the entire country. The bubble has burst and there’s excess inventory everywhere, not just Harlem. There are lots of empty buildings in Williamsburg too, there are lots of foreclosures in southern Queens.
Harlem is going to be hit hard by the recession, everyone is, and maybe Harlem will be worse off than other parts of the city. But, the credit squeeze will likely end in a year or so, the recession will ease, jobs will come back and people will start buying homes again.
Ken Tee
February 24, 2009
By the end of 2009, 40% or more declines are going to be common. The market is oversaturated, and developers are overleveraged. ManhattanKid and Forester are absolutely on the money.
bradhurst living
February 23, 2009
Also let’s remind ourselves that gentrification isn’t just about white people. Yes, white folks are moving to Harlem but so are a lot more affluent african-american, asian and hispanics too. Imagine there are a few developments hurting but there are plenty that seemed to fill up because they’re priced right. Dwyer has been mentioned. Soha118, Langston, Kalahari are others. Those units do have some subsidized units but seemed like they had plenty market rate/higher rate apts also. Brownstone Lane seemed to sell out which might be another reason why Corcoran bailed – still not a great sign. It seems like the developments on Frederick Douglass are holding up better than the ones to the east but there’s still a lot of building going on – wonder if we’ll see a push to more rentals.
ManhattanKid
February 22, 2009
Forester is precisely right, unfortunately.
Residential real estate values are a lagging indicator and the implosion of Wall Street since September 2008 will show up as an implosion in residential real estate values in 2009. Expect the peak pricing of $915 per square foot at Soha 118 in August 2008 to decline in value by 40% in 2009. That same apartment will be worth $550 psf by the end of 2009.
Read all of my Harlem condo market coverage here:
http://manhattankids.blogspot.com/search/label/condos
housing
February 21, 2009
I think the exact opposite will happen in Harlem. More and more middle class housing is needed – NOT poor subsidized housing. 3 developments will be opening in the next 6 months that are for middle class families who contribute to the tax rolls that will help the city survive and the services stable. The mayor understands this and that is why he’ll probably be reelected.
al
February 20, 2009
The levees have been broached, that is the 110th street levee that for so long prevented whites from crossing into Harlem, now whites are flooding all across Harlem enjoying the lower cost of living, great transportation, architecture, more space and staying in Manhattan. To imply this real estate softening is the end of gentrification is short sighted, Harlem gentrification is way past the tipping point.
Pete
February 20, 2009
James,
Will look forward to it. I would tend to agree that there are a number of factors that may run counter to the broader trends and the conventional wisdom.
Forester
February 20, 2009
(1) Harlem’s first financially troubled development was The Lenox Grand. The banks (not the developer) behind it is trying to salvage something out of it as a property/asset with this day care, restaurant, etc however it’s current use was not the plan, is not returning profits as planned. (2) Even across the street, the Lenox was supposed to have retail on the ground floor, not an auto/car dealeship, that does not add value to the development, was not the plan. (3) There are literally developments in Harlem that have not sold a single unit. Completed done & finished developments that have not sold a one apartment. One is just East of Pathmark and South of 125h, another is on 5th Ave and 128th or so. Not the one adjacent to the Church that just slashed it’s prices, but the one across the street on the corner on the East Side of 5th Ave. That place has a model unit furnished, has had numerous months of open houses, over 1 year now, has not sold a single unit. (4) UNSPOKEN FORBIDDEN TRUTH? It’s a fact, well documented all over the place that banks will not fund developers with developments in areas that lack core amenities. Major supermarket for example, etc. within 2 or 3 blocks, etc. This has proven to be prudent and valid from the standpoint of a bank funding major development. (5) Harlem does not have a sound and or established apartment condo or coop market. It never has. This is another “unspoken & forbidden truth”. The Harlem apartment market was initiated in ’02 or ’03 by The Renaissance Building on 116th & Lenox. A Co-op Lottery driven process where lottery winners paid far below market prices. I have a friend that paid $12,000 for their “shares” for the 3 bedroom they have there, the maintenance is $1600 or thereabouts and that’s all they pay. The we saw developments in Harlem like Rosa Parks, Harriet Tubman, these are all apartment buildings that of course sold out in a nano second. Why? They were sold via lottery with all sorts o incentives, perks, etc. ARTIFICIAL MECHANISMS making them dirt cheap. Of course they sold. This is the Harlem Condo/Coop Apt market. This is how it was founded. It was not founded on an open and free market, it was “rigged” to foster the illusion, the appearance of demand. Remove those perks, those incentives, etc. and what do you have? Sure, people have bought in the Dwyer, but the majority of the developments wherein the open and free market determined success……..have failed. Make excuses all you want, there is a TON of unsold inventory, and as stated and documented, entirely unsold whole developments. In sum, there is really no substance, no history, nothing supporting the assertion to claim new in SOHA is worth $800/Sq’ for example. Nothing but a sales pitch from a real estate agent. Drink the kool-aid, believe the hype. That’s what they ask you to do. (6) We’ve lived through an era of “nonsense”. Values inflated, mortgages and loans to all with a pulse (nevermind being unqualified). This nonsense that created our current problems is reflected and extended in many of these developments and their asking prices. It’s reflected in today’s problems with the Riverton & Savory Gardens. The Harlem Apt Real Estate Boom post 2000 was driven and built on “nonsense” (incentives, perks, cheap low bar free money). Sorry, there is just no substance to anything that’s transpired in the past 5 years plus. That’s why there is so much insold inventory, that’s way Corcoran packed up shop and exited Harlem, that’s why Vornado pulled out of Harlem and scrapped Harlem Park, that’s why there are whole developments with not a single apartment sold. It’s not a pretty picture. This is not about cheerleading. This is about calling it for what it is. Smoke, mirrors, and nonsense. The current downward cycle is in its infancy. The Brownstones are separate from my points. You will see prices in Harlem for apartments that are 30% of their ’06 levels….in ’09.. I don’t think people have any real idea what it takes to get a mortgage today…..very good credit, 700+ credit, low debt….the pool of warm bodies that can obtain a $750,000 mortgage Plus is very small……and though I love Harlem, today you can buy on the UWS for what they want in Harlem for pretty much the same square footage.
James
February 20, 2009
I think the 30-40% claim is waaay overstated. From what I’ve experienced, prices are down about 20% off peak…but there is still demand for these bargains. Inventory is fairly high, but Harlem has a few things still working in its favor. I will follow up on this point over the weekend on the bloggy. Cheers!
narmer
February 20, 2009
Just a few weeks ago, the City Council President Quinn call for the Harlem Developers of Condos to open the buildings to rentals so the people were displaced in the area could now now return and rent apartments in those buildings.
Any opinions on this?
tacony palmyra
February 20, 2009
Central Harlem is 93% renters. 30 to 40% decline in real estate values? Great, maybe I’ll actually be able to afford the rent!
Sorry, I wish that post-meltdown real estate discussion in New York wouldn’t focus so heavily on the plight of the precious few who could afford to buy property at market rates in this city during the height of the bubble.
A. Taveras
February 19, 2009
Not sure if I have a horse in this race, however it will be incredibly interesting to watch this all unfold. It’s great to have blogs like yours delivering these bits of inside baseball on matters that affect us all.
anon
February 19, 2009
prove the “harassment” instead of throwing loaded words around