But I do know that, in the past, the state of commercial real estate market has often been an indicator of things to come in the residential market.
That is precisely why this piece from Globe Street grabbed my attention. If in fact, as reported, the vacancy rate has dropped below 7% for midtown commercial space and prices are headed for the $200/sf mark, that means that people with deep pockets may be moving in, and they will be needing places to live. Where are all those executives going to live? (Here’s one idea: Perhap the City’s proposal to buy the Hudson Rail Yards would make a good place for some spectacular residential development and parks to serve the potential demand for more good living in midtown.)
It will be interesting to see how this plays out but I will say that when Reuters, Ernst & Young, and NASDAQ moved to Times Square, the residential prices, and in turn residential development picked up a great deal of steam. There is still some incredible value in the residential market in midtown. The gentrification of midtown is ongoing.
Outside our windows, we often are awakened, or just simply annoyed by the 5AM garbage pickup, the passing emergency vehicle, the rude honker impatiently weaving through the city streets, or the shouting and slurring bar patrons. So, it’s not at all surprising to me that a recent citywide survey showed that the #1 complaint of Manhattan residents is street noise
One solution within our realm of control: installation of an additional interior window that blocks out these annoyances. Check out City Quiet Windows Customers of mine who have installed these swear by them. (For the record, I have no affiliation with or in any way benefit from business that City Quiet receives from this post.) Just thought that if that many New Yorkers are complaining about noise, I could offer one possible solution.
Donald Trump’s mansion in Palm Beach, Florida, on sale for $125 million, was expected to set the mark for the most expensive home in the US, but Saudi Arabia’s Prince Bandar has upped the ante.
Christie’s Great Estates and Josh Saslove are now listing the most expensive house in the United States ($135 Million).
Saudi Prince Bandar’s Hala Ranch includes 15-bedrooms, 16-bathrooms, a racquetball court, and an indoor pool. According to The Rocky Mountain News, the 70,071 square foot house is assessed at $55,953,500.
Which one would you buy? The Trump manse? or Bandar’s Rocky Mountain ranch?
About 8 years ago I had the privilege of working with a buyer who was also a principal in one of Sydney Australia’s largest real estate firms. Not only was this gentleman stunned at the inefficiencies of the American housing market, more specifically New York City, but he was also surprised that we were not utilizing the power of the auction when selling homes.
Residential auctions have long been associated with foreclosures in the United States, but according to The Washington Post, Alex Cooper Auctioneers Inc. has auctioned off $80 million in non-foreclosure real estate (commercial and residential) in the past year.
Now most people who have purchased property over the past 5 years in NYC would argue that they were involved in an auction. The market has been so hot that most have people find themselves bidding against multiple people and often experience the frustration of bidding significantly over the asking price only to be outbid by someone else willing to through more cash on the table. But, that’s not really an auction.
The way I understand the Australian market is that homes are shown for a couple of hours (open houses) two days a week (perhaps Tuesday and Thursday) and then all bids are taken the following Monday when the "auction" begins.
This seems on the surface to be a fabulous system for a hot market, but you must have more than one active participant for an auction to work. In a cooler market as we are currently experiencing, I believe many sellers would be leaving quite a bit on the table if they chose to sell this way. That said, I am curious to see if auctions will catch on, how they will work, and exactly who will be willing to participate.
The Second Quarter Market Report prepared by Jonathan Miller of Miller Samuel Appraisers and released by Prudential Douglas Elliman shows that prices, inventory and interest rates are all climbing. Let’s not forget that The Corcoran Report prepared by Mitchell, Maxwell and Jackson does not concur.
Surely, both of these gentleman and the respective companies that released these reports have gone to great lengths to report the most accurate numbers, but the discrepency between the reports can’t be ignored. If Mr. Jackson from Mitchell, Maxwell and Jackson had particpated in the Podcast for The Real Deal, we would hear a very different report based on the data he used for The Corcoran Report.
What does this all mean? Well, they both agree that inventory has increased greatly and everyone has watched interest rates rise. Buyers are gaining more power in this current market and many developers have become negotiable with prices of their projects. I believe the third quarter numbers will be more telling as to exactly where we are in the market.
As confusing as all of this is, there has never been a more important time to have a seasoned real estate professional guide you through a mind boggling plethora of numbers.
Have you ever wondered who or what streets are named after? If someone tells you to hang a right on Ludlow Street, don’t you, at least for a second, think "what’s a Ludlow?"
The truth is there are tons interesting stories behind NYC street names. The Street Book by Henry Moscow takes a historical look at many of the Big Apple’s thoroughfares. Here’s a little sampling:
Ludlow Street
The Namesake: Lieutenant Augustus C. Ludlow, a naval hero of the War of 1812 to whom Captain James Lawrence said: "Don’t give up the ship."
Ludlow, 21, took command of the frigate Chesapeake when Lawrence was mortally wounded in battle with the British ship Shannon off Boston Harbor. His actual orders from Lawrence were: "Tell the men to fire faster and not give up the ship. Fight her till she sinks." But Ludlow himself was hit fatally and the two men are buried in one grave at Trinity Church.
Pearl Street
The Namesake: mother-of-pearl, the oyster shells that virtually paved the street when it was the East River shore.
Before landfill left Pearl Street high and dry several blocks from the river, it was often called simply The Strand. The frist city hall stood at 71-73 Pearl Street, a parking lot when this book went to press. The City Hall had begun life in 1641 as the Stadt-Herberg, or City Tavern: a five-story stone structure, it was built by Governo William Kieft, who had tired of entertaining visitors to New Amsterdam at home and needed an inn to which to send them. Twelve years later, the tavern became City Hall.
Harry Howard Square
The Namesake: Harry Howard, a foundling born in 1822, who became head of the city’s fire department in 1857.
A fireman before he was appointed chieft, Howard personally saved 100 lives. He introduced the system of permanent alert in the department; as a result, fire insurance companies had to cut their rates. Howard never married because his sweetheart’s parents refused to accept a foundling as a son-in-law. So Howard and his beloved lived out their lives as an engaged couple.
When investing in real estate, it’s difficult to know whom to trust. Josh Barbanell’s Sunday New York Times article about the perceived demand for Manhattan condos Are There Enough Buyers To Go Around? is a good example of how developers and appraisers see the same market from different perspectives.
There are some amazing condo projects nearing completion, and Gary Barnett of Extell Development was very enthusiastic about the condo market, saying "New York is the epicenter of the world, and everybody wants to own something here." But, not all developers are that optimistic. In my opinion, Barbanell got the best information from appraisers Jonathan Miller and Jeffrey Jackson. Both of these guys are on the front lines and have reputations for speaking candidly and honestly about market conditions.
Jeffrey Jackson, the president of Mitchell, Maxwell & Jackson, an appraisal company, said he had been consulted on half a dozen projects that may be postponed or converted to rentals…
…Jonathan J. Miller, an appraiser and the president of Miller Samuel, said he believed that many prospective buyers were ready to act but were holding back because of market uncertainty. At the same time, he said, Manhattan developers were holding the line on prices, confident that the new condos were worth their high prices.
"There are a lot of buyers, with money to spend, on the sidelines," Mr. Miller said.
With Goliath development companies like Related building hybrids containing both rentals and condos, as well as the chatter about other condo projects coming on the market as rentals, many believe that there are not enough buyers to go around. Until those buyers with cash on the sidelines who are waiting to see how the market shakes out feel comfortable jumping back into the game, the market will remain cooler than it has been in the recent past.
Because buyers are waiting for the condo market to develop, Miller is correct in saying that buyers should not assume that they always have to pay the asking price in this market. That doesn’t mean buyers should expect to "steal" a property either. I believe that as some of these projects come to market as rentals, others don’t come to market at all, and buyers begin to realize that developers are more reasonable about negotiating, the Manhattan real estate market will normalize and continue to be a great place to call home.
Maybe you’ve seen the latest news about Manhattan prices.
One report says Manhattan apartment prices grew in the second quarter; another says they fell.
Manhattan Apartments: Second Quarter 2006
| |
Prudential Douglas Elliman |
Corcoran Group |
| Mean |
$1.4 million |
$1.2 million |
| Change |
Up 6.6% |
Down 3% |
| Median |
$880,000 |
$775,000 |
| Change |
Up 6.7% |
Down 3% |
The 2 largest firms in Manhattan real estate have released 2nd quarter numbers that prove once again that more cooperation is greatly needed among the firms. As is, these numbers only add to the confusion of just what is happening in the Manhattan marketplace. We are talking about HUGE discrepancies here.
What is going on with these numbers and how is it possible that these two goliaths of Manhattan real estate can have such differing data? Main reason… no multiple listing service. Each company is compiling these reports based on their own proprietary data paired with additional data provided by two separate appraisal companies. The data is only as accurate as the agents who "update" it.
So what is going on with the Manhattan real estate market? It’s quiet. Buyers in many price points have much more inventory (both companies concurred here) to choose from and they are taking their time deciding which place they will call "home." It is a much more normal real estate market and I believe, more healthy for everyone involved. That said, with media reports like these, it’s no wonder that buyers and sellers are having more difficulty reaching a meeting of the minds than we’ve seen at any other point in the last decade.
Many sellers will choose only to read Prudential Douglas Elliman’s data and stand firm on their prices (very bad idea) and buyers will only read Corcoran’s numbers and will somehow determine that a 3% decline actually translates to 30%. It all adds up to continued frustration for all involved. By the way, the "days on the market" numbers are laughable as they are based on the time a home has been on the market at its current price (a home that may have been asking $2M last summer, but experienced three price drops, finally hitting $1.65M one month ago at which time it went to contract, would be reported as being on the market for approximately 30 days… a bit misleading right?)
Here’s What I See Happening in the Marketplace
Prices are flat to down depending on market. Third quarter numbers, I anticipate, will show prices that are down from highs of Spring 2005 (the peak). If third quarter numbers don’t show that, I will have an entirely new series of questions.
Sellers need to accept that they will be selling for as much as 20% less than their neighbors did last spring, and buyers need to understand that most in my industry understand this and have priced current inventory appropriately, so bidding 20% under ask is going to be met with silence from most sellers. The unrealistic seller will follow the market down as interest rate increases continue to thin the buying pool. The unrealistic buyer will find themselves giving up a minor reduction in current asking price and getting higher interest rates and a monthly payment that may be greater than if they had jumped into the market sooner.
According to Curbed llan Bracha of Prudential Douglas Elliman has reason to celebrate:
Despite plunging prices, illegal hotel rooms and a loss of public confidence in condo developments, Page Six says it spotted "Prudential Douglas Elliman’s top broker, Ilan Bracha, celebrating at Buddha Bar with his team after selling 114 condos at Herald Towers in two days." A reader wonders "114 in 2 days? Were they selling them for $19.99?"
As evidenced by the contract signing for 114 units at Herald Towers, aggressive pricing does indeed overcome all obstacles. Despite in-fighting between the original sponsor and the new development team, and delayed closings, the incredibly well priced units at Herald Towers are flying off the shelf.
A recent article in The Sunday New York Times examined the difficulties that both seller and buyers were having with this project. That said, it obviously drew a great deal of attention to the project as well as a new marketing campaign headed by Ilan Bracha and his team; generating a massive flurry of activity which resulted in two days of intense contract signing.
A Curbed reader asked if they were "selling them for $19.99." Not quite, but you’ve got the right idea! With these condo units priced below $800/sf, many people jumped at the chance to own their very own piece of the Big Apple—crunch!
I’m curious to know whether or not many of these units were purchased by a single investor who saw this great opportunity. Only time will tell.
Have you ever wondered who or what streets are named after? If someone tells you to hang a left on Gansevoort Street, don’t you, at least for a second, think "where in the hell did that name come from?"
The truth is there are tons interesting stories behind NYC street names. The Street Book by Henry Moscow takes a historical look at many of the Big Apple’s thoroughfares. Here’s a little sampling:
Battery Place
The Namesake: a battery of artillery installed on a platform there in 1693 to protect the city against a French attack that never came.
The site remained a supposed military strongpoint during the War of 1812, having been reinforced by construction in 1807 of the West Battery, which was renamed Castle Clinton in 1815 in honor of Mayor DeWitt Clinton. Battery Park, which Battery Place borders, served as a prison camp for captured Confederates in the Civil War.
Gansevoort Street
The Namesake: Peter Gansevoort, colonel of the 3rd New York Regiment of militia in the Revolutionary War, and later a brigadier general in the U.S. Army.
Gansevoort held off a British siege of Fort Schuyler at what is now Rome, New York and, though short of food and ammunition, spurned generous terms for surrender. His fort flew the first Stars and Stripes to see battle: the flag was contrived of ammunition bags, which were white; a captured British cloak of blue, and bits and pieces of red cloth. Before the street was named for Gansevoort, it was called Great Kiln Street, for a lime kiln sited there.
Gay Street
The Namesake: unknown, but probably for a family named Gay. An R. Gay, who lived in the Bowery, advertised a gelding for sale in a newspaper dated May 11, 1775.
The street runs through the site of a brewery owned by Wouter Van Twiller, the grasping no-goodnick who succeeded Peter Minuit as Governor of New Netherland in 1633. But the name Gay Street first appears officially in the Common Council minutes for April 23, 1827, which record a health inspector’s complaint against a privy belonging to one A.S. Pell, of Gay Street.
