Tips, Trends and Tales from a Pro
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Shirley Hackel
Are the challenges for homeowners who need to buy and sell at the same time any different in a fast seller’s market with limited inventory than in a slow buyer’s market with abundant supply? A strategic approach to a simultaneous closing of your current home and subsequent purchase is essential in any market.
Last August, I characterized 2016-2018 as “real estate’s great adjustment years” when four trends prevailed: rising inventory, slipping prices, more time on the market and multiple price reductions. We’re in for more of the same in 2019 as buyers and sellers come to terms with market changes and prices stabilize. In the current environment where uncertainty reigns, it behooves the real estate professional to be especially vigilant in the preparation of the all-important co-op board package and recognize the co-op’s obligation to protect the interests of shareholders as they evaluate a buyer’s qualifications and also seek to maintain property values.
Are we approaching a turning point in Manhattan’s housing market? Are prices nearing the bottom? Only with the benefit of hindsight can we determine highs and lows, but it feels very much like 2009 when home prices sank and remained flat until regaining traction and climbing past the peaks of 2007 to new highs seven years later in 2014.
Much has been made in the press of late of the shifting New York real estate market. Although buyer’s decidedly have the edge today, all is not lost for sellers. If you are in the fortuitous position of trading up to a larger property, while you may not do as well as you would hope for on the sale, you will more than likely make up for that deficiency on the buy. In this current climate, two important strategies can boost sales: pricing realistically and doing your best to convert that first offer into a sale.
Change in our local residential real estate market, and for that matter in life, is a given and our only constant. For every up, there comes a down, and for every step forward, there’s a step or two back. Life has its turns, and real estate has its cycles.
Buyers have the edge today. There’s more inventory to consider and less pressure for buyers to act quickly. With a slower trading pace, there’s more time to explore and evaluate increasing inventory options. With sluggish sales, sellers have adjusted their expectations, and they are reducing prices to more realistic levels to get deals done. Developers are also dropping prices, negotiating and offering upgrades and concessions. Even national builders like Toll Brothers are incentivizing homebuyers to boost soft sales. This month until July 29th, Toll Brothers is offering to pay mansion and transfer taxes to buyers of their condominiums in New York and D.C. This downward value trend is likely to continue for several more quarters.
Homeownership rates are steady. Despite incrementally rising mortgage interest charges, rates remain historically low, encouraging owning over renting. According to U.S. Census Bureau statistics for 1995-2018, homeownership percentages peaked at 69% in 2004 and 2005, then dropped to a low of 63.4% in 2016, but remain virtually unchanged at 63.9% in the last two years. Although last year’s tax reform puts limits on the tax advantages of ownership, it appears that more renters are opting to purchase to build wealth, create community and improve lifestyle, contributing to pride in ownership. It will take time, at the very least until next April 15th, to measure the tangible impact of the revised tax law on homeowners.
“Now is not the time for risk taking and speculative investment. If you’re making a purchase, choose a home in the best location possible where quality product will withstand market fluctuations.”
Gradually rising interest rates cause buyers to favor fixed rate products. Fed fund rates which control short term interest rates increased in June to 2%. With more rate hikes expected in September and December, buyers are choosing fixed rate products over variable options. As mortgage financing becomes costlier, affordability declines particularly for entry level buyers of studio and one bedroom apartments.
Fewer showings have become the norm. Sellers are asking, “Why aren’t you showing my home more often?” The truth of the matter is we are experiencing fewer showings, and not only because it’s summer. For nearly every property, first visits occur online. When a potential buyer actually visits the residence, the meeting is akin to a second showing.
A beautiful online presence has never been more important. In a nation of Facebook and Instagram, the visual image drives the consumer. As the first point of contact for the buyer, the online presentation matters more today than ever. If the image shows a cluttered home and fails to attract visually and emotionally, it’s too easy for the prospective buyer to click next. There’s no good reason for the homeowner not to take the time and spend the money to clean, declutter and stage the home to its best advantage.
Research shows millennials prefer home ownership to renting. Those born between 1981-1997 share the American dream of owning a home, much like their parents and grandparents. However, millennials appear to be postponing a purchase and renting for a median of six years in order to pay off existing debt (especially student loans), improve credit scores, repair credit history and save up for a down payment and closing costs.
If now is the time to buy, what about investing? Now is not the time for risk taking and speculative investment. If you’re making a purchase, choose a home in the best location possible where quality product will withstand market fluctuations. Lock in a fixed rate mortgage, reduce debt, increase savings and build wealth. If your purchase is investment driven, your time horizon should be 5-7 years, and don’t expect an immediate return.
A brief word about our newest property. If by chance you are looking to establish residency in Florida or buy a second home, we have an affordable choice for you to consider in Bay Harbour. Away from the tumult of downtown Miami and South Beach, The Sophie is a 7-story condo with 26 units, full amenities including beach club membership and 2 parking spaces. Prices approximate $500 per square foot. Do call if you’d like more information.
So, you’re thinking of putting out a For Sale By Owner sign. It’s understandable you want to save money and skip the brokerage fees. But are you doing yourself a disservice?
Multiple bidding is occurring with increasing frequency especially for entry level homes and well priced properties under $2M. As competition heats up, it’s worthwhile to review four competitive bidding tips.
I’ve been selling residential real estate for 35 years, and for the first time I hosted a business talk last week in my Living Room with a guest banker and an attorney. I had a script and an agenda, but we were an intimate group, and the setting was informal, so as I touched on the stats that impact the market, I encouraged Q & A from the buyers and sellers who had gathered. To set the stage for discussing whether now is the time to buy or sell, I offered an overview of current inventory, identified 3 distinct market segments, highlighted the rise of the condo product, and considered absorption rates.
No matter where we are in the cycle of real estate’s ups and downs, it’s appropriate to consider where we’ve been, evaluate where we are and think about where we are going. This year nearly every industry event I attended focused on the market’s upper end, a subject that has captured the most press recently. Last week’s Annual NYC Real Estate Showcase + Forum hosted by The Real Deal opened with the question “What’s Ahead For Luxury?”
Manhattan’s residential real estate market has always been fluid, but increasingly it is becoming more multi-layered and segmented, with different price points moving in different directions. In the light of Q1 2016 stats which show average residential prices exceeding the $2M mark for the first time, it’s instructive to take a close look at inventory numbers and pending sales to see how they break out according to co-op versus condo purchases by price. Two important caveats are noteworthy when reviewing 2016 sales figures: for one thing, these averages are skewed by closings at high end new developments such as 432 Park Avenue and 150 Charles Street; secondly while sales records are an important part of history, it’s contracts signed that more accurately reflect the market moment since the closings for most new developments can follow contracts signed by as many as two years ago.
Is it legal for an attorney to send out multiple contracts on the same property simultaneously? The answer is yes. Is it ethical? The answer depends on whether there’s full disclosure. In the same vein, is it lawful and ethical for an agent to represent more than one buyer in negotiations on the same property? Both queries are thorny and merit serious consideration.
The more things change, the more they remain the same. Ten years ago, I concluded in a column, “Some sellers get no respect.” Homeowners who set unrealistic values on their homes—who fail to heed conservative pricing advice from experienced agents—lose valuable time and ultimately money. That message is worth repeating, particularly in today’s climate where price drops abound and where activity has slowed.
Three years ago, several weeks into the start of 2013, I reflected on the Wall Street adage “As January goes, so goes the year.” At the time, impressive financial gains were scored with both the S&P 500 and the Dow which were up in the month of January 2013 by 5.05% and 5.77% respectively, signaling the best start to the year since 1987. In residential Manhattan real estate, January 2013 witnessed a jump of nearly 28% in signed contracts over January 2012 (2,888 vs. 2,265). Sofia Song, at the time StreetEasy’s Head of Research, called it “The Year of the Frustrated Buyer.” I termed it “The Year of the Smart Seller.”
With the exception of well priced apartments under $2M which continue to attract multiple competitive bids and top sales dollars, price increases of Manhattan homes have abated. Sellers have relinquished their upper hand as buyers find more balanced footing in a market that seems to be heading back slowly to equilibrium. Throughout this year, new development options have come to market steadily yielding more than two and a half times as many choices for buyers than in 2014: approximately 6,500 units in 100 new buildings compared to roughly 2,500 units in 59 buildings last year. At the ultra high end, sales are stalled. In 2015, Manhattan’s residential real estate market shifted in more ways than one.
In 35 years, I’ve had my share of challenging transactions, but this one takes the most recent proverbial cake. I closed on the terraced penthouse in Carnegie Hill this summer, nearly two years after my first meeting with the estate’s executor. For the deal to happen, I needed to overcome at least three significant obstacles. First, the property’s interior had been reconfigured 35 years earlier by an abstract architect with distracting curved walls and pivoting room dividers and needed a total redo. Second the co-op board put up a series of roadblocks by questioning the legality of an upper level that had been annexed to the apartment by a former owner. The 17’x11’ addition with wet bar and bathroom sat directly beneath the building’s water tank and was accessed by a narrow spiral staircase in a corner of the Living Room. A 1992 House & Garden feature highlighted this “Tower Room,” a term I adopted in my marketing. Responsibility for the Penthouse’s wrap terraces was the third serious bane of a sale.
I’m at the midpoint of my current co-op renovation, a total gut of a two bedroom apartment, and this is my 6th undertaking to date, not including my Westchester home which was a builder’s spec house that I finished. I’ve renovated the one bedroom units for my two children, altered our first family postwar on East 79th Street, then our seven room prewar on Central Park West, and 5 years ago I gutted a one bedroom pied a terre. Renovating a Manhattan co-op presents unique challenges and requires careful planning.
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.
In the current market, do you sell first? Buy first? Or sell and buy at the same time? A lot depends on your financial situation and stamina for risk, disruption and chance.
If you sell first, as conservative traditionalists recommend, you’ll know precisely how much additional money you’ll have to spend, but it may take some time before you’re able to identify a suitable next home, so you may have to rent or move in with family in the interim. Don’t expect to be able to make your sale contingent on finding suitable housing.
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.
