For several years, the New York City real estate market has seemed unstoppable. Yes, prices in Manhattan, Connecticut and coastal Long Island dipped in the wake of the financial crisis, but those losses were nothing compared to what occurred across the rest of the country, and, in the last couple of years, home values have more than rebounded—much of the tristate area is now seeing record high prices. “Before the crash,” explains Douglas Elliman CEO Dottie Herman, “everything was so extravagant. Then people became more conservative. But now, real estate is back, and the high end is back in a really big way.”
Indeed: For a New York minute, the country’s most expensive real estate purchase was a $120 million, 50-acre home in Greenwich, Connecticut, which closed in April. But that was easily topped in early May, when activist investor Barry Rosenstein paid $147 million for an 18-acre beachfront spread on East Hampton’s ultra-chichi Further Lane. At press time, it was the most expensive residential purchase in the country, ever. But there’s no telling how soon that record will fall.
In fact, many experts, including Herman, now think that New York is poised to overtake London as the world’s number one city for real estate—the first place wealthy foreigners will come to park their cash. New York should claim the global crown, Herman believes, by 2024, but prices are already rising so quickly that some savvy shoppers are flipping their just-purchased properties for big returns. For example, Douglas Elliman brokers (and brothers) Tal and Oren Alexander sold a 69th-floor unit at the Time Warner Center for $13 million in April 2013. In November 2013, they put it back on the market…and had a signed contract for $15 million just a month later.
The frothy atmosphere is partly due to a historic lack of inventory, which is at an all-time low; nevertheless, the sales keep coming. The Real Estate Board of New York, which surveys its brokers four times a year, reported that there’s been an uptick in confidence during the first quarter of 2014. (REBNY’s “Overall Confidence Index” figure was 9.21 out of 10, compared to 9.00 during the previous quarter.) They attribute the rise to a steadily improving economy and an increase in home sales throughout the city.
“Our brokers—both residential and commercial—continue to express strong confidence in New York City’s real estate market,” said REBNY president Steven Spinola. With good reason, apparently: At TOWN Residential, for example, business was up almost 50 percent in the first quarter of 2014 when compared to the first quarter of 2013, according to TOWN’s owner and founder, Andrew Heiberger. “New developments are leading the charge,” he says, “and prices in them often exceed $2,500 per square foot.”
However, lower-priced luxury real estate is trading faster than the super-expensive properties, at least in Manhattan. “Apartments and town houses priced above $20 million are not moving as quickly” as those that are a bit more affordable, Heiberger says. “Residences priced below $5 million are seeing the most demand.”
On the East End, though, it’s a case of rising tide lifting all boats. Home sales have jumped 38 percent on the South Fork…and they skyrocketed an astonishing 60 percent on the North Fork, according to the Corcoran Group, who compared the first quarter of 2014 to the same time period a year earlier. (Some areas, like the Cutchogue/Mattituck/Laurel area, jumped over 100 percent, while Greenport saw sales jump 200 percent.) Many feel that North Fork’s rise occurred as a result of South Fork’s, mirroring the revitalization of Brooklyn, which saw its desirability soar in tandem with Manhattan’s.
“The East End is experiencing an incredibly active market, more so than we’ve seen since 2006,” said Corcoran CEO and president Pamela Liebman. “The lure of sand and the beach are always a big draw, and North Fork is beautiful, but more approachable than the Hamptons.” Herman agrees: “People can get a lot more for their money in the North Fork, [and the area] is coming into its own.”
And it’s not just volume that’s increased—as indicated by that record-setting Further Lane property, prices are also up across coastal Long Island. Douglas Elliman’s latest East End market report found that the average sales price has increased by 40.2 percent, from $1.21 million in the first quarter 2013 to $1.7 million in the first quarter of 2014. On the North Fork, the increase was even higher: 52.3 percent, from $533,481 to $812,231. “There is no land south of the highway in the Hamptons,” explains Herman. “People are buying multi-million dollar homes as teardowns.” Appraiser Jonathan Miller agrees: “The numbers are off the charts.”
One of the biggest trends impacting the Hamptons, Manhattan and Connecticut is that some wealthy people are buying multiple homes in the tristate area. Take, for example, fashion designer Reed Krakoff and his interior-designer wife, Delphine: Having recently sold their Upper East Side town house for a whopping $51 million—netting themselves a tidy profit over the $17 million they paid in 2005—the pair plunked down $28 million to buy a town house that previously served as the offices of the New York Observer. This, less than a month after they bought a 54-acre estate in New Canaan, Connecticut, that had once belonged to the reclusive heiress Huguette Clark (they got a bargain, considering that the original asking price was $32 million and they paid just under half that). And, of course, this is all in addition to the East End house they already own, known as Lasata, which is famous for being Jackie Kennedy’s childhood summer home.
The numbers might seem crazy—particularly at this level—but many experts expect that housing’s popularity (as both a luxury and an investment) will endure. “People believe in real estate,” Herman explains. “It’s something they can touch, see and feel.