Tips, Trends and Tales from a Pro
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manhattan co-ops
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?”
It has become increasingly more challenging for buyers who require financing to compete with cash purchasers. Given the chronic market conditions of tight inventory and high demand, buyers continue to outnumber sellers, and multiple bidding has become the norm. For every five bidders, as many as three can be all cash. Clearly the cash purchaser has obvious advantages over the buyer who needs financing to close a transaction; however, there are definite tactics to consider when competing with all cash rivals.
NYC property values have been rising steadily for more than two years. According to reports from the major brokerages, the number of closed transactions in Q1 2014 was at a seven year high, setting new records with average apartment prices exceeding $1.7M. Limited supply and high demand have become chronic market conditions which continue to drive up prices. Month after month, a strong local economy, historically still low mortgage rates and robust foreign investments contribute to successive price increases. As the climate for buyers becomes ever more challenging, I offer a basic primer for those purchasers who seek to win in the current hot seller’s market.
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.
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.
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.
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.
This spring, as the real estate market rebooted, there were signs of recovery and stability everywhere in Manhattan. A little over three and a half years after the worst financial tailspin in recent memory, activity and sales were robust again. As buyers and sellers grew more in sync, the spread between asking and closing prices narrowed, and the numbers of signed contracts and closings increased. Confidence was up in Manhattan during the second quarter of 2011.
In a previous column I posed the question: Isn’t it time to drop SoHo’s AIR requirements? Several brokers wrote to say they would welcome an opportunity to join in a concerted effort to accomplish this. A number of attorneys said they were actively involved with clients to effect a change. A handful of non-SoHo homeowners were astonished that such outdated laws were still on the books. One reader expressed regret that artists were being displaced and that the area “has turned into a mall.”
Selling a prewar loft in SoHo has become problematic of late because of renewed attention to AIR—artist in residence—zoning requirements. Though the law has been in effect since the early 70’s, it’s been virtually ignored—until now. Although the reasons behind the new focus are sketchy, it’s clear that if the zoning rules currently on the books for SoHo were enforced strictly, real estate values would be undermined. It’s time to amend the outdated ruling and acknowledge that SoHo is a different place today than 40 years ago.
“We are a nation of Google and Facebook.” That particular phrase from the President’s State of the Union Address resonates strongly with real estate professionals. There’s a great deal of pressure in our business of late to keep up with fast changing technology and with online social networking trends.
We're poised in these last months of 2010 to finish the year with an improved 4th quarter. After a tumultuous 2009, our market rose slightly and hesitantly as 2010 began, picking up unexpected steam steadily through April, May and June, but then slowing and falling flat through much of the summer. Following on the heels of Labor Day, market activity resumed, and the mood is upbeat again. As of this writing on a crisp October 3rd morning, the possibilities loom that the spring momentum can be repeated in the next eight weeks before Thanksgiving.
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.
