Have you ever read something and wondered, is this real? Timothy Ellis of the Seattle Bubble had exactly this reaction to a recent email he received. Quite frankly, Timothy wasn’t the only one astonished by what “Mr. F” had to say about the real estate bubble:
Regardless of what happens with the bubble the longer you wait to purchase a home the harder it will become. The only time I would agree that it would be appropriate to wait would be if you feel the bubble will burst and prices/values will fall.
Nothing in anyones crystal ball says anything about values falling in the Northwest, the primary reason being supply and demand. Here in (Mr. F’s) County our market is cooling. Even at that if we only have a 10% appreciation this year it is still great news for homeowners. So my recomendation would be to buy now not later. In not buying now you are loosing appreciation and tax writeoffs. As I tell most new buyers, just get on the up escalator! Once there at least what you currently own is appreciating at the same value as most of the homes around you so it will be easier when you are ready to sell and buy the next one.
If you ask me, this is a perfect example of a novice real estate agent believing his own hype; also a perfect indicator of the low barrier to entry in our industry nationwide. The best argument for buying “right now” is that prices are becoming more negotiable than they have been in about 7 years, and interest rates remain low. As far as the idea of real estate being a speculative investment, I am of the belief that it is a shelter first. History has proven that over time, it will appreciate, but history has also proven that people who buy at the peak of a market and are forced to sell in the short term can lose their shirts in the process (i.e. late 80’s-early 90’s). That said buyers are as savvy as they have ever been and to suggest “buy now” is insulting. I believe that they have the ability to weigh their own financial situation, including tax advantages and mortgage products, with their housing needs to determine if a purchase is a viable option.
Via Bubble Meter.
According to Forbes, downtown Manhattan has four of the most expensive zip codes in the country:
- 10013 is 12th
- 10007 is 19th
- 10012 is 31st
- 10006 at 48th
In 10013, the median home sales price in 2005, according to Forbes, was $1,875,000.
(via the Walk-Through)
The Walk-Through has word of families with children fleeing cities.
Anecdotally, I have been noticing the opposite. In many New York neighborhoods, you can’t walk a block without seeing a stroller. That just wasn’t true 15 years ago.
Contrary to census numbers, my colleagues and I are seeing a mass return to Manhattan by families who “thought” they wanted to live in the ‘burbs. Many of the families (and many with three and four children) are selling their suburban homes and returning to Manhattan for a variety of reasons.
The reasons I hear most often are they miss the conveniences of the city, they want to reduce their commute, and most frequently… they are “bored.”
With many of the suburban areas surrounding Manhattan experiencing the same phenomenal appreciation in prices, many of my clients have also found that the ‘burbs are not as much of a bargain as they thought.
Of course, many families are making the exodus but there seems to be a trend toward larger families staying in the city. Some are even deciding to sell vacation homes so that they can afford larger homes in the city and the cost of private schools for their children. Once again, Manhattan seems to be a statistical anomaly.
People have been saying for years that “a home is a good investment,” and it looks like young people are getting the message loud and clear. Business Week‘s Peter Coy shares some new research:
Yale economist Robert Shiller, author of “Irrational Exuberance,” says that one earmark of a speculative bubble in housing is when people start talking about a house as an investment rather than just a place to live. If he’s right, then younger people are more affected by a bubble mentality than boomers.
Forty-two percent of Gen X’ers and 39% of Gen Y’ers said they thought of a house purchase as an investment, vs. just 32% of boomers who felt that way. Boomers were more likely to think about buying a home because of a life event such as a job change or marriage.
There has absolutely been a shift in buyer mentality towards housing as a shelter for your money and not just your family. With the incredible appreciation that the housing market has experienced, my “Generation Y” clients have come to the table with expectations of continued appreciation of their homes.
If we choose to view housing primarily as an “investment,” we must also weigh ALL economic factors that influence prices–including but not limited to interest rates; types of mortgages available; supply and demand; and specific property elements such as location, size and special features like views and amenities.
I choose to view my primary residence as a shelter for my family first, and an investment second.
The Real Deal has word that prices jumped in the outer boroughs in 2005.
I can’t say I’m surprised. More and more of my clients have been priced out of the Manhattan market and have explored options in the boroughs. There’s no ignoring how much further their money goes and what it buys them in Brooklyn or Queens.
That said, certain areas in the boroughs, like Park Slope, are almost on par with Manhattan prices.
People are always asking me what the “next” neighborhood will be. It’s something we’ll be talking at more length in the future on TrueGotham. But the quick answer is: Long Island City is in the midst of a renaissance with a very strong Business Improvement District, the Bronx is on the radar, and the still untapped area in the West 30’s of Manhattan has incredible room for development and growth.
In the latest episode of the TrueGotham podcast, we delve into one of New York’s favorite topics: unscruplous real estate brokers.
The episode is a little more than eight minutes long, and covers a lot of ground. Here’s an excerpt, about how selfish or desperate brokers (The New York Times reportedly recently that the vast majority of New York brokers have no listings) can cost sellers major time and money:
Often, a broker will have multiple offers on a property, and before they present all of these offers to you, they will go through those offers and they’ll say “which one of these is going to make me the most money?” And that’s the offer that they’re going to push on you as hard as they can. And that offer may not be in your best interest.
You may have someone who comes in and says “I’ll pay you two million dollars, cash. I’ve worked at JP Morgan Chase for the last 10 years, I’m a senior vice-president, I’m a managing director, I’ll close whenever you want.” And then you have someone else over here, a struggling artist, God bless them, but they’re not making a lot of money, they need a mortgage contingency, they have to get financing and the contract has to be contingent on that… if the broker stands to make a six percent commission with that person, and only a three percent commission with the other person because they’re working with a broker–I’m not saying all brokers, but many brokers are going to steer you toward that six percent person.
And it’s not in your best interest. It’s only in the broker’s best interest. And three months, six months down the road when you’ve gone through a board process, you know, you’ve been trying to get this person approved by a co-op board and you get a rejection, you’ve lost three to four months of income, or expenses that you’ve been putting out, and worse yet, now your apartment has been on the market for four months.
Statistics show that the longer an apartment has been on the market, the less its going to sell for. So you’ve lost money. And there’s nothing you can do to salvage that.
Listen to the whole episode by clicking here.
Jonathan Miller really knows his stuff. Look at his most recent research and you’ll see that by some important measures, condominiums have moved to the forefront in the New York City market which has long been dominated by co-ops.
And that’s a very big deal in a market where only 20% of the inventory is condo.
There are a multitude of reasons for the comparative increase in condo sales. Here are some biggies:
- The number of new developments as well as the number of condo conversions is greatly increasing condo inventory.
- As prices have increased market-wide, it becomes increasingly difficult for some buyers to meet the financial requirements of many co-op boards, making the condo the only option for some (i.e. a condo requires 10% and sometimes less of a downpayment while co-ops generally require 20%-50% down and some insist on all cash).
- I deal with condo buyers all the time who also like the anonymity of living in a condo and prefer to not disclose their complete financial picture to a co-op board.
I owned a co-op and was a member of its board for three years, but I live in a condo now. The way I see it is that co-op living tends to be more intimate, with more interaction among neighbors and everyone taking a greater interest in the quality of life in the building. Condo living is definitely more anonymous as the buildings tend to have more transiency than co-ops. The apartment next door to us has had three or four tenants in the past three years: hardly time for the kids to make new friends. Our previous co-op is made up of mostly the same people who lived their with their families for a decade or longer.
My clients who are looking for condos in today’s market are doing so because of the ease of purchase, absence of financial intrusion, and the ability to refinance, renovate, and rent their property to whom they choose with little or no need to seek approval. Not to mention all of the amenities and bells and whistles that many new developments and conversions are offering!
For the record, condos aren’t like the wild west with no “sherriff.” The Board of Managers acts on behalf of unit owners to develop building policy, review applications for purchase, lease, and renovation and determine what is best for the building and its unit owners. The major difference is that Condo Boards do not have the omnipotence that a co-op board has and should a condo board ever deny a sale or lease, the building must then pay your contract price for your unit (this is called exercising their “Right of First Refusal.”)
All of that said, it comes down to the supply of available apartments and personal preference that determines whether someone buys a condo or a co-op.
From time to time on TrueGotham we’ll be offering tips for buying and selling apartments in New York.
Today my advice is simple, but frequently overlooked: when you are selling your apartment, get your broker to print out, present, and sign a marketing plan.
You want that in writing.
There are very few brokers in the industry who will actually commit to what they say they’re going to do. It’s easy to promise a certain mailing, or e-mail marketing, or this much advertising, or that you’ll hold a certain number of open houses.
As soon as you sign on the dotted line, with some brokers those promises go right out the window.
Get yourself somebody who will type out a full marketing strategy specific to your apartment. And make them sign it. Make them commit. You’re committing to pay them six percent–make them commit to delivering what they’re getting paid six percent for, because it’s a lot of money.
The blog Bubble Markets Inventory Tracking shows how brokers take listings that have been on the market for a while and re-list them to make them look new and more appealing.
We’re lucky in New York that this doesn’t happen here at nearly the rate it does elsewhere. My only experience with this in the New York market is when a listing is conveyed from one exclusive broker to another. Often times the new exclusive broker will have the old listing removed from the system to give the appearance that the property is new to the market.
(Have I ever done this? Once in a blue moon–and merely to make clear that I’m newly representing it. I have always let people know that it was on the market with another broker prior to my taking over.)
That said, I’ll make this promise right now: I will never again engage in this practice, as I absolutely see the deception involved.
An even greater ramification of this practice is that it skews the “days on market” numbers (i.e. If 3 brokers have a property for 6 months each and the last broker makes the listing “new,” it will appear that the property sold after 6 months when in fact it was on the market for 18 months.)
I challenge everyone in my industry to make the same promise, and to abolish this practice. By all means let people know that your representation of said property is new. But let’s not pretend it’s a new listing.
Interesting summary of anonymous real estate bloggers’ thoughts on the market. In short: it’s not pretty. (via the RealDeal)
