Property Grunt has word of brokers getting very nervous:
Up in the burbs of NYC, brokers are going bats**t since nothing is moving. Even the high end luxury stuff isn’t budging. There is wide spread fear that the market is going to tank in a bad way. There is no sign of that soft landing. It appears the reckoning is coming.
Among the brokers in Manhattan, I am getting mixed signals. There are some brokers who claim to be making money hand over fist and others who are barely making a living. It is difficult to determine who is telling the truth. I already caught one agent who lied about closing a deal when in fact the exclusive had expired and the property was still on the market.
I’m puzzled why PropertyGrunt would be so secretive (why all the hiding behind the scenes?), but will assume he/she really is a New York real estate professional. And I would say kudos to him or her for an attempt at brutal honesty about the marketplace.
The nervous chatter about a cooling market has indeed picked up but predominately by those with less experience in the industry. The seasoned broker with significant time in the business has witnessed a cooler market and has not been as spoiled by the boom conditions of the past several years.
Who am I kidding, I loved it and am sad to see it go!
Those agents who have been in the industry for 7seven or fewer years are freaking out because they have had it easy. It’s time to step up the marketing, deliver what you say you will, put more effort into accurate pricing, and be patient. There was a time not long ago where property was on the market for two years and interest rates were well into the double digits. I don’t believe that is where we are headed but brace yourselves, the real ride is just beginning.
Teri Karush Rogers of The New York Times is writing about something that brokers all know about: this job can give you a hell of a lot insight into people’s personal lives:
In the course of probing for information, brokers sometimes encounter far more than they really want to know or need to know. Details that might make a therapist wince, or at least write faster.
“More so than any other profession, I think you get to see the window of people’s inner souls in a kind of hyper-reality superquick time,” said Rob Gross, a senior vice president of Prudential Douglas Elliman. “Is it big enough to have kids, do I want to have kids, do I want to live in the city for the rest of my life? Do I want to move out to the suburbs? Should I move out? Real estate just opens up the kimono. And you see it all, beauty and warts.”
For brokers, the line between information they need to do their jobs and information that’s just embarrassing is an occupational hazard most often encountered when dealing with couples.
Perhaps we as brokers can start charging hourly fees for the therapy and advice we provide to clients? Talk about opening a can of worms. We’re right there with bartenders, hairstylists, manicurists, accountants, financial planners, and cab drivers.
Sometimes you can find yourslef in compromising positions where the ability to remain objective becomes as important as an asking price or whether a buyer wants a fireplace, a terrace, or a building with a pool (another interesting piece in The Times about new projects with pools).
This article reminds me of one instance when I became something of a counselor for a divorcing couple selling their apartment. They were both claiming that the other was mentally ill (neither was but the stress of the divorce sure gave that appearance) and their paranoia was a continuous obstacle to the sale of their apartment. There were children involved, pets, substance abuse, restraining orders and even jail at one point. At the end of their divorce proceedings the judge and me were the only two people in the world that both husband and wife would talk to.
My team and I finally sold their property–but not before we all experienced an emotional draining and extra long hours as we found ourselves personally vested in the well-being of the husband, wife, children, and even pets. I am happy to report that the divorce was indeed finalized and all parties went on to live happily ever after.
Moral of the story… good real estate brokers are hard working “human beings” who often help far beyond the minimum requirements. Thinking about clients like that, it kills me that so many people assume brokers are essentially slimey used car salesman at heart.
Since the dawn of the internet, everyone has speculated that the face of the real estate industry would be greatly changed. That is no more evident than in the amount of business that we see generated by the internet vs. the various forms of print advertising.
Here in New York city where we lack a multiple listing service, The New York Times website is serving as a pretty good substitute. Not only are most all property listings (broker and for sale by owner listings both) contained on the Times website, but it also allows browsers to link to broker websites to view additonal photos, virtual tours, and floor plans thereby allowing the prospective purchaser to “weed out” properties that don’t necessarily match their criteria.
The days of clients walking around the city with the newspaper are long past. Today, buyers show up to open houses with printouts from various websites and they already have clear expectations of a property based on the floor plan and photos.
Richard Nacht at RealBlogging recently attended a presentation by Allan Dalton, President and CEO of Realtor.com. Nacht came away with a handy little chart (it shows that only 1% of marketing expense goes to the internet which generates 12% of calls, as compared to 56% of marketing expense to print resulting in 8% of calls). Nacht asks the question:
Why are companies spending 56% of their money on an activity that produces just 8% of inbound calls? I don’t think Allan was joking when he quoted a Realtor as saying, “we’re spending millions of dollars offline because we can afford it, but our stupid competitors can’t, and they’re following us anyway.” Interesting strategy but it does almost sound like he’s kidding, doesn’t it?
Unfortunately, most sellers are still insistent on spending dollars on print advertising when it has been proven that the web is much more effective.
Jennifer Breu is a real estate professional on the Heddings Property Group team. She shows property, handles many aspects of client contact, and plays a major role in marketing, co-op board package preparation, and other tasks.
As it happens, she’s also pretty damned talented with a camera. She has been nice enough to take some photos of New York that will become a regular part TrueGotham. We’re looking forward to showing you much more of her work here in the future. |
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Ellen Florian Katz of Fortune magazine has some very solid real estate tips that are up now at CNNMoney.
The piece gives advice for sellers, buyers, and those who plan to stay where they are in this cooling market. Here are some of my favorites:
Not a Time for Short Term Speculation
On the top of my list of favorite points is this piece of advice for speculators: Katz suggests “don’t do it” and I couldn’t agree more.
This is simply NOT a market to buy and expect to flip for a profit after a very short hold.
Sellers: Hire an Experienced, Professional Agent–and Price Aggressively
Of course I strongly agree that you should hire an agent (are you surprised that I also think you should pay the agent 6%?). But I also agree that the agent you hire should have a significant history and a proven track record in the industry. Pricing is the most important aspect of selling in a cooling market and I would suggest pricing in the bottom 20-25% of similar properties on the market (not a novel idea but a good one… it works).
Buyers: Make an Offer
For buyers, Katz smartly suggests not to let the asking price be your guide. Make sure you are working with an agent who understands the current market (at least as well as any of us can) and can at least help you formulate an offer on a property based on current market indicators.
Many NYC properties are still over-priced, so MAKE THE OFFER. Those that aren’t are still selling quickly.
You have nothing to lose and stop worrying about insulting sellers.
An Opportunity to Upgrade at a Savings
I would also add that if you are thinking of selling your current place to upgrade to a larger place, a cooling market could very well be your best friend as your decreased gain on your current apartment will most definitely be less than the decreased price on the larger apartment.
Consider a More Stable Mortgage
And finally, for those who are staying put, it is suggested that you keep your cool and watch that mortgage. It may be a good time to have a conversation with your lender or mortgage broker to discuss the options of getting into a more stable mortgage product. Otherwise, stay calm and ride out the storm.
Before I had a blog, I published a newsletter called The Pulse. A while ago, in The Pulse, I wrote that I suspected banks would devise creative tactics as the market cooled, including incredibly long-term mortgages, in an attempt to lure customers with lower monthly payments.
Real estate agents aren’t the only ones who have had a party for the last several years, and the banks are searching for new ways to keep this particular party going into the wee hours.
Problem is, people are much more savvy than the banks are giving them credit for and the 50-year mortgages we’re hearing about are oddball gimmicks. (Sounds very much like a 5 Year ARM to me and we all know that many of those will be “adjusting” over the next few years.)
Holden Lewis of Bankrate runs the numbers:
A 50-year loan has lower monthly payments, but the total cost is astronomically higher than that of a 30-year mortgage because you’re stretching out the payments for two decades longer. It’s impossible to guess how much higher because the rate moves up and down annually for the last 45 years of the loan.
But just for grins, let’s compare a 30-year fixed-rate loan with a mythical 50-year fixed. For a 30-year loan of $300,000 at 6.5 percent, principal and interest cost $1,896.20 per month. A 50-year loan for the same amount and at the same rate costs $1,691.15 per month in principal and interest.
The 50-year loan costs $205 less per month, but the payments stretch out for 20 years longer and will cost a total of $332,058 more.
Fresh off co-writing an article about how home prices aren’t appreciating as much at the moment, Damon Darlin of The New York Times has an interesting little tidbit on his Times real estate blog, The Walk-Through, about real estate agents getting incentives from their higher-ups for convincing sellers to reduce prices.
Price overcomes all objections. That has been a major topic in our weekly business meetings here. The pool of buyers has thinned somewhat, and there is a little bit more inventory in New York. The suggestion is that if you have exhausted all marketing efforts and it still has not sold, then the price is not right.
If you reduce the price, then at the very least you can get some offers and get an idea of what the property is really worth right now.
The activity with my own listings is telling. I have 19 listings at the moment. 14 of them are in contract. The commonality between those 14 is that the sellers were all amenable to pricing that put them in the bottom 20% of similar properties. Those who wanted higher prices will have to wait and see if that was a good decision.
Curbed.com had a little mystery going as to which building had the $39 million eight-bedroom duplex on the east side. As Curbed has since figured out, that building in those photos is clearly the River House. The City Review describes the River House this way:
If you’re lucky, you’ll think you see Fred Astaire and Ginger Rogers waltzing in the garden overlooking the river on which the very large lobby looks. The lobby, of course, is entered through the ornately gated and large, landscaped driveway on 52nd Street. The lobby has a black floor and large cloakrooms to accommodate the many guests that are constantly attending the very swank parties being given by the illustrious residents.
NYC-architecture.com says this:
Despite its vast size, River House contained only sixty-four apartments, among the most luxurious ever, with numerous duplexes as well as a seventeen-room, nine-bath triplex at the top of the tower. Many apartments were provided with balconies, and virtually all the roof surfaces were allocated to gardens and terraces.
What the piece doesn’t discuss is the infamous reputation of the exclusivity of the building. I was once asked by a selling broker in the buiding if my clients were “WASPS” or “Jews.” No idea if the broker was speaking for herself or the board, but it was definitely not typical in any case.
As it turns out, my clients were neither, and didn’t wish to proceed with that purchase anyway–but I would love to have known how their religious affiliation would have affected the purchase.
When you are making your millions in real estate, there will always be risk. And even when you have made enough to retire happily, there will never be a shortage of reptiles eager to prove a point by taking you down. Consider the case of Ronald Bergeron, as told by the Associated Press:
A real estate tycoon who owns a nature preserve tried to show off for visitors by jumping on an alligator’s back for a ride, but the reptile bit his hand and dragged him into 15 feet of water.
The 8-foot alligator let go of Ronald Bergeron, 62, after witnesses pulled its tail.
He suffered a shattered pinky, a broken ring finger and puncture wounds in his palm.
The multimillionaire developer was injured Sunday while giving a tour of his preserve to weekend guests who had made large donations to the Boys & Girls Club. It wasn’t the first time he’d tried the stunt.
“I always tell them I’m going to wrestle an alligator,” Bergeron said Wednesday. “It’s part of my Florida cracker culture. My grandfather was a game warden in the Everglades, and I grew up around alligators.”
He said he usually rides the alligator for a minute before letting it go.
If you have a big mortgage and not a lot of equity, you might be feeling a little squeamish about all this talk of soft markets. In The New Yorker, James Surowiecki describes some new ways you might be able to protect yourself.
There is one much feared cataclysm, though, against which everyone has so far been defenselessóa housing-price slump. Seemingly every magazine and newspaper in America has now prophesied the imminent bursting of the housing bubble. But even though many Americans have invested all, or almost all, their net worth in their homes, they’ve had no way of insuring themselves against that asset’s value taking a severe tumble.
That’s all changing. At a new online site called HedgeStreet, investors can bet on changes in home prices in certain cities. And later this month the Chicago Mercantile Exchange is going to start trading futures contracts pegged to housing-price indexes in ten major metropolitan areas. The Chicago plan, which is the brainchild of two economists, Karl Case, of Wellesley, and Robert Shiller, of Yale, is straightforward: if you just spent, say, $1.5 million on a two-bedroom apartment in Manhattan, and you want to hedge against the risk that it might be worth $1.2 million three years from now, you can sell contracts that will reap you a profit if local prices fall, allowing you to lock in the current value of your home. Alternatively, if you think the housing boom in Los Angeles still has a ways to runóor if you’re interested in buying a year from now but are afraid that you’ll be priced out of the marketóyou can place a bet that will pay off if prices keep going up.
You can watch the price of New York City property futures on HedgeStreet (with a twenty minute delay) here. Interesting stuff.
Surowiecki points out the drawback: are Americans really in a mood to dilute potential gains from real estate? It’s so ingrained in us that real estate is a good investment. I have a hunch it won’t take off. But for all those pessimists out there, here’s a chance to put your money where your mouth is.
