- Carol Lloyd interviews an expert who promotes a lot of real estate debt: "Now that the market has changed, I asked him, don’t investors need to adopt different strategies? He told me he has insured himself against the down market by buying homes people want to rent and by maintaining plenty of cash reserves. Indeed, Dexter’s actual investing seems quite a bit more conservative than his advice for readers. "I haven’t bought anything for the last two years," he said. In the end, he had some dark things to say about the financial instrument his book seems to applaud. "There are two things that can kill you, and one is disease and one is debt. I’ve been putting people in debt for 16 years. I’m a merchant of debt. It’s a tool to prosper [but it’s also] a sword that can cut you down." Indeed, his next book gives a sense of just how he might profit from those who mistake his current book as an invitation to incur debt willy-nilly. Its working title? "How to Profit From the Coming Wave of Foreclosures."
- Get ready for the tallest building in SoHo, courtesy of Donald Trump. Lore Croghan reports: "Trump is already doing excavation and site prep – for which he does have city permits – at his property at 246 Spring St., which had been a parking lot. He’s planning a luxurious glass tower with 411 units designed by high-profile architect David Rockwell. Most floors will have superb views because it will be the tallest building between 23rd St. and lower Manhattan. There will also be a rooftop pool with cabanas. The Hudson Square nabe where the site is located is full of low-rise industrial buildings, mostly used as offices. Its zoning allows regular transient hotels to be constructed, but not residential buildings. Trump plans a condo hotel – which opponents call an apartment building in disguise."
- Meet the people of Zillow on video. They don’t look so scary on Robert Scoble’s home video.
- Seems like the Stuyvesant Town sale is not exactly derailed, at this point. Justin Rocket Silverman writes: "Councilman Daniel Garodnick (D-Manhattan), a resident of Stuy Town, sent a letter to city Comptroller William Thompson on Tuesday asking him to examine a clause in insurance giant MetLife’s original 1942 contract to manage Stuy Town. A subsidiary of MetLife got a 25-year tax break in exchange for keeping its earnings on the property under six percent. Garodnick says it is not clear that the subsidiary was dissolved before last month’s sale. Garodnick said Thursday that MetLife has a responsibility to the city to live up to its agreement. He stopped short of saying this snag could derail the sale of the vast East Side complex. ‘There is no specific goal here other than to ensure that MetLife did what it was supposed to do under the law,’ Garodnick said ‘That’s why I reached out to the comptroller.’"
In an incredible attempt to thwart the upcoming closing of the largest sale in history, Stuy Town/Peter Cooper Village for $5.5 billion, the law firm of Trautman Saunders—no surprise that they represent the tenants who attempted to buy the complex to "save" it from developers—found a provision in a 1942 document (what, no statute of limitations?) indicating that MetLife agreed to accept no more than 6% profit annually from any future sale of the complex.
Okay, let’s do a little calculation. At an original price of $50 million with 6% interest compounded annually they couldn’t sell for more than $617,540,051.41. So, the city would reap an "extra" profit of $4,882,459, 948.59. Now, if the numbers make your head hurt, they could sell for roughly $618 million and would have to fork over about $4.9 billion to the city. My bet, that’s not happening, but you can’t fault Trautman Saunders for trying!
Head over to Curbed for more on the Stuy Town/Cooper Village Sale Surprise Snag.
Probably not exactly what the landlord had in mind.
Jeanne Lang Jones of the Puget Sound Business Journal writes about the ongoing "do I need a real estate professional in the age of Zillow/Craig’s List/Redfin etc., and notes that an investor in Redfin hired a traditional real estate professional to sell his home. (via 360 Digest)
Take Seattle residents Matt McIlwain and his wife, Carol.
The McIlwains used Seattle’s online residential real estate agency Redfin to buy their new home, but turned to Windermere Realtor Barbara Shikiar to sell their old home.
That the McIlwains were willing to try Redfin isn’t surprising — Matt McIlwain is a managing director at Seattle-based Madrona Venture Group, which has invested in Redfin. For his part, McIlwain said there is value in both approaches, especially given his family’s circumstances.
"When the consumer is more online savvy and can do their own research, a site like Redfin can lower the cost on the buyer agent’s side," McIlwain said. Despite multiple offers on the home they wanted, Redfin helped them win the bidding.
"They did a terrific job," he said.
But faced with the prospect of two mortgage payments, the McIlwains hired Shikiar because her "deep experience" in their neighborhood could help them set the right price on their house and get the word out quickly that it was for sale.
There’s no substitute for experience, said Shikiar, a 28-year veteran Realtor.
No shame in selling your property the way most people sell their homes. Just a little irony in this case, perhaps.
I’m currently working with two high-end buyers, one couple in the $10-14 million range and another in the $20 million range. There is plenty of inventory to peruse at the $10-14 million range and less to see in the $20 million range.
The prices also don’t always seem to jive with what the property offers. Robin Goldwyn Blumenthal points out that the market above $5 million has seen greater appreciation than the rest of the
market (18% from same period last year…WOW!!!).
Just look at the numbers from Manhattan, America’s apartment mecca. The average price per square foot for a condominium — and most of the new buildings are condos — continued a long climb in the third quarter of this year, to $1,171 per square foot, pushing the median price of a unit to more than $1 million. And that’s just the median. It’s increasingly common to see sales for $4,000, $5,000 and even $6,000 per square foot.
In the upper 10% of the New York market — including cooperatives, long the city’s mainstay — the average sales price surged 18% in the third quarter from the level a year earlier, to $4.5 million, says Jonathan Miller, CEO of Miller Samuel, a New York real-estate appraisal firm.
With a dearth of available apartments in grand, prewar properties along Park and Fifth Avenues, buyers increasingly are clamoring to get into the many new steel-and-glass complexes going up all over the city. The $20 million-and-up segment is especially coveted — "statement homes," as some call them. "Everyone is trying to find out where those are and ‘How do I get my client into them,’" says Sharon Baum, director of the exclusive property division of the Corcoran property brokerage in New York.
Let’s look inside those numbers… first of all we are dealing with a HUGE spread here when grouping all properties over $5M in NYC ($5M-$45M is indeed a big spread!). Secondly, we are also dealing with a smaller number of transactions in this spread than in the lower end of the market (Ha! Under $5M is the “lower end”…feeling poor?) so that one big sale of $30-40M could indeed have a large effect on the overall numbers reported.
The combination of these two factors, a big spread and fewer transactions, take the bite out of the statistics in my opinion. Additionally, as I tour these properties with my clients, there appears to me incredible disparity in asking prices depending on who the owner is (some big egos) and who they have hired as their listing agent (sometimes even bigger egos). My feeling about the ultra luxury market… there just aren’t enough ultra wealthy buyers to absorb all of this ultra high-end property. I expect to see more inventory spending a longer period of time on the market and only the absolutely spectacular residences will continue to fetch spectacular prices.
I wish I could say that I was shocked and stunned by this unbelievable bit of trickery but it is no surprise that this developer has found a way to circumvent the system (and even have their sales agent inform prospective purchasers of the ability to remove their “fix” once they move in).
I have showed property across the city for 15 years and have been told by many listing agents that something was done to code “but you can remove it once you move in… who will know?”
I have also represented sellers who followed this advice and were met with great difficulty when trying to resell these properties after making alterations that were code violations.
Dozens and dozens of really good submissions, and cutting it down to eleven (I snuck two into #4) took lots of careful reading, weighing, and brutal decision making. But the work is done, and here are my favorite posts from the real estate blogosphere in the last week:
1. THE big topic of this week and many others in the real estate blogosphere is what kind of future, if any, there is for real estate professionals. Kevin Boer from Three Oceans Real Estate has the most intelligent post on that topic that I have seen in a while. Absolutely, he argues, the internet is having a massive effect. And certainly, there will be big changes (and I would argue, a shakeout). But real estate professionals are not going away, because, he writes, "…the real estate business is not really about homes, and transactions, and escrows, and mortgages. It’s not about negotiation, and home inspections, and contracts, and deadlines. It is, instead, primarily a business of relationships." I wholeheartedly agree that those who build and value relationships in our industry will be around for a long time… the capacity in which we serve our clients will continue to change dramatically and at lightning speed. Those who resist change will die a pretty quick death, which may be some happy news for the realtor haters. But we’re certainly not all going away.
2. On that note, Greg from BlueRoof touches on one of the big keys in figuring out who will succeed in this brave new world of real estate, and who will not. He writes that reputation is all we have, and I totally agree: "There are agents that I know are liars and will say and do almost anything to get business and I know that working with them means a transaction full of deception and non-disclosed items and problems. There are agents that I know do not care about their clients at all, but instead care only about their own gain. And there are many agents that I know who are very good people and care very much about their clients and also care about each transaction being a win for everyone."
3. One of the smartest real estate bloggers out there, Jonathan Miller, has an excellent piece on sellers, saying they "are creating havoc by their unwillingness to realign with current market conditions."
4. Conferences! Mike Simonsen at Altos Research drops by an invite-only conference and learns, essentially, that every real estate professional ought to have a blog: "You are much more likely to do business with a friend than you are with a total stranger," he writes. "If business comes from online, then make friends online." (Speaking as someone who has just read a whole bunch of real estate blog entries, I only hope that all those future real estate bloggers get the point that it’s pointless and even a little insulting to use your blog to trot out mindless and tired "rah, rah, real estate/mortgages/me/whatever I’m selling" sales copy.) Realty Thoughts compares and contrasts NAR and Inman conferences: "When you go to a panel on ‘Top money making strategies in online marketing’ at NAR there is no one sitting on the panel that was born after 1970. When you go to a similar session at Inman you rarely find a person on the panel born before 1970."
5. The Digerati Life tells us that before buying the cheapest property on a great block, consider that a recent study found "low income people in a sea of rich folks ended up dying earlier than their peers living in lower income areas."
6. WebHomeUSABlog has helpful perspective about why the websites with MLS searches–like the NAR, Realtor.com and Move.com–are vulnerable to upstarts: "NAR, Move.com and Realtor.com give home searchers MLS-Friendly Search. What home searchers want is home searcher User-Friendly Search."
7. Andrew Maury spot checks some online estimating services and finds "of the 13 values that I was able to find, only 3 were within 5%. Overall, the sites were off by an average of 12.2%."
8. Dean Bundschu of InTheNumbers writes: "…a lot of gurus and websites that advocate foreclosure investing act like every foreclosure property is a good investment. This is simply not true." Correct! He explains that after you research the state of each individual mortgage, most foreclosures are not worth bidding on. Even when there is value there, I have seen auction property sell above market value…
9. Searchlight Crusade clearly explains something that might be a little surprising: "Yes, lenders can legally stop loan funding after signing."
10. They say when a referee is doing her job properly, you barely notice she’s there. The Real Estate Zebra says being a good real estate professional is much like being a referee: "A well-handled transaction that goes smoothly for all parties involved is something that may not garner a whole lot of talk, but it is always noticed and remembered. I want to help my clients in such a way that they never even really notice that they are buying or selling a home, or at least never have to think about it."
Welcome.
Although it’s published, and largely written, by a working Manhattan broker, TrueGotham was never about buying and selling property. (In fact, there has never been a single link or description on TrueGotham to any of Doug’s properties.) On the contrary, TrueGotham was born with a clear mission to help build trust between real estate consumers and their real estate professionals.
That makes TrueGotham a rarity: reports from an experienced voice inside the industry that is not afraid to admit that a whole bunch of what happens here is scandalously terrible. To that effect, in its young life TrueGotham has been home angry posts about brokers intentionally misleading their clients (in various different ways), the low barrier of entry to the real estate profession, the shady practice of making old listings look new, and all that mindless rah-rah "the market’s always good" talk that comes standard from some real estate professionals.
TrueGotham also aims to have straightforward, non-salesy, hands-on perspective about the business of real estate, including how to find a good broker, why not to get hung up on price per square foot, what’s wrong with low-ball offers, the new housing futures market as a predictive tool, the hassles of very aggressive co-op boards (and more), and why it’s not always good to have a broker fall totally in love with your property.
TrueGotham also has really sweet wheels.
Go to Patrick.net for the full-sized original and commentary.
I would only add that the National Association of Realtors is not alone. Not EVERYONE who stands to profit from a sale or purchase is blowing smoke, but the NAR is notorious for this. Again, they have to show their constituents that they are spending those fees on something productive, even if it’s insulting to the public.
Perhaps you saw Alan Greenspan’s recent comments, here recounted by the Associated Press:
"The economy is obviously going through a significant slowing period, which as best I can tell is more than likely temporary," Greenspan said during a question and answer session at the annual Charles Schwab Impact conference in Washington.
Greenspan said that while the housing market is not out of the woods yet, the current slump may not worsen.
"I think that while we are past most of it there are a lot of negatives … but it is no longer subtracting from the (gross domestic product) growth," the former Fed chairman said.
For the broader economy, Greenspan offered tempered optimism, citing strong profit margins and capital goods data that are "showing some potency."
"It’s hard to envisage those two key factors coming at the beginning of a recession," he said.
Greenspan also touched on the potential adjustment in loan costs for home buyers with nontraditional mortgage products.
While some individual buyers may feel the pinch as their payments rise, Greenspan said those changes were "very unlikely to have a macroeconomic effect."
If Greenspan says it, it must be true! According to Mr. G, the housing market isn’t going to worsen. I hope he’s correct. I also hope he’s correct about the minimal effect that changing loan rates, particularly those adjustable mortgages that are soon to adjust, will have on the market and the overall economy. I tend to concur with this as I believe that most will be able to absorb the higher payments without being too painful to their wallets. Oh it will be painful for some, but as Greenspan predicts, it won’t have "a major macroeconomic effect."
No one knows how the market is going to shake out in New York City but October was a record month for my office of 200+ agents and some big money is getting paid out on the Street (Wall Street that is) this winter.
I am starting to believe , based on curent and near future market conditions, that Manhattan will see less (if any) further decrease in pricing than much of the rest of the country.
