If “all the world’s a stage” as Shakespeare reflected in As You Like It at the turn of the 17th century, then it may seem that professional real estate stagers are a little late in coming to Manhattan. According to the website for the International Association for Home Staging Professionals, an organization founded in the mid 1970’s by Barb Swartz in Washington State, the New York City chapter was formed only recently in November 2004. Staging as a recognized trade is pretty new. However, with the rising popularity of cable TV shows like “Sell This House” and the demonstrated success of recent “staged” apartment sales, the business is definitely growing.
If you’re a seller today, proper pricing is more important than ever. While it’s tempting to sign on with the broker who says your apartment can fetch a higher price than other broker estimates, expectations need to be real and achievable. When agents overprice properties—or when sellers fail to heed conservative pricing advice—valuable time is lost as the real estate sits on the market only to be ignored and ultimately discounted. Some sellers get no respect.
The deluge of press ink on the housing bubble debate continues even as the media offers broad coverage of record breaking highs for transactions during the first and second quarters of 2005. In every category and in every area of the city, milestones have been set. Last year, the headlines broadcast that the average price for a Manhattan apartment was a cool $1 million. By the end of the second quarter of this year, the average sales price had topped $1.3 million. Despite the negative environment created by all the talk about boom and bust, prices rose steadily.
What do Richard Nixon, Madonna, Antonio Banderas and Melanie Griffith, a hedge fund superstar, a foreign national family man, and a successful litigator have in common? Answer: they are co-op board rejects.
Talk continues about a possible bubble in real estate. In the last year, prices have jumped as much as 30-40%, and the pace of trading has been frenetic. In the months and year ahead, however, a return to more balanced activity with modest price appreciation is welcomed.
Inventory has been shrinking steadily. But with new construction and new conversions in the works, more than 25,000 apartments are scheduled to come into the marketplace in the next 18 months. For certain, the market will be impacted. Will the “if-you-build-it, they-will-come” mentality continue? Undoubtedly, some developments will be more secure in their locations than others, like The Plaza, The Stanhope and The Mayflower Hotels.
As momentum continues in Manhattan’s real estate market, with record setting prices the focus of media and cocktail party attention, shouts about a possible bubble are turning to whispers. In 2004, prices across the nation rose faster than in any other year since the 1970’s. Despite disappointing employment and corporate numbers, declining consumer confidence, high oil prices, sagging U.S. and global stock, and worldwide uncertainties, prices in New York surged in a tight market amid heightened demand and frenzied activity. High incomes and low interest rates fueled ever-rising values. In nearly all segments of the real estate market, bidding wars drove prices up by leaps.
When you’re invited to meet the co-op’s Board of Directors, you’re halfway home. The interview is the “look-see” part of the process. Some boards may ask you to bring your dog to make certain your pet is well mannered. Children, however, almost never participate, unless a parent is purchasing for an adult child.
According to Paragraph 6 of the Contract of Sale, co-op apartment transactions are “subject to the unconditional consent of the Corporation.” By contractual agreement, purchasers are required to submit their application and all supporting documentation within 10 business days after the delivery of a fully executed contract of sale. But how, in the light of the growing number of board rejections, do buyers ensure that their co-op purchases will be approved and will conclude ultimately in a successful closing?
It’s tough to ignore the economists and real estate pundits who see in the current marketplace signs of ebbing exuberance and cooling ardor. Professional brokers will agree that the frenzy of last spring is gone, and that is a good thing, they add. But are we headed for a freefall? Are we in the midst of a real estate bubble that’s about to burst? No, and no.
What’s ahead for Manhattan real estate? To answer, a review of the year to date will help. The cold wait-and-see mindset that pervaded January and February was replaced in March and April with a cautious optimism; though spring was late, war seemed to have ended quickly, and the economy seemed to be recovering; buyer confidence had returned, and a good deal of pent up buying energy was released. Then in May and June, the market really swelled as enthusiastic buyers snapped up most of the apartments that had been lingering on the market. While some listings were getting ready to celebrate their one-year anniversaries, there were no distress sales, and, in fact, prices remained high. A mostly rainy summer was characterized by a shortage of inventory. All the while, from spring through summer, the power of mint held, as contracts for properties in move-in condition were getting signed within weeks, some in multiple bid situations.
Following former President Clinton’s lead, fresh residential opportunities and commerce are coming to Harlem. The press is calling it a housing renaissance. New zoning approved last fall for south central Harlem, the area’s most desirable location, allows for modest increases in residential density and also encourages ground floor retail businesses. The zoning changes are intended to balance growth and preservation while promoting commercial development to support the revitalized community.
Harlem is humming with revitalization. Dumpsters in the streets and work permits in the windows proclaim that renovations are in progress. Boarded up buildings are being rehabilitated, and dilapidated shells are getting full makeovers and facelifts. Private investors are rushing in on the heels of earlier developers who were given economic incentives by the city to renovate abandoned properties. Existing structures are being converted to luxury housing, and brand new construction is being built for mixed use.
Prices are up, but so are anxiety and disappointment. For every accepted bid, there are probably three also-rans. With Wall Street bonuses higher this year than last by nearly 40%, and apartment inventory still shrinking, demand for quality apartments continues to exceed supply. In the current, heated market that’s rife with record breaking highs, here is some food for thought.
With each new month of 2004, sellers have been enjoying an increasing advantage. Clearly, we are in a rising market, and the pace of activity is fast and furious for property owners on the east and west side, up and downtown. Competitive bidding is becoming the norm. However, not every property is rushing out the door to contract, and we are experiencing a fair amount of buyer drop-out. Therefore, today’s sellers are cautioned to curb your enthusiasm.
It’s not easy being a buyer in the current real estate climate where sellers have the clear advantage. Today’s market pace is fast, and competitive bidding is furious: there simply isn’t enough product to meet buyer demand. Within days, a listed property has an accepted offer over the asking price with multiple back-ups. What’s a buyer to do in this tight market?
Our economy is improving: inflation is low, consumer confidence and spending are up, and corporate earnings are exceeding expectations. However, unemployment remains high, and we’re still at war. Nonetheless, the mood on Wall Street and the streets of Manhattan is buoyant. In these first few weeks of 2004, buyers are competing for a short supply of apartments, and they are stepping up to pay asking price or better—in sharp contrast to last January when Wall Streeters were worried about losing their jobs, and real estate buyers were watching from the sidelines, waiting for the other proverbial shoe to drop. It never did. At the start of this first quarter, things are looking positive, and the impact on demand from hardy and impatient New Yorkers is palpable. Additionally, interest rates are staying at low levels longer than expected. The 30-year mortgage is projected to average 6.4% this year, up modestly from 5.8% in 2003. However the supply of apartments, which has been short for the last 9 months, is shrinking even further. The declining inventory is giving sellers the advantage.
Construction cranes are everywhere in this city, and new development business is booming. According to The Real Deal, by the end of 2005, more than 9,000 new condominium units will have come on the market this year. To put that number into perspective, only 1,300 new condo apartments were offered in 2000; 2,200 units were added in 2001; 2,900 in 2002; 3,000 in 2003; and 4,800 last year. With the high number of new projects complete with amenities packages not found in older products, buying opportunities and choices abound. However, caveat emptor—buyer beware—was never more important than when buying new construction.
