Tips, Trends and Tales from a Pro
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Manhattan co-ops
Our residential marketplace set new highs in 2Q2015. Reports from real estate brokerages are trumpeting similar though slightly differing stats, and news agencies have been buzzing with the story because everyone loves to talk and read about real estate. Record levels have been achieved in both average and median sales prices, inventory though up initially last quarter is still stalled at about 20% below the 10 year average—especially for properties under $2M, and trading volume is down.
Congratulations! You’ve signed a contract to purchase your next apartment, and you’re pretty confident the co-op board will approve your purchase. It’s not too soon to begin planning your actual move-out/move-in. Ranking high on life’s stress meter because it’s all about displacement and disruption, moving requires preparation, organization and perspective.
This new year will feel a little like Yogi Berra’s “déjà vu all over again.” Real estate headlines for 2015 will echo many of last year’s dominant themes with a few twists.
New residential construction is booming in New York City. Pounding jack-hammers and vibrating power saws provide the backdrop din; monster construction cranes and huge cement trucks crowd the streets; giant lego-like barriers divert pedestrian traffic; billboards on elaborate scaffolding and tall screens broadcast the players of a thriving construction industry.
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.
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.
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.
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?
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.
Week Three of the NYRS course for top residential brokers covers Professional Ethics, a critical issue and compelling area of study, especially in the light of increasing lapses in moral behavior by individuals in every arena, from corporations to politics to religion. As brokers, we make decisions and take actions daily that affect the interests of others. How we go about our business greatly impacts the results we achieve.
All’s not quite right with the world. As the credit squeeze deepens, financial insiders tell us that there is more bad news to come with more write downs at banks before things get better. The work out period, they acknowledge, will be longer than previously expected or hoped for. What began as a subprime U.S. real estate debacle turned quickly into a complex tangle of interconnected crises at financial institutions around the world.
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.
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.
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.
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.
