One morning last April, New York real estate broker Sharon E. Baum eased into the leather back seat of her Rolls-Royce Silver Spur, which bears the license plate SOLD 1, and told her chauffeur to take her to Midtown Manhattan.
As her car turned onto East 57th Street, Baum -- who, by her own count, has clinched $1 billion of sales in her 18-year career -- was aiming for another closing. On the 12th floor of one of the buildings there, a half-dozen paint-splattered workers were gutting a four-bedroom, five-bathroom apartment. It was up to Baum, 65, to add the finishing touch: the asking price.
"Whatever Sharon says, that's what it will be," said the owner, Bettye Martin Musham, who greeted Baum inside as power drills droned, sanders skirled and white dust rained from freshly spackled drywall. One of a few brokers who've dominated high-end New York real estate during a record-breaking, 10-year boom, Baum glided across the bare plywood floors and, in the master bedroom, delivered her verdict.
"In the fours," Baum said, her voice just above a whisper.
Translation: $4 million to $5 million, a price that might net a broker such as Baum a 5 percent, $250,000 commission.
Ten years ago, five years ago, even one year ago, such bounty would have been unheard of for this GUT-REHAB (renovated unit) with LVLY VUS (lovely views) in a GB (good building), as the apartment is described in classified ads.
Fueled by low mortgage rates, the average price of apartments in Manhattan has soared 141 percent since 1995. In 2004, the average topped $1 million, according to Miller Samuel Inc., a New York-based property appraiser. That average jumped to $1.21 million during the first quarter of 2005, and again to $1.32 million during the second quarter.
Riding New York's real estate wave is an elite corps of brokers such as Baum who land outsized commissions by snaring listings of $10 million or more.
A vice president at Corcoran Group Inc., the city's top-selling residential real estate firm, with a Harvard MBA, Baum has sold an Upper East Side residence to the emir of Qatar and has shown apartments to actors Harrison Ford and Nathan Lane. Her latest trophy listing is a Fifth Avenue mansion owned by the heirs to the Duke family tobacco fortune. The asking price: $50 million.
Another top broker is Patricia Burnham, 53, who courts celebrity clients such as Calvin Klein at her corner table in the Grill Room of the Four Seasons, the power-dining temple off Park Avenue. Earlier this year, Burnham was shopping for an apartment for Sharon Bush, the former sister-in-law of President Bush.
Meanwhile, upstart broker Michael Shvo, a Prada-wearing Israeli who began his New York career in the taxi business, targets a young, new-money crowd. Shvo, 32, juggles three cell phones as his black chauffeur-driven Mercedes-Benz S500 bounces over potholes on the way to the restaurant Daniel, where chef Daniel Boulud's eight-course tasting menu runs $168. Shvo says -- only half-jokingly -- that he dreams of installing hot tubs on every roof in Manhattan.
As prices jump from record to record, Baum, Burnham and Shvo all agree the market is headed in one direction: up.
The Four Seasons, the Rolls, the Prada -- no one would mistake these brokers for the sad-sack property hustlers in the Broadway revival of David Mamet's Pulitzer Prize-winning play "Glengarry Glen Ross," which won a Tony Award this year. Yet rule number one of Mamet's fictional boiler room also applies in real-world real estate: "ABC -- Always Be Closing."
Brokers such as Baum, Burnham and Shvo often work seven days a week, said Steven Gaines, 53, author of "The Sky's the Limit: Passion and Property in Manhattan" (Little, Brown, 2005). Baum says she fields calls while lifting weights in the gym at 6 a.m. Shvo employs not one but two assistants -- one for his day shift, which finishes at 7 p.m., and one for his night shift, which ends at 2 a.m.
As a national center of commerce and culture, New York is one of the most visible examples of the housing boom that has swept communities from coast to coast. The price of a typical American home, however, wouldn't cover the cost of most one- room studios in Manhattan, where home prices have sailed beyond the reach of ordinary people.
Slice of the Big Apple
The mortgage payments alone on an "average" Manhattan apartment run $5,836 per month, or $70,032 per year, assuming the buyer puts down 20 percent and secures a $1 million, 30-year mortgage at 5.75 percent. The median household in Manhattan, home to about 1.54 million people, earns just $48,030 annually, according to the 2000 Census -- nowhere near what it would need just to make the mortgage payments.
As an investment, a slice of the Big Apple has trounced U.S. stocks and bonds. So far this year, homes in Manhattan, by far the wealthiest of the city's five boroughs, have appreciated like dot-com stocks during the 1990s. While the average apartment price jumped 21 percent in the first quarter, the Standard & Poor's 500 Index fell 2.58 percent.
Undaunted by the steep rise in home prices, people bought 2,028 Manhattan apartments with a combined value of at least $2.45 billion during the first three months of this year, a figure that dwarfs the combined economies of Belize and Equatorial Guinea.
The first-quarter streak was the market's hottest since 2001, when Wall Streeters and stock market investors were still flush from a record bull stock market that had sent the Nasdaq Composite Index soaring 500 percent from 1995 to 2000. Since then, the Sept. 11, 2001, terrorist attacks have stunned New Yorkers, Wall Street firms have suffered through the longest bear market since 1939 to 1941, and slashed 100,000 jobs before starting to hire again, and the Federal Reserve has raised interest rates nine times.
And yet New York home prices have kept spiraling higher. Today, New Yorkers such as Musham spend millions of dollars for apartments in hopes of flipping them for even more. The 8,000 active real estate brokers in Manhattan are now vying for a shrinking number of listings, helping to drive prices higher still.
"It makes me nervous when I see such a staggering increase," says Paul Purcell, a partner at Braddock & Purcell LLC, a New York real estate consulting firm. "I worry that the market may be a little too hot."