Last year, as we moved into March 2007, there was a decided spring and great momentum in our steps. Not so in the first quarter of 2008. Our stride has become more tentative, and with good reason.
The financial world is still reeling from the aftershocks of last summer’s subprime crisis. Banks have reported staggering losses exceeding $133 billion from mortgage related structured investments, and more write downs are expected to occur. Layoffs have resulted at many financial institutions, and the CEO’s have stepped down at Bear Stearns, Merrill Lynch, and Citigroup.
Higher education for residential real estate brokers? Indeed, yes. Rodney Dangerfield would tell us that as a group we don’t get no respect. But now there’s a new designation and course from REBNY to encourage the best among us to step up and go forward to be recognized for our commitment to excellence and professionalism.
This past year of 2007 will be remembered as the year of pervasive and far-reaching credit and debt woes—the year when Manhattan real estate sidestepped a severe nationwide housing slowdown with few, if any, scars. Originating in the subprime financing markets, the crisis underscored the complexity of interconnected financial markets worldwide and the resilience of our city’s residential marketplace.
Could it be that it’s déjà vu, all over again? A little over two years ago, in October 2005, I titled this column “Coasting Sideways This Fall.” At the time, there was a deluge of press ink focused on the housing bubble debate. Since early 2004, skeptics have been predicting that our market will tank. Despite all the gloomy talk about boom and bust, however, prices have been rising steadily. Buyers in all categories have been making deals for their homes at good prices, encouraged by continued historically low interest rates and short inventory. In October 2005 in an atmosphere of intense negative media attention, I wrote: “If anything, Manhattan prices are moving sideways, not down.”
At this writing, nearly 6 weeks in advance of an October 1 publication date, with the debt markets in turmoil and the stock market zigging and zagging, it’s too soon to tell what effect the fallout will have on our real estate marketplace. It feels a little like 2005 when economists and pundits were speculating whether a real estate bubble would burst. Greenspan saw “froth” in the housing market and predicted that the “irrational exuberance” could not be sustained. Despite the dramatic headlines, however, 2005 turned out to be the year of the bubble that wasn’t. Manhattan real estate did not tank, and although we experienced a mild slump during part of 2006, we ended last year with unexpected vigor and strength.
We know well that there’s a huge disparity and even a disconnect between Manhattan real estate and the rest of the country. As an example that is repeated in cities across the nation, a housing boom in Phoenix has gone bust as the number of unsold homes rises and builders pull back. On the news of collapsed earnings, home building stocks have declined sharply, and related job losses in the industry have affected national employment figures negatively. Nonetheless, even as neighboring suburban markets like Westchester prove to be sluggish, New York City real estate is alive and thriving. Prospects bode well for September, the last quarter of 2007, and into 2008.
If you’re a Manhattan buyer who’s been sitting on the sidelines hoping for a summer markdown, you may be hanging on pointlessly. Much like the two characters of Samuel Beckett’s existential play Waiting for Godot, who wait for someone named Godot, you may be hoping for something that doesn’t come. The waiting in Beckett’s play turns out to be aimless, because Godot never shows up.
In January, after an unexpectedly strong close to 2006, we were forecasting busy first and second quarters for real estate. Discretionary bonus money jingled, pent up buyer demand was high, interest rates stayed low, and quality inventory remained tight. As of this writing (4/30/07), the mild slump of 2006 is decidedly over, and our market is surprisingly hot again. The pace of trading has quickened, open houses are crowded once more with as many as 30 people showing up in an hour, and competitive bidding is becoming commonplace in all price ranges and categories.
Walk throughs in existing properties and walk throughs in new developments are vastly different from one another. In the former, the inspection of “used” properties is scheduled just before closing, but very often, it occurs on the way to a closing. Generally, buyers and their brokers, along with sellers’ brokers, allow twenty minutes to walk through a space to see that the home is delivered “broom clean” as specified in the contract, and that nothing has changed measurably from the time of contract signing. The walk through serves as the buyer’s opportunity to visually inspect that no wear and tear was caused by the seller’s move out and that no damage resulted from fire or leaks. It’s also the time to see whether light fixtures and draperies that were included in the sale are in place, and that original door knobs or other expected details have not been removed. If there are problems, the closing can be postponed, or money can be put in escrow until corrections are made.
All indicators point to a busy buying season ahead this spring. The year’s beginning has been surprisingly hot, following a stronger than expected 4th quarter for 2006. Outperforming historically low end-of-year expectations, we moved with great momentum into 2007. Despite negative media attention throughout much of last year, prices rose a steady 6% over 2005. There was no slump.
Did you know that there are national standards for calculating the square footage of single family houses? Initiated in 1996 by the American National Standards Institute, and supported by the National Association of Home Builders, the published criteria differentiate between finished, heated floor areas and unfinished, unheated floor areas for above and below ground spaces. They provide specific guidelines for how to measure single family homes, and are recommended for voluntary use. A Google search shows that the state of North Carolina also publishes recommendations based on the ANSI model for computing the square footage of single family houses. The guidelines, however, are not applicable to apartment or multiple family dwellings.
I begin this column with a disclaimer. Although I have called upon my attorney contacts to share their insights and experiences, I do not offer legal advice, but rather bring attention from a broker’s point of view to a current complicated issue. Buyers and sellers always should consult with their lawyers for legal guidance in all aspects of their real estate transactions.
1. Real estate is big news. We’ve gotten beyond the boom and bust bubble stories that dominated the headlines for three years, but now we’re being bombarded with speculation about whether a shifting market is in for a soft or hard landing. There’s not a day without some housing talk by the media. For more than six consecutive years, until this year, the housing sector enjoyed a steady, robust uptick of rapidly rising prices, fast paced transactions, and high numbers of sales. This year, growth has been minimal. With ever expanding inventories of new development projects, trading has slowed, sales volume is down and prices have leveled. In addition, across the country, new housing starts have declined. Nonetheless, value abounds in the marketplace.
Congratulations. Your contract has been signed! But before you break out the champagne, now is the time to begin planning your move. Next to divorce and marriage, moving ranks high on life’s stress meter. Because it centers on displacement and disruption, it requires preparation, organization and perspective. Here are some tips I’ve gleaned over the years.
We’ve sharpened our pencils, bought new notebooks and are ready to get back to business as usual in September 2006. For the better part of this year, we’ve been a market in transition. What lies ahead for Manhattan real estate? To answer, a review of the recent past will help.
Those who know me know that I’m a realist and a straight shooter. Always, I speak the “emes”—pronounced em-es, or em-et, which is the Hebrew word for truth. So what are the realities of the current marketplace? Simply put, we’re a market in transition, and working with a pro and managing the deal are more important than ever.
My children say I send the same message in each monthly column: price realistically and collaborate with a professional broker to help buy or sell your home. Undoubtedly, the transaction represents a significant portion of your net worth, so why even consider shortchanging yourself
Today, there are more than 28,000 residential real estate agents and brokers doing business in Manhattan. Because of the record breaking run-up in sales prices over the last several years, the field has attracted an increasing number of newcomers. Many will not stay the distance.
If you’re a buyer, a seller, or a developer, how do you choose from among the vast numbers of professionals? What makes a good broker? And why hire a broker at all when the Internet provides access to a global marketplace for available inventory?
What’s most important to the success of a renovation project? I asked a handful of property owners who have renovated multiple times, an architect, a space designer, and a contractor. All agreed: do your homework, plan thoroughly, and respect timing.
Do your homework
Before you begin, talk to as many as you can who have been through the process. Get lots of recommendations, ask dozens of questions and take notes. Interview your primary professionals carefully, examine past performance, and check references. When evaluating bids, consider reputation and experience as much as you consider price. When checking references, ask how each responded when problems surfaced during and after the job.
If 2005 was the year of the bubble that wasn’t, how will this sixth year of the second millennium play out for buyers, sellers and brokers?
Last year, boom and bust stories about the real estate market dominated the press with dramatic headlines. For the most part, however, the reports were conflicting, and the media spin on medians and averages proved to be confusing ultimately for readers. There were contradictory interpretations of statistics as data was misread and facts were distorted—particularly in the year’s last quarter which saw a decided drop in the volume of sales, though not in the price of transactions.
