Jonathan Miller wonders about some of the listings out there these days:
I wonder if any meaningful proportion of the residential listings currently on the market are sellers who are not serious and/or are “trolling” for a crazy price. I know several people personally who have their apartments listed but whose selling is strictly optional (meaning, they don’t have to relocate, don’t need a larger space for more kids, etc.), and their pricing reflects their flexibility. They offer what they consider to be a “score” price, meaning if they sold it at that they’d be very happy with their returns. That might be one of several contributing explanations to the reduction in sales volume without a related reduction in prices…
Absolutely there are still some “fishers” out there, hoping for a crazy price. But from what I have seen the numbers of those type of sellers have dwindled significantly in recent months.
Lauren Bacall, Leonard Bernstein, Connie Chung, Judy Garland, Boris Karloff, John Lennon, Yoko Ono, John Madden, Paul Simon, Sting… a ridiculous number of celebrities and artists have lived in the famous Dakota at 72nd and Central Park West. It has long been more or less the epicenter of much of what makes New York so famous.
There are a million stories about that building, none more famous or tragic than the murder of John Lennon there.
In 1979 Stephen Birmingham wrote an incredibly detailed book about the building, called Life at the Dakota, which tells of everything from ghosts, and squabbles over unsightly air-conditioning, to the influx of scary developers who wanted to tear the whole building down. These are the kinds of fights that are going on in places around New York as we speak. It’s amazing to think the mighty Dakota faced the same thing decades ago. Birmingham writes:
Therefore, considering the amound of hubris the building had generated among its tenants over the years, it was with considerable shock that on the afternoon of Friday, December 17, 1960–whild the rest of New York was going about its business of pre-Christmas shopping–the residents of the Dakota learned that their special status was about to come to an abrupt end and they might have to face life as ordinary mortals. That was when Mr. Ernest A. Gross, the one of the building’s most distinguished residents, an international lawyer and three-time delegate to the United Nations General Assembly, was sitting in his Wall Street office and a call came through from William J. Zeckendorf who, though he later fell from grace, was then the unquestioned czar of New York real estate and who, in the years since World Was II, has been busily reshaping the Manhattan skyline. "I want to introduce myself," said Zeckendorf to Gross. "I’m your new landlord." Ernest Gross froze. Though Mr. Zeckendorf’s phone call was by way of a greeting, it also conveyed in no uncertain terms a warning to Gross and his fellow Dakotans. Whenever William Zeckendorf acquired an old, unprofitable building like the Dakota on a choice piece of land, he razed it and erected in its place a shiny tower of steel and glass which was a modern model of efficiency and economy. "Building like the Dakota don’t make sense in New York anymore," said Mr. Zeckendorf.
The Dakota was eventually spared–the building’s powerful friends brokered a deal whereby it became a co-op.
Sunday’s Real Estate section of The New York Times wonders whether it’s a conflict of interest to have a real estate agent, who sells property in a building, also serving on that co-op’s board of directors?
They outline a number of potential problems with the arrangement.
I have personal experience with this both as an agent who served on his co-op board for three years and as an agent who has represented a buyer for a co-op board that was greatly influenced by an agent whose behavior was unethical.
First, my experience playing both roles: I resisted becoming a board member but after multiple invitations and pleading from other board members, decided that my perspective of the real estate market could be an asset to the building and my fellow shareholders. My fellow board members found my perspectives quite useful in carrying out the management of the building and assisting with the determination of what improvements would be most effective in increasing the building’s value etc. I also had the priviledge of selling eight of the buiilding’s 26 units while I was an active board member and always recused myself from meetings regarding admissions and remained cognizant of all disclosures that I made to prospective purchasers. It was also very helpful to know exactly what the Board was looking for from a financial perspective and my intimate knowledge of the building gave prospective purchasers a genuine confidence that they were buying in a solid building. For everyone, it was a win-win.
Now for the filp side: On more than one occasion, in more than one building, I have had complications with buyers attaining approval from a Board of Directors solely due to a real estate agent acting as a board member who was “annoyed” that they had not represented the seller with the sale. I have first hand reports from board members in these buildings who have disclosed to me that the “agent/board member” seemed to have a vendetta against me and my clients for not working with them on the sale. Fortunately, one agent on a co-op board does not have enough power to determine acceptance or not of a prospective shareholder. That said, they can make the process more painful than necessary and ultimately affect the “personality” of the board. My clients in these situations were always approved and I’m happy to report that at least in one instance, the agent/board member is now only an agent… and one who still needs some lessons in integrity.
Jonathan Miller is at it again with his incredibly adept knack of deciphering numbers and explaining the NYC housing market. Check out his latest fancy chart. On Curbed he explains it this way:
This week I present the quarterly average price per square foot of Manhattan co-ops and condos (adjusted for inflation) over the past 10 years. For both the first and last quarters of the time series, I inserted a pie chart illustrating the market share of co-ops and condos that sold in that particular quarter, based on the number of sales.
Not surprisingly, the average price per square foot for both co-ops and condos showed an upward trend over the decade. However, the condo market, after adjusting for inflation, slipped 2.3% since 2Q 2005, arguably the point where the housing boom ended in New York. The inflation-adjusted appreciation rate 2Q 2004 to 2Q 2005 for condos was 18.5%. Co-ops faired better since 2Q 2005, rising 6% after adjusting for inflation. This was less than the 20.6% appreciation pace for co-ops seen in the previous year (2Q 2004 to 2Q 2005). Since these are overall market numbers, they are affected by the mix of what actually sold, but they do illustrate the change we are all seeing.
At the beginning of this time-series, in 1996, 59% of the apartments sold were co-ops compared to 41% condos. By the end of the time series in 2006, condos represented 57% of the number of sales to 43% of the co-ops. In the near term, we don’t expect condos to outsell co-ops every quarter, but the pace of new development is changing the housing stock. In 1996, the ratio of co-ops to condos in the housing stock (existing housing units, not number of sales) was approximately 80/20, while the 2006 ratio is about 75/25.
New York has long been a hard-core co-op town. In the big picture, as Miller documents, that trend is waning somewhat. But on the street today? I can tell you that co-ops are attractive to many buyers at the moment. I believe the condominium development boom, paired with prices of new development projects has given greater appeal to the co-op market in the short term possibly explaining the slip in condo prices (after adjusting for inflation) since 2Q 2005. To many buyers, co-ops are a little more attractive for the moment because they are less expensive alternatives to all those starchitect buildings.
That said, in the long run as condominium inventory increases, I believe the premium paid for condo ownership will decrease, and the major difference between condos and co-ops will be one of legal ownership and not price. We also can’t ignore that co-op transactions are now public domain and may in fact be subject to mortgage recording tax in the near future. It will be interesting to see if these factors, combined with the increase in condominium inventory expected over the next 18-24 months, will further close the gap between condo and co-op inventory and prices. Only time will tell.
Watch for Doug tomorrow on New York One, in a story about little things you can do to help your New York apartment sell in this market. Look for the Fortune Business Report at about 10pm.
For a more in-depth look at the same issue, listen to the TrueGotham podcast on that exact topic from a few weeks ago.
Zillow Blog’s Spencer Rascoff reports an interesting tidbit from last week’s Inman Connect conference, involving Glenn Cohen, CEO of Expert Realty.
Glenn made what I think was one of the most interesting comments of the conference: most of the innovation in the real estate industry right now is about liberating data (e.g., Zillow, Trulia, Propsmart, etc), whereas most of the innovation five years ago was about alternative brokerage models (e.g, Zip Realty, Foxtons, discount MLS providers). It made me wonder where the next wave of innovation will come from five years from now.
Service, expertise, and professionalism! I believe that five years from now we are going to see a hybrid of the real estate agent and the real estate consultant. As data becomes available to the masses, it will become increasingly difficult for agents to demand high commissions–unless they are providing service above and beyond that of what many provide today. Consulting services will become prominent, giving homeowners even more choices when it comes to selling their homes. Instead of handing over the keys to a full-service agent as is the norm today, homeowners might pay hourly for a la carte professional help asessing the market, pricing, advertising, marketing, negotiating etc.
As one of the foremost writers on New York Real Estate, Toni Schlesinger has come up several times on TrueGotham before. On the evening of Wednesday, August 2, you can meet her in the flesh at a reading at the Skyscraper Museum. Here’s a map and the official invite:
The Skyscraper Museum invites you to a reading and wine reception for Toni Schlesinger and her book, Five Flights Up and Other New York Apartment Stories. The evening will be architecturally inspired with emphasis on salt furniture, apartment survival, Mr. Fioleau, Dead Malls, Robert Moses, and the secret, inner lives of architects and planners.
6:30 pm, Wednesday, August 2
Center for Architecture
536 LaGuardia Place, a block and a half north of Houston, between Bleecker and West 3rd Streets.
212.683.0023, www.aiany.org,
The program is free and no reservations are necessary.
www.skyscraper.org
Five Flights Up is a collection of Toni Schlesinger’s eight years of Shelter" columns that appeared in the Village Voice and her new writing about New York.
Last Friday, in a roundup of real estate news, TrueGotham linked to a Business Week story about a Virginia-based numbers cruncher named Michael Youngblood with a new model for predicting housing prices. Rather than depending on traditional measurements like interest rates and inventory, this model, as Youngblood explained in an earlier interview, is based on growth in employment and growth in personal income.
Does that work? I don’t know. Let’s just say I have my doubts about some of his projections. As reported by Toddi Gutner of Business Week:
- Housing prices will rise in each of the next four quarters, but by progressively slower rates year over year: 7.1% in 2Q 2006; 5.7% in 3Q 2006; 4.4% in 4Q 2006 and 3.5% in 1Q 2007.
- MSAs with fastest year-over-year gains in 1Q 2006 will continue to rise. Those cities include Phoenix, Az (34% expected rise in 1Q 2007) and Naples, Fla. (51% expected rise in 1Q 2007).
- California market will have continued rising house prices with a median year-over-year rate of 24.1% in 1Q 2007.
- Ten of the largest MSAs will continue to rises in housing prices: 17.5% in New York City; 26.7% in Los Angeles, Ca.; 4.9% in Chicago; 3.9% in Houston; and 4.8% in Atlanta, Ga.
I took enough statistics and economics courses in college to know that numbers can be manipulated to say just about anything. And this guy works for an asset backed securities firm, which means he has a vested interest in everyone feeling good about the housing market.
Check out some of the reactions from commenters on the Business Week site:
- Parithead: "I have run some of my own models based on history, complex mathematical algorithims, tide and moon phases and processed it through the flux capacitor. The result is clear, Micheal Youngblood is a crackhead."
- Doh: "Well, his model is already wrong. Only took one month to debunk this junk science of his."
- Bill: "Interviewing the Managing Director of an asset backed securities firm who has a vested interest in the stability of asset backed securities like houses is akin to the dot-com days when analysts were giving rave reviews to stocks they owned. Of course he’s bullish on housing."
- Bubba: "I think that this guy is purposefully trying to be contrarian. In the off chance that he ends up being right, he looks like a genius and is anointed the seer of the real estate industry."
I’ll say this for the Business Week site–they have some good commenters!
Of course I am bullish on housing in the long term, but to argue that several of the major markets will see double digit gains this year is absolutely ludicrous. There is no substitute for the real numbers provided by those on the front lines of the real estate market and we all know that the NYC market has cooled considerably since its peak of Spring 2005.
Just another example of the media reporting "man bites dog." He is one of a rare few (the only one I have seen recently) who has made such ridiculous projections going into 2007. I wonder how much property he owns.
