As most of my readers know, my mission on True Gotham is to raise the level of honesty and integrity in the real estate industry in an effort to dispel the myth that agents are essentially used car salesman. (For the record, I’m sure there are some fantastically honest used car salesman out there).
Sometimes that task seems incredibly daunting as I weed through the stories that whirl around Manhattan and the nation. It’s no secret that the market has changed significantly and whether you believe it is "healthier" or simply "scarier" isn’t the main issue. Defining market conditions is the real issue and the one that, frankly, baffles me at the moment.
Every day I receive at least a dozen and sometimes as many as 50-60 emails from agents in New York and all over the nation: Miami, Arizona, the Carolinas, Colorado, and even cowboy country like North Dakota and Wyoming. The thing that all of these emails have in common is that they are aggressively marketing property to the NYC marketplace, and they often are advertising price reductions. OK, no big deal you say. This is to be expected in a cooling market. I absolutely agree.
On the Ground in Manhattan: Movement
Last week, my team and I represented a 1BR buyer in a bidding war. Our buyer "won" the privilege of paying $12,000 over the asking price. A colleague has multiple offers on a $2.1M apartment on Riverside Drive. She’s confident it will sell over the asking price. I have a potential multiple bid situation brewing on a 1BR that has been on the market for several months. And the biggest kicker of all… yesterday, on behalf of one of my clients, I contacted a selling broker of a 12 room apartment on Park Avenue in the 80’s asking $12,000,000. The first showing of this apartment is next Wednesday, and they already have 22 appointments scheduled for that day!
I’m as confused as the rest of you.
As a blogger, I read more real estate news every day than I care to admit. The majority of it is negative (just check out the doom and gloom issue of this week’s New York magazine). Yet I’m seeing contradictory information on the front lines that I absolutely must share. For this reason, I have decided that the best way to give an honest appraisal of our market is to report EVERYTHING, the good and the bad, and let you savvy readers decide how to interpret this information. I will continue to chime in with my professional assessment of what’s really happening. I will also admit when I’m puzzled. Well, I’m puzzled!
The Overplayed "New York is Special" Angle May Be True Now
In general, the "New York City is an anomaly" angle is overplayed in my opinion. Frankly, I get sick of hearing it. But there are times when that sure seems to be the truth.
Certainly our market is subject to the same market indicators as the rest of the country. But we do have some quirky elements that make our market a bit different than the rest. The lack of rental property, the massive wealth, the co-op element, and the knowledgeable buyers and sellers (what percentage are lawyers or financial professionals?) are all distinct factors.
Certainly, I don’t want to sound like a broker who is clueless to a cooling marketplace. There are plenty of dark clouds out there. (I’ve been blogging about it since True Gotham started, and talking about it for much longer than that.) My personal experience of the market, in recent weeks, however, has been remarakably more positive than what the media is reporting. At least this month, there’s no point in arguing the point that Manhattan real estate rises and falls "differently" than other markets. I haven’t seen anyone who can explain where we are now or where we are going.
The real estate market has not been great, they’re reporting.
You’ve got to be kidding me. They are also reporting that Ben Franklin discovered electricity and get this one… Elvis is dead! The obvious is finally stated.
As some of us in the industry have reported and most of the media has taken great pleasure in overblowing, the housing market is cooler and off its peak of 2005. Locally, I think that peak was last Spring.
In all honesty, I am skeptical of most of the numbers that are reported on the housing market. Why you say? The intricacies of statistics and the "playing around" with asking prices vs. selling prices and days on market data combined with the underlying motives of the companies reporting the numbers make it difficult to decipher what is real and what is hype.
That said, I’m wrapping up the busiest August and September of my 15 years in the industry. "Real" sellers have already adjusted their selling prices and "real" buyers appreciate the dip in prices and the still-low mortgage rates. Manhattan remains an anomoly of sorts. I’m not suggesting for one minute that our market is "bubble proof" or anything like that. But, I do know that it is a transient city with people moving more frequently than the rest of the nation.
Keep your ears open the next time your walking down the street or sitting in a restaurant. Every five minutes, someone is discussing their apartment and whether or not to buy, sell, rent, downsize, upsize, leave the city, etc. With rental vacancy rates at all time lows, those who choose to live here have a lot of pressure to own. As sad as that may seem, it is reality. It will be interesting to see how interest rates move after the elections with many speculating they will continue an upward trend. We also can’t deny the glut of condo inventory expected on the market in the next 18 months (not as much of a glut as originally expected as many will become rentals or convert back to hotels). But for now, prices in Manhattan are holding firm and many in my industry are talking about multiple offer situations again. It appears that most sellers have adjusted their prices for the current pool of buyers. Perhaps the New York seller is also more savvy than those across most of the country? I do know one thing… they sure would like to think so.
If Doug’s schedule is any indication, the Manhattan market is picking up steam. He’s flying all over the place, with no time to blog, so here are some links:
- Doug checks in with news from 485 Fifth Avenue, which had been on its way to becoming condominiums: "The sponsor of the condo conversion of 485 Fifth Avenue has filed an amendment to the offering plan abandoning the offering. The hotel business is on fire in Manhattan right now. Rumors are swirling around the industry that this, paired with the cooler condo market, is resulting in some developers converting their projects back to hotels. Similar rumors are have been overheard about The Stanhope conversion. Looks like Manhattan is getting some of its hotels back and less condo inventory will be hitting the market than originally planned. All good news for the future of real estate in Manhattan. One other note: The developer of 485 Fifth is not only refunding all contract deposits immediately, but they are also paying full commissions to brokers who procured buyers for the project. A very classy move."
- Robin Finn of The New York Times wants you to meet Councilman Daniel R. Garodnick, whose district includes Stuyvesant Town and Peter Cooper Village: "’I did not expect one-fifth of my Council district to go up for sale,’ he says. ‘In a beautiful world, MetLife would recognize that not only do they have an opportunity to make a profit here, but they have an opportunity to do right by the city by dealing directly and fairly with the people who live here. But how much affordability do you get out of $5 billion? Not much.’ His math puts it at $450,000 per unit; perhaps not too steep for young professionals like him, who pay market-rate rents of about $2, 700 to $3,200, for one-bedroom apartments, but too much for many of his neighbors."
- Trulia is asking lots of experts to to predict various housing numbers. Good idea.
- Foreclosure auctions are not for the first-time investor.
- More talk of re-listing homes.
- A report of kleptomania at a New York City brokerage.
Now, when homeowners find mistaken information in their listings, they can make updates, and have their information appear immediately adjacent to the public listing information.
Zillow Chairman and CEO Rich Barton was the first person to put it to use. He explains:
In my case the public records say that my house has 2.25 bathrooms, when there are really 3.5. Zillow now presents my facts side-by-side with the public record facts. Additionally, I was able to publish My Estimate of my home’s value letting any prospective buyers know that we remodeled 2 bathrooms, added a home office and a laundry room, and did a basement remodel including a wine cellar. I also picked what I think are the most appropriate comparable home sales for calculating the value of my house. I chose to make this estimate public and now Zillow presents My Estimate right next to Zillow’s Zestimate.
As some of you know, I have both criticized and praised Zillow on True Gotham and today I have mostly more praise and a tiny bit of criticism for "team Zillow." They are obviously working diligently to improve their product by creating ways to imporve the accuracy of their information.
The "new" Zillow is excellent in theory. Flawless? No. I’m concerned sellers might have a natural tendency to, intentionally or unintentionally, overstate renovations and house details. Is there a way for Zillow to put in some sort of policing system allowing viewers of property to report accuracy of information? I imagine that’s in the works. May help keep sellers more accurate about disclosure of such information. Bravo to Zillow though for making efforts to increase their data and accuracy of information, thereby improving the service that they are providing to the consumer. I’m liking it more and more and truly believe that the team at Zillow has every intention of creating an information product that becomes a leading resource for buyers, sellers, and agents in pricing and trading residential real estate.
Les Christie of CNNMoney is checking the early returns of the housing futures markets. The number of investors is small. But early track record is reportedly pretty good, while the predictions for the New York market are not–currently the market anticipates a 6% drop by August 2007:
"The [trading results] have some predictive value and I would not expect them to be off investors’ expectations by some order of magnitude," says Richard DeKaser, chief economist for National City Corp who compiles his own market valuations. "But it is not a very deep market. It is traded very thinly. I would be reluctant to attach too much importance to the numbers right now."
So far, however, those doing the trading seem to be betting correctly. Trading yielded results earlier in the summer that came "fabulously close’" to where the actual index wound up in August, according to Fritz Siebel, director of property derivatives for Tradition Financial Services, which brokers the S&P CME Housing Futures and Options.
That’s not good news for homeowners in Boston, New York and other big markets – every one of the 10 cities covered by the indexes is showing a drop.
I suspect they’re overly pessimistic.
First of all, now it makes sense to me that this market was always destined to attract nay-sayers. There was never a shortage of ways to bet on real estate. But these markets became an easy way to bet against real estate. In short: people who believe in real estate can put their money just about anywhere. People who don’t believe in real estate? A fair number of them have to know about these new markets.
The other reason is that anyone who is invested in real estate–a huge percentage of Americans–might be wise to hedge their bet just a little. Not have all their eggs in one basket. That means some people who are betting against real estate on the Chicago Mercantile Exchange actually have bigger bets in real estate itself, and therefore would appear to actually believe real estate is a good investment, despite their behavior on the Exchange.
I have been talking about a correcting market for more than a year now and I remember my excitement when the Chicago Mercantile Exchange made it possible for people to hedge their ownership in real estate by trading in housing futures.
This article is suggesting that 10 of the top real estate markets in the United States will see declines in their housing markets over the next 12 months. Had I read this article two months ago, I would have likely seen nothing to argue. But being on the front lines in the Manhattan market is proving not only CNNMoney wrong but also me. The recent drop in interest rates, paired with a new trend in media suggesting it may have overhyped talk of a bubble seems to have created another buzz in the local market.
Of course, realistic sellers setting more appropriate asking prices and buyers feeling less overwhelmed by the past hyper-speed paced market are also buoying the Manhattan market.
And to all those who predict wildly dropping prices, I have some breaking news… prices have already dropped from their highs in New York. That said, I believe the next 6-12 months will continue to be somewhat stable as long as sellers and buyers remain realistic about their expectations. I’m not for one minute suggesting that we couldn’t see a slight decline in prices but I can’t be certain that we won’t see a slight to modest increase either. If I had to bet, I’d guess I’m not really going out on a limb here by saying that I believe the NYC market will likely be stable (+/-5%) over the next year. Maybe I should buy some housing futures…
A few days ago I wrote: "With so much talk in media of bubbles bursting it is hardly surprising that some people might not feel like buying." That same sentiment–that the media might be having an effect on the market, is echoed in a Vikas Bajaj column from Sunday’s New York Times.
Richard A. Smith, vice chairman and president of the Realogy Corporation, the nation’s largest residential real estate broker, said there was a “constant flood of media that is so negative” that it was discouraging many potential buyers and sellers.
“Nobody wants to be foolish in this kind of market,” he said. “No one wants to sell too low or buy too high.”
The column continues to explain the thinking behind a lot of what’s happening: journalists don’t want to be late to the story if there are problems on the real estate horizon.
Many journalists who cover the real estate market said they expected, and were not worried by, criticism from the industry. They said they were more concerned about whether the news media were skeptical enough about the boom while it was continuing.
“We were late to the savings and loan crisis and we were definitely late to the dot-com crash,” said Bradley J. Inman, publisher of Inman News, a real estate news service, who said he believed that the news media have done a better job covering the housing boom.
Some critics say the news media did not include enough contrary viewpoints during the run-up in home prices.
“Obviously, people get carried away,” said Dean Baker, co-director of the Center for Economic Policy Research in Washington, who runs a press criticism blog called Beat the Press. “But if there are voices that challenge it, it stops some people.”
But Mr. Shiller said he was not so sure it did. In reviewing historical news clips, he said, he found that the press had frequently questioned the premise of booms, including the 1920’s stock market boom. “Newspaper people do that more than their audience demands,” he said. But it appears, he added, that people “read it blandly and it doesn’t sink in.”
How the media covers real estate matters is on the one hand, a pretty dead horse. Media attacking media for over-reporting? There has certainly been a plethora of “bubble” press but I agree that the press has mostly been careful with their reporting portraying a “soft landing” or cooling of the market.
But it’s still on people’s minds. There is confusion there in the flood of media reports. You can find articles taking just about every conceivable position on this market.
Many have echoed the sentiment of Prudential Douglas Elliman CEO, Dottie Herman who likened the current real estate market to driving 55 mph down the highway after spotting a state trooper when you had been going 80. Sellers seeking record prices should stay put and buyers looking for huge bargains should temper their expectations. Today’s market is more traditional, but in recent weeks, we are seeing well priced property sell relatively quickly as buyers and sellers are experiencing a meeting of the minds.
Glenn Roberts of Inman News discusses the practice of removing a listing for a property, then re-listing it so that is doesn’t look, in the listing, like it has been on the market a long time.
The comments are all over the map. Here are some samples:
- "The easiest way to reset DOM is to sign with a new real estate broker. But if a client is happy with our service, why should we lose the business and force them to go somewhere else just to reset the clock? As long as the client knows what’s happening, and you have the paperwork to back it up, there’s no ethical issue at all. In fact, if you know the practice works, not recommending to a client could be an ethical violation."
- "Unfortunately perfectly fine homes are overlooked because of days on market. It could be argued that this practice keeps these homes from being excluded by this stat. Also, MLSs allow it so it must be ethical. If they had a problem they could change it."
- "It is a violation in every MLS I am familiar with. Furthermore the more you mess with the data in the MLS the more fire power the DOJ, and others have to call for further regulation."
- "I can’t believe some of the comments on this. Some of you actually think that it is an acceptable "strategy"? If others do it, so should you?!? If you worked at a grocery store, would you change the "sell by" date on the milk so you wouldn’t have to throw it out? And then you wonder why real estate agents are near the bottom of the list on consumer confidence and respect. Please, please find another career."
My feelings couldn’t be clearer: this practice is misleading, skews days on market data, and is unethical. One of the commenter’s on Inman suggests that because an MLS “allows” the re-listing practice that there is no problem with it. Considering the many issues that the public has with the nature of an MLS “holding information hostage,” I don’t think this argument holds much weight. I believe that this practice contributes to the “used car salesman” reputation that most of us in the industry fight every day.
Anyone want to buy used car? Real cheap…got a whole truckload from Nawlins last month… oh no worries about those water marks…
Doug hasn’t been able to blog today because he has actually been working. He just told me it was the busiest day he has had in six months. Why now? He suggested a variety of reasons, including new property coming on the market.
In any case, he has been getting wet walking all over the Upper West Side since early this morning. That’s probably not good for Doug’s suit ("It is destroyed," he reports. "I look like a traveling salesman.") but can’t be a bad sign for the market.
