Recently I was hired by the executors of an estate to sell an apartment in a ground lease building on the Upper East Side. We’ve cleaned and staged the property, but as of this writing, we’ve chosen to wait before putting the unit on the market because there is too much uncertainty surrounding the renewal of the lease which expires June 30, 2010. I’ve been in this business since 1980, have sold in several landlease buildings in the past, but I’ve never heard of an instance where the co-op board and landlord waited until the 11th hour before coming to terms on a leasehold extension.
In today’s Internet Age, real estate buyers and sellers need only to turn on their computers to surf the proliferating public websites for immediate access to all kinds of information. With the click of a mouse, they can check out available inventory, view floor plans and photos, gain data about recorded sale prices and even join discussion boards and blogs. When the Internet provides such easy access to information, why hire a broker? And how does one choose from among the growing number of real estate professionals? What makes a good broker?
Last February, our market was reeling from the aftershocks caused by a stunning chain of events that began with the collapse of Bear Stearns and bankruptcy of Lehman Brothers. The subsequent downturn in Manhattan's residential market was sudden and precipitous. Sales activity nearly halted and then grew tentative as buyers waited for successive shoes to drop. Whatever limited transactions occurred came with steep discounts averaging 25-30 percent off the highs. Fast forward more than a year, and there are real signs that our marketplace is on the comeback.
In an ever-changing real estate market, a seller needs to seize every available advantage. Experienced brokers are adept at advising clients how to prepare their properties for showing, and we have been providing this service free to our sellers for years. We are grateful to the professional stager to whom we can turn to as a third party for objective guidance. Much like a stylist, the stager is a design professional who is hired for a fee to present a property for maximum visual and emotional appeal.
It’s tough to be writing on a hazy, hot and humid day in the last week in August for an October publication date. By Fall, an unusually damp summer will have morphed into cooler, drier crisp autumnal air. If we’re lucky, we’ll experience an Indian summer, and soggy greens will explode into vibrant foliage of reds and oranges. Though I’m not in the business of forecasting weather or market trends, I do declare I’m optimistic about residential real estate for the last quarter of 2009. But I also have some worries.
I’ve been a skeptic, and I’ve had my reservations, as I rationalized: Who has the time to learn about social networking and how to use it? Besides, my private life is—well, private. Being discreet is a requisite of my business, and I likened social websites to reality TV, arguing neither was my cup of tea. Though not a full convert yet, I’ve made an extra special effort to begin. Hardly a passing fad, social networking is spreading to include users on both sides of 50. As baby boomers join their children in ever-growing interactive online communities, the way people work and play together is being transformed. As the various social websites proliferate—each with its own distinct personality—marketing on these sites is evolving, underscoring an increasing interconnectivity between social and business worlds. What’s a broker to do?
There’s been a burst of new activity over the last several months, with the volume of signed contracts increasing through the spring and continuing (hopefully) well into the summer. As I write this on a mid June morning, buyers have been stepping out regularly in growing numbers to evaluate the inventory pool, and stepping up steadily, however cautiously, making offers to buy and going to contract with sellers who finally have come to terms with market realities.
Are sales prices on the verge of stabilizing? Probably yes. Is the worst behind us? Almost certainly yes. We’re about 33% down from the highs of 2007—less perhaps for mint condition apartments—with not much further to go to hit ground level, if we accept the prediction made some months ago by JPMorgan Chase of a 40% decline from peak to trough.
On the first days of April as I write this column for May publication, it’s important to acknowledge that we’re in a much improved position than last fall when overwhelming uncertainty gripped the Manhattan marketplace. With the tipping point of the Lehman Brothers bankruptcy in mid September 2008, real estate activity came to a near halt until the end of last year. Open houses were quiet, some buyers who were already in contract renegotiated prices, while others walked away from deposits, leaving everyone else on the sidelines waiting to exhale.
“The reports of my death are greatly exaggerated,” wrote Mark Twain in 1897 when his obituary was mistakenly published nearly 13 years before he died. Fast forward more than a century later, Ted Kennedy told well wishers to please “hold the eulogies” as he celebrated his 77th birthday in late February. In a similar vein, we respectfully request that the press refrain from sensationalizing the current new realities of the Manhattan residential marketplace. Our market is not dead, nor it is “cratering” or “rotting” as Barron’s February 23rd cover story would have us believe. Real estate values continue to decline, coming off highly inflated levels, and transaction volume is down considerably, but following last year’s most unusual 4th quarter of near inactivity amid grim global financial news, hints of optimism have been surfacing steadily in the first months of 2009.
Buyers are back! Sidelined during 2008’s fourth quarter, they have returned to the residential marketplace in these first few months of 2009, visiting open houses again as they scout neighborhoods and evaluate inventory. Releasing pent up demand and testing the waters with low offers, they seek value and discover that prices are down as much as 20% from six months ago in all categories. Many who were priced out of the market previously can now afford to buy more for less, and deals are being made once again.
Since the subprime crisis first erupted in the summer of 2007, we’ve endured a steady progression of one proverbial shoe dropping after another. What began last July as a U.S. housing debacle spread quickly into a complex tangle of interconnected crises at financial institutions worldwide. With both debt and credit markets in turmoil, the meltdown deepened and some hedge funds closed, a number of mortgage providers declared bankruptcy, and banks labored. When Bears Stearns, once the 5th largest U.S. investment bank, failed last March, and JP Morgan Chase rushed in with an emergency takeover backed by a $30 billion Federal Reserve loan, even thick skinned New Yorkers were jolted. Then in July, shares plunged at struggling financial institutions like Lehman Brothers, Citigroup and Merrill Lynch. After that came the near collapse of the two mortgage twin giants—Freddies Mac and Mae.
Dear Prudence Beier: Congratulations! Your co-op contract is fully executed. Patience and contingency planning will be critical at this point and going forward to get you through the next steps of the board review process before you can set a definitive close date and confirm a move.
