With one or two recent celebrity townhouse purchases, the idea that Harlem is a dangerous neighborhood has finally begun to melt away. Even with the hype surrounding the area, there is still ambiguity surrounding the facts of what is happening with the townhouse market there. Exactly where is the Harlem luxury residential market, and what can be expected moving forward?

Here are my thoughts:

What people look for objectively in a townhouse is there already. You have good retail, nice restaurants, quiet townhouse blocks, etc. What you’re lacking is strong precedent for a luxury home. While plenty of multifamily townhouses sell to end users for conversion to single family, virtually none have sold post renovation. The luxury home market’s existence is really dependent on inventory coming from three fronts: investors who convert and renovate townhouses for a sale, single family owners selling their houses, and multifamily properties being delivered vacant. Right now, Harlem only has multifamilies as an inventory source. The existing single family homes don’t have a proven premium over multifamilies yet, so investors are not buying for luxury conversion yet.

So with prices slowly but surely creeping up, investors have two possible routes to follow to meet their desired margin. Either a) blaze the trail, renovate a house to the nines, and be the first to capitalize on the market that is bound to form itself soon, or b) make boutique condominium units and sell out in more easily digestible pieces.