Tips, Trends and Tales from a Pro
November 24, 2013. The year 2013 is sure to go down in the annals of NYC real estateas a stellar time. What were some of the dominant trends? Let’s take a look.
(1) Housing stock shrinks further.An overriding and ongoing lack of inventory defines the 2013 market. All analytics point to the lowest level of supply in more than a decade. The shortage has heightened competition among buyers and driven up price levels. Demand has remained consistently strong and is expected to be sustained.
September 9, 2013. The fundamentals of Manhattan’s residential marketplace that have characterized most of 2013 are expected to continue into the fourth quarter with some notable variations. Demand will remain strong; inventory will improve somewhat; prices will hold steady; interest rates are trending higher however.
Combining apartments to create larger residential spaces is not a new concept, but it’s also not an everyday occurrence. Despite Mayor Bloomberg’s advancement of affordable pint sized micro units, the demand for large properties continues as does the practice of putting together multiple units. Even developers of new condo products are going back to their drawing boards to combine apartments to capture higher price yields per square foot. Given the current shortage of sizeable properties, one wonders whether we will be seeing more combinations.
March 2, 2013. I’ve been penning this monthly Manhattan Market Watch column for nearly ten years and have a sizeable library of articles about New York’s residential real estate market and its trending issues and cycles. In July 2009 at what turned out to be the nadir of the market, I wrote about “The Buyer’s Advantage” and two Januarys later, I characterized 2011 as “The Year of the Buyer.” In sharp contrast, today’s real estate climate is putting many buyers at a disadvantage and favoring savvy sellers. The Year of the Smart Seller is now.
Does the direction of January predict the course for the year? Wall Street where the adage originated thinks so. The first month of 2013 scored impressive gains with the S&P up 5.05% and the Dow gaining 5.77%—signaling the best January since 1987 and rising above 14000 for the first time in over five years. In Manhattan’s residential marketplace, a similar scenario is occurring on the Main Streets of our city with 859 contracts signed in the first month of 2013, up 30% compared to January 2012 and the highest January according to Noah Rosenblatt since his online UrbanDigs began compiling real time analytics in 2009. Following a gangbuster December when players raced to close before January 1 tax changes, and contrary to expectations for a beginning of the year slowdown, properties in January were snapped up by buyers who competed aggressively and speedily for a limited supply of homes.
The Art of Ethical Negotiation, part of a series of master classes in the NYRS program, takes place in the wood paneled boardroom at the Real Estate Board of New York. It’s an intimate venue that allows 30+ participants to engage in a lively discourse about bargaining and winning. It’s less about revealing real estate war stories and more about successful professionals discussing best strategies. For the past several years, it’s been led by Warburg’s President Frederick Peters and his life long friend, veteran investment banker Alec Haverstick, a principal at Bessemer Trust. Following is my take-away on guidelines for conducting a successful negotiation.
There’s plenty of data available to support a U.S. housing recovery even in areas that were hardest hit by the downturn like Miami and Phoenix. New residential construction is on the rise nearly everywhere, and home builders like Toll Brothers, DR Horton and Lennar have been posting significant gains monthly since October 2011. While the housing market indeed is improving across the nation, New York City continues to dazzle as it attracts not only foreign buyers who have found safe haven for sovereign money, but the brightest and the best who make NYC their home.
There’s a palpable boom at the top of the new development market as a growing supply of high end products sizzles with through-the-roof pricing. At the same time, price conscious home buyers are choosing from a shrinking inventory of resale properties. Both phenomena are reasons for optimism.
Is there an optimum time to list a property? Yes and no. Spring is the season of perennial promise when inventory, demand and activity peak. But buying and selling occur year round, and while the seasonal calendar affects the volume and velocity of sales, there are two more important considerations than the time of year a property comes to market—namely the life stages of buyers and sellers defined by marriage, birth, death, and employment and the life cycle of a listing which is shaped by pricing and condition.
We’re at an interesting moment of time in the current residential marketplace. On the one hand, an already thinning inventory of apartments has been shrinking steadily since the second quarter of this year. According to analytics provided by Noah Rosenblatt’s www.urbandigs.com, as of this writing, a total of 5,659 apartments are on the market in Manhattan—the lowest number in more than four years. At the same time, there are 3,012 pending sales—just 189 deals short of the highest number of signed contracts achieved during this same period on June 14th of this year. Properties in all price ranges are being absorbed at a faster rate than new properties are coming to market. With supply dwindling and demand rising, sellers who price realistically have the edge today.
Last December as the year was coming to a close, the New York Times characterized 2011 as “The Year of the Turndown.” In addition, the reporter acknowledged that it was becoming more common for co-op boards to grant provisional consent to buyers, requiring that significant sums of money be held in escrow to ensure that monthly charges would be paid on time. This year, co-op board rejections and conditional approvals have not diminished; in fact, they are on the rise.
Five years ago on 4/30/07, I wrote a column about Best and Final offers. The real estate market was at its peak, and competitive bidding was commonplace in all price ranges and categories. Discretionary Wall Street bonus money jingled with frothy cash payments, interest rates hovered at 6%, buyer demand was high, and quality inventory was tight. Open houses were crowded with as many as 30 people showing up in an hour, and activity was brisk. Apartments were not staying on the market very long, often trading 10-15% above asking prices.
New York Residential Specialists stand out above the crowd. The new credential—the highest offered by the Real Estate Board of New York—encourages the best among us to step up to be recognized for our commitment to professional excellence and advanced education. The designation—or its acronym NYRS—identifies those who meet qualifying criteria and complete an eight week educational course with renewal classes biannually. For the industry, the new designation is all about raising the bar and maintaining high standards of professionalism, ethics and leadership. For brokers who achieve the new title, a certain competitive edge is gained. For consumers, the credential is the industry’s quality control and veritable seal of approval.
March 5, 2012. What’s a buyer and seller to think when on March 1 we read on wsj.com about a “weakness in sales” and a deepening real estate slowdown during the first two months of this year, and then on March 2nd urbandigs.com highlights the highest deal volume since 2008 in February? Shut the front door, we say, as we proclaim that February was an especially strong month. We expect the first quarter of 2012 to finish on an uptick, signaling continued stability as we enter the spring market.
The Real Estate Board of New York is bringing critical attention to an issue of great complexity. Their recently released seven minute video, appearing on www.rebny.com and titled “Property Tax Fairness—No Margin for Delay” focuses on New York City’s rising real property taxes. The subject is as convoluted as it is complicated, and as political as it is inequitable. It’s tough to even speculate how solutions will be tendered to a problem of such complex proportions.
Price per square foot, or ppsf, is only one of several factors that contribute to a property’s value. Other considerations include condition, view, layout, light, time on market and market conditions. Yet ppsf has become the common denominator, if not the virtual currency in which real estate properties trade. Although it’s a basic unit of measure for floor area, the square foot is not always absolute and sometimes grows bigger by degrees depending on who is doing the measuring.
Square footage is a critical consideration in determining and comparing property values. Yet there are no uniform standards for measuring space in New York’s residential housing stock of co-ops, condo’s and townhouses.
I’ve taken to begin these columns with a dateline because the global economic picture is unclear and can change on a dime. There’s no magic bullet or one government tool that will repair our struggling world economy. Are we headed for another recession as some economists forecast? Pimco’s Mohamed El-Erian sees a financial crisis looming again as European sovereign debt spreads well beyond Greece and observes that all intervention despite being “massive” has not been enough to function as a “circuit breaker” to contain the quandary.
A dateline is essential when faced with a 2 month advance deadline for an October publication issue—especially when it’s 3 days after Standard and Poor’s downgraded the credit rating for U.S. Treasuries from AAA to AA+. The Dow plunged today 635 jaw-dropping points, the biggest stock market decline since December 2008. It will take time to absorb the full impact of this unprecedented measure, and all eyes will be watching as events unfold.
In mid July, Fred Peters posted a blog about the complexities inherent in a broker’s job “as well as the multiple pleasures.” He mused, “Our business involves strategizing . . . relationship management . . . aesthetics . . . negotiating skill, and it often involves being a strong hand within the softest velvet glove,” concluding, “There is no other work quite like it.”
