3-Bedrooms Soar as New York Nests 

Sep 26, 2004

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IT was as frenzied as a Manolo Blahnik sample sale. Michele Kleier, a broker at Gumley Haft Kleier, put the prewar, three-bedroom apartment on the market two weeks ago, then stood back and watched the hordes that descended for her first and only open house. "We must have had 100 people in two hours," she said. The seven-room co-op at 88th Street and Madison Avenue went into contract above the $3.45 million asking price in a four-way bidding war.

These days the most prized apartment may be the one that offers three bedrooms. Buyers, typically families needing space for children or couples seeking space for offices, are finding that there is very little available.

The extra bedroom doesn't just add a bit to the price. To get a prewar three-bedroom, buyers have to spend an additional $700,000 to $1 million above the cost of a two-bedroom.

Three-bedroom apartments are the fastest growing share of the market, according to a study by the residential brokerage firm Brown Harris Stevens. Of 5,489 sales during the first eight months of this year, 638 were three-bedrooms, increasing the market percentage of three-bedroom sales to 12 percent from 9 percent for the same period last year.

On the East Side, the median price of a three-bedroom apartment rose to $2 million from $1.3 million. (If the price tags on Manolos increased by that much there would be riots by wage-earning fashionistas.) On the West Side the median price grew to $1.75 million from $1.59 million, while the median price downtown grew to $1.55 million from $1.47 million.

Gregory J. Heym, the chief economist at Brown Harris Stevens, who conducted the study, suggested that the surge is driven by families opting to raise children in the city and young people looking to trade up.

Not all three-bedrooms are created equal. "When you get into larger apartments, there is a lot of difference in size and design," Mr. Heym said, with square footage ranging from 900 to many thousands. Prices range from $299,000 in Harlem to $12 million and beyond on the Upper East Side. But no matter where they are, he said, "the demand is strong and they tend to hold their value."

Classic seven-room prewar apartments average $2 million to $4 million; a three-bedroom with two maid's rooms, another typical configuration, is at least $4 million to $6 million, according to Deanna Kory, a senior vice president at the Corcoran Group who specializes in large apartments on the Upper East and West Sides. Ms. Kory said that, in general, the larger the room count, the larger the rooms. "If you look at a six-, seven- and eight-room apartment, the seven and eight are going to have larger-scaled rooms," she said. "And the price goes up exponentially."

Demand for affordable three-bedroom apartments is at least as intense. Next week, the Developers Group will market a new building in Washington Heights, the Bennett Condominium at 736 West 187th Street, of which 27 of the 56 apartments will be three-bedroom units starting in the mid-$500,000 range.

"We are already getting an enormous amount of phone calls about them," said Highlyann Krasnow, the executive vice president of sales for the Developers Group.

Many good values can be found in Washington Heights and neighboring Inwood. "I think that's where the growth market is, in that area," said Hall F. Willkie, president of Brown Harris Stevens. "It is more affordable for young families whose means might be more limited. There are direct subway lines and buses. Amenities are catching up. If you're priced out of one area, you just keep going until you can afford it."

Some couples who look for apartments before starting a family, so they won't have to move continually, find the prices rise faster than they can make decisions.

Patricia A. Zapf, an associate professor at John Jay College of Criminal Justice, and her husband, Robert Parfitt, a business consultant, now rent a three-bedroom on the Upper West Side.

Ms. Zapf said that they started looking at two-bedroom apartments last year and that most of the units were going for $660,000 or more. "I can't even think about paying that much," she said. But in a year, she said, "they went up to $880,000." That made them realize they had to act fast.

They have been actively looking for and bidding on three-bedrooms for the past six months. But they have had to branch out to other neighborhoods, and they're now looking in Harlem.

Currently there is only one three-bedroom apartment on the market in their price range of $450,000 to $500,000 in Harlem, according to Ms. Zapf. But the apartment, with a $475,000 asking price, is in an income-controlled building in which buyers cannot make more than $160,000 a year. (The couple exceeds that limit by $5,000).

For some intrepid buyers, the do-it-yourself three-bedroom is the most effective way to get a spacious apartment. Steve Goldschmidt, an associate broker with Warburg Realty, sold five units in a co-op conversion building in Morningside Heights at 535 West 110th Street in a matter of months. Several of them were going in pairs at $650 to $800 a square foot for raw space to buyers who planned to combine them. For one of the larger combinations that would have 2,300 square feet, the price tag was about $1.5 million, before renovations.

"This is not buying mint condition," Mr. Goldschmidt said. "These are people who are independent business people who don't show the traditional co-op package. Here they can take two whole apartments and make it their own."

Downtown, Mr. Goldschmidt said, three-bedroom apartments in residential areas like TriBeCa are swallowed whole as soon as they hit the market.

Some buyers prefer TriBeCa because they don't like the prewar style. "You know the apartment in 'Mr. Blandings Builds His Dream House'?" asked Julie Spigelman, referring to the 1948 movie starring Cary Grant. "That's what uptown apartments look like to me. They are so boxy."

Mrs. Spigelman and her husband, Sam, a urologist, who are from Los Angeles, recently bought a three-bedroom apartment in TriBeCa. They had planned to sell their house in Los Angeles, buy a smaller one nearby and get an apartment in downtown New York at some point in the next two years. But they moved faster when they discovered how quickly apartments were going and how much prices were rising.

Their daughters, 17 and 20, are in musical theater and were planning to move to the city. The Spigelmans wanted to have space for their children to stay and something they could use as a second home in retirement. They thought a one- or two-bedroom might work. While Mrs. Spigelman and her older daughter were in New York to see some plays last March, Mr. Spigelman called from California to suggest they check out a one-bedroom he had found online.

"I loved the building, I loved the area," Mrs. Spigelman said of the condo building on Nassau Street overlooking City Hall Park. She called her husband from the apartment and he asked her if she could see them living there in 20 years. "I said not even if we were newlyweds."

"I'd forgotten how small an apartment in New York can be," she said. "I'm here in my house 3,000 miles away looking at them online. One bedroom, two bedroom seems pretty doable. But when you stand in it and say 'I'm going to cram everything I own in this place, my husband, and have space for children?' "

The listing agent, Lisa Wong of Douglas Elliman, suggested Mrs. Spigelman look at another apartment in the building, a three-bedroom on a higher floor.

"I walked in and looked out at the Empire State Building, called him from the doorway and said, 'Put the house on the market, we can live here.' "

In the time it took to get the check sent overnight from California for the apartment, the only other three-bedroom unit in the building went into contract, which made Mrs. Spigelman very nervous. But this summer, they closed on the apartment.

New developments like the Time Warner Center and the Trump buildings are adding three-bedroom apartments that are less family oriented, and are attracting buyers without children who simply want the space.

Michael Shvo, an agent with Douglas Elliman who also works as a consultant to developers, said some buyers in the Time Warner building have converted 2,400-square-foot apartments into one-bedroom units. "They want the space, but not all those rooms," he said.

So why not just build them as one-bedrooms in the first place?

"As a developer," he said, "it doesn't matter how many square feet, if you can put in three bedrooms you're always going to get more money for it than if there is only two. As conscious as people are about price per square foot, they are also conscious of price per bedroom."

His current developments, including a building at West Broadway and Franklin Street that will have 2,600-square-foot three-bedroom units starting at $4 million, are being designed with modular floor plans. "If people want to knock a wall down, they can," he said. "If they want to combine it with the apartment next door, they can."

Three-bedroom apartments in new developments in Brooklyn are also selling quickly, in certain neighborhoods. Two units from the Developers Group in Park Slope at 103 St. Marks Place — each with three bedrooms, three and a half baths and more than 2,400 square feet — were priced at $890,000 and $980,000 and sold in two weeks.

But it's a different story in Williamsburg. At another building handled by the firm, the 226 South Second Street Condos, the three-bedroom triplexes priced at $900,000 and $940,000 took longer to sell.

"In Williamsburg our best seller is a two-bedroom, not a three-bedroom," Ms. Krasnow said. "A lot of younger people are going there to get more bang for their buck. Once the size gets big, then the purchase price gets too high."

With prices rising so quickly, those who want larger apartments feel increasing pressure to move before prices rise further.

"Things that we were looking at that were $700,000 are now $1 million, $1.2 million," said Lucy Appert, a teacher at New York University, who with her husband, Edward, has been flirting with buying a three-bedroom apartment on the Upper East Side for the last five years. "We could never tell anyone in North Carolina, where we're from, that we're looking at million-dollar apartments."

With both of their families in the furniture business in North Carolina, the couple had so much furniture crowding their two-bedroom Upper East Side apartment that they had to rent storage spaces.

"We are looking for some mental space and then public space — a living room, a dining room, then room for a family in the future," said Mr. Appert, a senior manager at Deloitte Touche Tohma.

They calculate compromises (should they look at two bedrooms, move out of the Upper East Side, jettison furniture?) even as they are conscious of the clock ticking on current prices.

"We have that eternal optimism," Mr. Appert said, "and hope that someday we can get a bigger space."


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