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In the Battle For Space In NYC Apartments, Condos Trump Co-ops

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Real estate guru Jonathan Miller breaks down the difference between co-op and condo sizes

This week, real estate appraiser, Curbed graph guru, blogger, and Housing Notes newsletter writer Jonathan Miller looks at the difference in apartment mixes in co-op and condo units over the past decades.

For this week’s column, I went back two decades to explore the relationship between co-op and condo apartment mixes. Curbed readers have taught (actually, scolded) me to refrain from using too many lines in a chart so I grouped apartment sizes into two categories: small and not-small. Studio and one-bedroom sales were combined in the first (small sized) group and two-, three-, and four-bedrooms comprised the second (not-small sized) group. These groups were then broken out by co-ops and condos and they tell very different stories.

Co-ops: Smaller co-op sales represent a common entry point into Manhattan homeownership. With housing prices running higher and wage growth fairly tepid, it’s no wonder that the market share of smaller co-op sales has expanded while larger co-ops have weakened. Note the surge in market share at the peak of the Manhattan housing boom (’07-’08) and the year after the September 2008 "Lehman tipping point" when the federal government, as part of the stimulus plan, offered incentives for first-time buyers to sign contracts during this period. The plunge of interest rates after Lehman had more impact to the smaller segment of the co-op market during this period. Since 2010, market share has steadily expanded as consumers are pressed to seek out affordability with smaller apartments.

In contrast, one of the weakest segments of the Manhattan market continues to be larger co-op apartments, especially those on Park Avenue, Fifth Avenue, and Central Park West. The shift in Wall Street compensation and their high (but declining) dependence on bonus compensation over salary, as well as heated competition from new-development condominiums, has hurt that specific market. Perhaps many see co-ops as the safer market of the two ownership types since co-ops essentially are a fixed form of housing stock and would see less volatility and more price growth than condos. But this hasn’t been the case as indicated by the volatility in the mix of sales.

Condos: After making the switch to larger units during the dot-com boom, the condo market has never looked back. Larger units have continued to hold sway over smaller units, mainly from the shift in mix towards larger new development units.

It is interesting to see market share trends for condos hover in a much tighter range over time than within the co-op market—even though the co-op market has essentially remained a fixed housing stock over the past two decades. The mix didn’t change all that much in the year after Lehman either. The year 2010 ushered in the first signs of a rebound with a jump in larger condo sales. However, that trend has declined and expanded since.