Is it Just Us or Does it Seem Like All of Battery Park City is on the Market?

Battery Park has always been a hot topic for us since we love the community but just can't stomach buying anything given the monthly ground rent costs, which are seriously people sometimes almost as high as the rent that you would pay for the equivalent apartment. Talk about throwing money out the window. Yet despite this hurdle, we find ourselves continuing to drift through BPC open houses, looking longingly at cute one and two bedrooms with beautiful water views and balconies in quiet, family-friendly condo buildings. Even our dog likes Battery Park and he's very picky.

We think of Battery Park as having three type of properties:

1980s Condo Buildings in the south (e.g. 2 South End Avenue)
Foreclosed new construction in the south (e.g. Rector Square)
Still ticking new construction in the north (e.g. The Riverhouse)

This post deals only with the 1980s condos, which (fittingly) is where our journey started almost one year ago, when we saw a 908 sq ft 1BR, 1.5BA with a terrace at 21 South End Avenue ("The Regatta"). That apartment by the way (also quite fittingly) is STILL on the market after 184 days with only a minor price reduction and multiple broker switches (peeps, it's not the brokers, it's the price). In fact, for less than the list price of that 1BR you can buy a 2BR, 2.5BA that is 300 sq feet larger in the same damn building. On a higher floor. But really, who do we think we are? After all, logic, comparable listings and sold comps only work on some sellers, as we all know from watching way too many episodes of "Real Estate Intervention" on HGTV.

And speaking of comps, what exactly is going on with these 1980s buildings? One thing that's DEFINITELY changed since the last time that we hit an open house is the inventory. In the Regatta for example, there have only been 3 sales in the entire building over the past year (2 of them for less than $500k) despite the fact that there are currently 15 apartments (or 8% of the total building) on the market. At this pace (boy, is this ever unscientific on our part but still interesting to ponder), it would take 5 years just to sell the apartments that are on the market in that building right now. A similar situation exists at the comparable 2 South End Avenue ("The Cove Club") where 16 apartments (or 10% of the building) are currently on the market.

The other big change since last we poked around these buildings is price. Despite our lament over the continued eyebrow-raising pricing at our seminal 1BR, 1.5BA at The Regatta, many sellers in BPC are dropping and dropping their prices, often to no avail. You can now not only buy a 1BR, 1BA in Battery Park for under $400k, you also have choices within this price range. Similarly, you can buy a large 2BR, 2BA for under $800k. The 1980s buildings now offer many apartments at $650 per sq foot or less, which would put Battery Park pricing in line with desirable Brooklyn neighborhoods.

So...what's the problem? Well, there is of course, a catch. Remember those 1BRs for under $400k? If you take a representative one, such as this listing at 350 Albany St ("Hudson Tower"), even though the price is a very manageable $399K, the monthly carrying cost of the apartment (hello ground rent!) is $1566 or a whopping $2.41 per square foot. If you were to rent this apartment, our guesstimate is that you would pay no more than $2100 per month (and that's the high end folks, we actually think given the glut of rentals in the area that the real rent would be closer to $1950-$2000). So, if you are a cash buyer, you would eke out a tiny profit on the place ($6408 per year), which is a stunning 1.6% return on your $399k. And that does not include transaction costs. OR you could put the $399k in an ING account and earn the same damn thing. Risk-free. Remember the focused dolphin performing math from yesterday's post?

If you actually want to live in your apartment, the math is even worse. The gross monthly payment (with 20% down) will cost you almost $3300, approximately $1200 a month more than renting. There is a tax benefit of course, but it's roughly offset by transaction costs in the beginning and then dwindles over time. And those common charges? They never go away. Evenutally of course, you will break-even. Or will you? Similar to the analysis that we did last summer, we once again ran the numbers through the NYT buy vs. rent calculator and...once again determined that even at $399k, you never breakeven. So at what price point do you break even in a reasonable timeframe? Turns out that it's right around $250k where you will break even after a mind-numbingly long wait of 17 short years.

And Speaking of Buy vs. Rent Analysis...

After we did our own little buy vs. rent analysis on a typical Battery Park one bedroom, demonstrating that sales prices need to fall dramatically for buying to make economic sense, we read this Curbed piece by Jonathan Miller, featuring rather doomsday graphs which should both have a caption reading:

"If you look at our own damn charts, the sales price/rental price ratio is still at historical highs. Until this situation corrects itself, buying an apartment is hard to justify. Duh."

Instead, the commentary from Jonathan Miller is how do we put this nicely?...cryptic, to say the least, leading us to conclude that a real estate appraisal firm isn't just going to come out Jim Cramer-style and say "Don't Buy! Don't Buy! absolutely nothing from these findings.

Even the 50 paying renters at the Curbed (love) moderated panel on Thursday featuring Jonathan Miller and Prudential CEO Dottie Herman, were having trouble getting unbiased advice. Billed as an event to help people navigate the rental market, the Tribeca evening deteriorated rather quickly into yet another sales pitch discussion on how now is the time to buy zzzzz.

Asked one (we imagine) frustrated renter hoping to actually learn something about rentals for his $12 entrance fee - what if I just can't buy? Dottie actually replied that "buying with friends" is a viable option. Charming.