I LOVE Manhattan.
Oh my. I can’t believe I said that!
Let me explain. The cooler than usual real estate market this summer has afforded me the luxury of spending some time outside of Manhattan and for the first time in my life I think I’m actually becoming one of those "city" snobs.
I grew up much the opposite, in a working class neighborhood outside Baltimore city (half suburban/half urban). People in that neighborhood were not snobs at all. I moved to New York City in the summer of 1989 having never even visited before.
I’m not ashamed to admit that "the city" petrified and intimidated me at first. I lived in a sublet in Hell’s Kitchen where people were shooting heroin and prostitutes were on the street in broad daylight.
Boy has the city and my feelings for it come a very long way. Today I was driving back from a business meeting in central New Jersey. The setting was aesthetically similar and equally void of culture as the place where I grew up. Did it make me long for home? Why yes it did. But not the home of my childhood.
Manhattan has been my home for the past 17+ years and will likely be my home until the day I die. You can have the suburban lifestyle and I will visit the beach or rural areas when I hunger for that, but there is no better place in the world to call home than New York City. The energy, the creativity, the sophistication, the people (who definitely get a bum rap outside of "the city"), and the everyday conveniences it provides me and my family are most appreciated when I am without them. For this and a plethora of other reasons, I can’t see why anyone would want to live anywhere else.
He was interviewed for a New York One story about the sale of Stuyvesant Town and Peter Cooper Village.
My intitial reaction to the story in today’s New York Times was "not again, less New York City housing for the middle class, what a shame." I have written before about what a mistake it would be to turn Manhattan into an island of the rich.
Stuyvesant Town is really the poster child for rent stabilization in New York. Of course, if the property changes hands those rules don’t evaporate. Doubtless, many people living there now, who meet all the legal guidelines for rent stabilization, will remain there with stable rents for years to come. But there will be teams of lawyers looking at ways to get those properties ready for conversion to condominiums or market rate rents. That in and of itself might inspire a fair number of tenants to move out, as the feel of the place will undoubtedly change.
And at the same time, this won’t help the total amount of affordable housing in Manhattan.
For me, that lament was immediately followed by "Who do I know that may have access to the kind of money it would take to snatch up this amazing urban parcel?"
First some back story on the 110-building site north of 14th street on the East Side. Charles V. Bagli and Janny Scott report:
Behind the scenes, the sale has already drawn interest from dozens of prospective buyers, including New York’s top real estate families, pension funds, international investment banks and investors from Dubai, according to real estate executives, even though the marketing book will not be released to bidders until next week.
The deal is likely to lead to profound changes for many of the 25,000 residents of the two complexes, where two-thirds of the apartments have regulated rents at roughly half the market rate. Any new owner paying the equivalent of $450,000 per apartment is going to be eager to create a money-making luxury enclave, real estate executives say.
The sale would only add to the seismic cultural shifts already under way in New York City and especially in Manhattan, where soaring housing costs have made the borough increasingly inhospitable to working-class and middle-class residents. It would be another challenge to Mayor Michael R. Bloomberg’s effort to stabilize and expand the number of affordable apartments in the city.
I admit I quickly sent out an email to the owner of a private equity fund asking if he was ready to get into real estate. Half joking, I would be lying if I didn’t tell you that part of me thought he would respond by saying, "Wow, yes, what an opportunity!"
Wisely, he didn’t. To compete with the likes of Related, Glenwood, Vornado and the like on a $5 billion dollar deal would be foolish on anyone’s part in my opinion. These players know what to do with a prime piece of real estate like this.
I also must say that although the development of such a large scale project as this is quite exciting for me as a real estate broker, it does evoke sadness that more middle income people are going to be forced out of Manhattan. Another step toward Manhattan becoming an exclusive island for the wealthy. How long before Central Park is converted into a golf course?
Jonathan Miller makes some fantastic points about the "lending bubble." For instance:
The problem here is: what happens if the values of homes begin to decline as inventory builds and rates rise? What does the lender do? They had better decide to start caring about values as well as credit in order to make intelligent loans. Underwriting standards have to rise to avert a lending crisis.
WAMU is the posterboy for weak underwriting. They built their growth and aquisition engine around mortgage lending during the housing boom. As mortgage rates increased and the housing market started to cool in the way of lower transaction volume, what department did they cut to save money? You guess it: The appraisal department.
Frightening. I have first hand experience with Washington Mutual (WAMU) as they provided three of my most recent mortgages (I have since refinanced and left them as a mortgage provider) with very lenient underwriting requirements.
If I were fortunate enough to be a large lender, I would have NEVER lent myself the money for one of those purchases. Fortunately, I sold that property at a significant profit and got out before I got myself in trouble. But this raises the question of whether or not it is a bank’s responsibility to keep purchasers "out of trouble?" It will be interesting to watch and see if, as more people get closer to defaulting on loans, if the banks finally tighten up on their underwriting requirements. Some already have.
Perusing today’s Carnival of Real Estate, I came across an interesting post from Florida broker Bryant Tutas. The challenge here is to tell someone their precious house–the depository of their hopes and dreams, their nest egg, and an expression of their personalities–is not nearly as valuable as they had hoped, all while courting their business. Not simple.
I knew it was going to be a tuff one, but I felt up to the challenge. The challenge was, they had been listed for 6 months with another Realtor at $360,000, when the house, maximum, is worth only $299,000. They had already told me on the phone they were ready to reduce to $340,000. So I really had my job cut out for me. I won’t take an overpriced listing so my goal was to get them to reduce $65,000. Also, since they were with a discount Realtor before, I needed to raise the commission a couple of points as well. So, if you do the math, we are looking at more than a 20% reduction in their anticipated Net.
Big challenge, but I woke up this morning ready to face it. I had prepared an analysis, to take with me, that was over 70 pages long. Now I don’t know how you do your CMA’s but 70 pages is a little over the top to say the least. It included:
- Details on similar homes with pools.
- Details on similar homes without pools.
- Details on every pool home that had sold near theirs this year.
- A list of every home on the market in their area.
- A list of all of my sales YTD.
- My grocery list from last week.
Anyway, you get the point. I was loaded for battle and well prepared to defend my position.
For the record, the couple hasn’t yet signed up, but he’s confident they will.
A nice new Carnival of Real Estate is up now.
I’m baaaaack!!! Kudos to Henry for maintaining TrueGotham while I was away and providing us with excellent content. Thanks Henry.
I have just returned from spending a week with the family in Bethany Beach, Delaware and wanted to share some interesting perceptions that I had of the real estate market in this seaside resort town just five LOOONG hours (especially with two kids in the car) from Manhattan.
Firstly, we stayed in a private 5 BR home just 200 feet from the ocean beach that is currently on the market for sale at $1.8M. It is also directly on Route One which is a major fou lane highway that runs up and down the coast. Traffic noise is worse than some New York City apartments.
Although the house was quite nice, $1.8M seemed quite steep. Another interesting tidbit… the neighboring house is also for sale, at $2.15M. An ocean front home and another on the same street are also for sale. Four out of ten homes on the cul-de-sac are actively on the market.
Additionally, the number of “lookers” stopping by to pick up flyers for these homes (left in waterproof boxes on the realtor’s sign) was significant. I plan on keeping tabs on these homes to see how long they are on the market and what there sales prices may be.
Secondly, the television ads for realtors were plentiful with one in particular that left a lasting impression. A local realtor in the Bethany/Rehobeth area is offering his buyers a whopping 24% of his total commission earned just to procure buyers. Let’s see…assuming he is able to represent a purchaser buying the $1.8M home at 6%, he would split the commission with the seller’s agent and walk away with $54,000 of which he would give his company approximately 40-50% and his buyer approximately $12,000 (not a bad sum to help with closing costs)! Buyers must be pretty scarce in his neck of the woods as seems to be the reported trend nationwide.
Let’s say he is fortunate enough to sell one of these a month in his market. That’s $144,000 that he’s willing to give up on an annual basis. A hefty sum but perhaps a necessary cost of doing business in a market that has seen significant cooling. I wonder if this trend will spread across the country? Or perhaps it is already happening in other places? Has anyone heard of this anywhere else in the US?
Lastly, the NYC market seems to be picking up steam again. Don’t know what to attribute it to but I will say that my week off was the busiest of the summer with seven contracts going out for sale. Go figure… the last weeks of August is traditionally sleepy but for the last two years it has proven to be very active.
Richard Ford, the celebrated author of The Sportswriter and Independence Day, is about to release the third book in that trilogy, called How Was It To Be Dead? Ford talked to the New Yorker about, among other things, why he decided to make the main character of those books a real estage agent:
Frank is a Realtor, and a large portion of the novel, if not of this excerpt, is taken up with his thoughts on real estate and on what constitutes a home for Frank’s various friends and clients. Is real estate an obsession of yours (or of America’s)?
I can only say (since the word “obsession” seems sort of unpleasant) that real estate must be something I’m interested in—again, at a very primary level of impulse. I made Frank a Realtor, in “Independence Day,” because I needed to give him a new vocation, something different from being a sportswriter, which he was in the prior book. Giving characters a line of work is a way to make them begin to be plausible to me. The vocation I chose had to be one that a person could enter in midlife without a lot of preparation, because I didn’t want to write about that preparation. Realty is such a job. I also liked the working vocabulary of real estate; it seemed both serious—because practitioners take it seriously—and often very funny.
The way in which real estate connects to our national spirit in America came along entirely fortuitously. I was writing a paragraph about what it feels like to live in a town where housing prices are falling. And, in the process of thinking about that, I just expanded my frame of reference to include the larger human condition.
I have noticed that brokers (like Doug, who is out of town, and unable to defend himself) are always very careful never to confuse the words "agent" and "broker."
They are not the same thing. When someone e-mailed a question along those lines, I looked it up. According to Home Buying for Dummies, by Eric Tyson and Ray Brown:
Every state issues two kinds of real estate licenses: a salesperson’s license and a broker’s license. People with broker’s licenses must satisfy much tougher educational and experience standards. If your real estate agent is not an independent broker or the broker for a real estate office, he (or she) must be supervised by a broker who is responsible for everything that your agent does or fails to do. In a crisis, your transaction’s success may depend on backup support from your agent’s broker.
You know what that makes me think about? This recent post about real estate fraud. If you read the post and the comments, you’ll see there is interesting discussion about the merits of strict barriers to entry as a way of weeding out potential fraudsters out of the real estate profession. Would tougher certification requirements for agents improve the industry’s performance and reputation?
Seems like an imperfect, but handy "back of the cocktail napkin" way to guage that would be to examine the records of brokers vs. agents. With all that education and experience, do brokers tend to be roped into shady business practices at a similar rate as agents? Are they better? Worse? Anybody know?
A TrueGotham reader e-mails about a Midtown encounter:
"I saw some guy handing out flyers in front of the Time Life buliding today. The flyers said that there were plans to develop and change the name of 50th street between 2nd and 3rd. The developer’s name is Richard Nouveau."
Gawker is asking the same question, and introduces the notion that Richard Nouveau might not even exist. His name was involved in a lame prank.
Upon further review, if you read the bio of him here, it seems like the man is clearly the product of an angry person’s imagination, and I suspect any and all hijinks involving his name are, in fact, efforts to drive buzz and traffic to this site.
