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?
Though interest rates are rising moderately, the increase won’t derail the real estate market. In fact, there’s an inverse relationship between interest rates and apartment size: the larger the budget, the smaller the impact of rising rates. First time buyers and sellers of apartments under $1 million will feel a rise in interest rates most. Interest only products will continue to be interesting options for buyers with a time horizon of six years or less. While analysts continue to worry about where interest rates are headed, the truth is that our economy is in pretty good shape. Inflation is being managed, and there’s growth in most industry sectors. Something needs to be done, however, about the escalating price of oil and gas, because it’s psychologically disconcerting to pay over $50 to fill an average tank. Unchecked escalating oil prices certainly will influence discretionary spending, especially travel purchases.
We’ve witnessed a series of boom years in this city’s real estate market. It’s been a heady experience for principals and brokers alike. Last year, I wrote that a slowdown in price increments was to be expected, along with a leveling of market activity. Well, stability and balance are here, along with some new realities and shifting expectations.
Instead of dramatic and successive price jumps in sales, we’re seeing modest appreciation in price levels in the single digits. Bidding wars—last year’s accepted manner of doing business—are still occurring when there is perceived value. In each property category in nearly every area of the city, when there is an offering that has a particularly compelling element—like a high floor view or a ballroom sized living room—buyers are competing to purchase, and they are acting aggressively and quickly.
But while some properties are moving briskly, others are languishing. Overpriced homes are being ignored. Those with obvious flaws, like a lack of sunlight or a fussy board, must be reduced in price to compensate for shortcomings. But sometimes, despite the best pricing advice, a property will sit on the market wallflower style. When a property is ignored, a price accommodation is in order, or the home will devalue itself. Winter and spring leftover inventories are being reduced or removed from the market.
When Less Brings More
At the outset of an offering, there is always a range in price to consider. It’s far more effective to price under or on the mark so that the property shows as the best on the market at a given price. Listing a property at the high end of a price range is counterproductive because it wastes valuable time. Today’s buyers are not bidding unless the asking price is in range of their intended offer. In the rapidly accelerating markets of past years, it was reasonable to pay a shade more than budgeted because the market was moving so fast. In a slower paced market, there’s less pressure for more prudent buyers to act quickly, so it’s taking longer to sell a property.
With the urgency gone, it’s becoming increasingly important for sellers to recognize and appreciate real buyers. It’s up to experienced brokers to present buyers and their offers in the best light possible. Persuasively outlining the strengths of a purchaser lends validity to an offer, and encourages negotiation.
Perhaps the greatest shift in the marketplace is occurring among new developments which have grown exponentially in the last two years. The condo explosion has added vitality to the marketplace by creating new choices for buyers. But the increasing inventories also have led to unhurried deal making and a slower absorption rate. More products are coming on the market than ever before, crowding the real estate terrain. Increasing construction costs, in some cases as much as 30% over last year, are putting pressure on developers. Proper pricing of new projects is critical if they are to be absorbed. Throughout the city, there are examples of developers who are working creatively to get the attention of the buying community. To avoid price cutting, some are offering concessions to purchasers in the form of upgrades or by covering closing costs.
With nearly 20,000 new condo units approved for sale in the next year, new developments are changing the face of New York’s housing supply. Estimates indicate that the proportion of condo and co-op products will change from their current ratio of 15%:85% to 35% condo and 65% co-op. Additionally, these new developments are expanding housing’s geographic limits as the gentrified city grows larger and pushes deeper into Brooklyn, the Bronx and Long Island City.
Yes, Virginia, the echoes resound: collaborate with an experienced broker to buy or sell your home, set realistic expectations, price precisely, and listen to the healthy hum of the marketplace.