I had the pleasure of joining Tracy and Chris on the Noon edition of FoxBusiness.com Live today to discuss recent housing numbers that continue to confuse.
August home sales up 1% and September sales down 3.6% when an anticipated uptick of 2.6% was expected. It is all very confusing and I still maintain that these macro numbers are incredibly inaccurate when discussing a specific region and even more so when discussing a specific property. Perhaps these numbers can be useful in determining overall national trends but those trends mean very little to the individual homeowner who is my number one priority.
Not soon enough for me, but it seems that the Manhattan real estate market is becoming less of a paper wasteland. Finally managing agents and co-op/condo boards are taking into consideration the ridiculous amount of paper that is being wasted in the application and home sales process.
In the past 2 weeks, we have had multiple attorneys thank us for sending them offering plans, financial statements, and purchase applications in electronic format. But we’ve been doing that for a long time. More exciting than our paperless efforts are those like this. At least one building that we know of is requesting applications, which can often be hundreds of pages of tax returns and supporting financial documents, on CD. I’ don’t know for sure but 5 reusable CDs seems like a smarter option than more than 1000 pieces of paper. Other buildings are also adopting more green policies by developing websites for prospective purchasers to retrieve documentation as well as submitting those completed applications in electronic format to board members for their perusal.
Anyone who has attended a closing or sold property in Manhattan knows that we are a long way from even putting a dent in the amount of paper that is wasted in a real estate transaction. And for what…so the bank can store this paper in a warehouse in Iowa only to tell you that they have lost it when it comes time to sell again thereby charging you more money to make more paper copies of those that they lost.
Kudos to all of the agents, their brokers, property managers and building boards who have reduced their paper usage exponentially. For those who haven’t, shame on you.
Video still isn’t killing the virtual tour star but it is gaining considerable steam. The once averse Manhattan real estate market is now more frequently embracing real estate video as a powerful marketing tool to transparently represent and efficiently sell homes. But unlike many housing markets across the country where MLS rules disallow agents actually appearing in these videos, Manhattan, chock full of agent/"actors" permits agent guided tours. This creates a double edged sword.
The trend that I’m beginning to see is that some of the agents seem to think that their appearance in the video is much more important than the home itself. Obviously I don’t begrudge anyone for appearing in a guided real estate tour as I have been doing just that for almost 3 years. However, many of the new videos that I am seeing are elaborate "performances" that feature the agent more than they do the home. Let us not forget that these videos are primarily created to make the sales process easier and more transparent for the consumer (both buyer and seller) by allowing them to view a property in more detail than ever before possible prior to deciding to schedule an in-person visit.
So why are we seeing so many real estate tours that focus more on the seller’s agent than the property itself? EGO. Don’t get me wrong here, I thoroughly enjoy appearing in all of my property videos but my camera person and I are always very careful in determining when my appearance helps show the property (i.e. opening closets or standing in a room to show ceiling height) or hinders/takes away from the impact that the property itself may have on the viewer. For example, just yesterday we decided that shooting a gorgeous pear wood eat in kitchen in a penthouse at 2 East End Avenue without me pointing to appliances would be a much more effective and less distracting way to show the property.
My point: I think that sellers and their agents should be mindful of the way a video shows your home and not so much the way in which it shows the agent.
I was contemplating NOT chiming in on the big company’s 3Q Manhattan residential real estate market reports, but alas I must give my two cents. Never has the answer to the "how’s the market?" question been so complicated. It is all relative of course and if you compare the the 3rd quarter 2009 to the first half of 2009, then yes the news is good and the market is much busier. But despite a few stats that show some YoY increases, like sales volume of 2BR apartments, the market is nothing like it had been for the past decade and that’s not necessarily a bad thing for everyone as a correction albeit fast and steep was absolutely necessary.
Check out this snapshot from Curbed of the numbers from Elliman, Corcoran, and Halstead/Brown Harris Stevens (same owners):
Average sale price
1) Elliman: $1.323M – Down 10% from last year, up 0.8% from last quarter
2) Corcoran: $1.282M – Down 16% from last year, down 11% from last quarter
3) Halstead/Brown Harris Stevens: $1.274 million – Down 13% from last year, flat over last quarter
Median sale price
1) Elliman: $850,000 – Down 8.4% from last year, up 1.7% from last quarter
2) Corcoran: $799,000 – Down 18% from last year, down 4% from last quarter
3) Halstead/BHS: $781,000 – Down 14% from last year, down 1.7% from last quarter
Number of sales
1) Elliman: Down 16% from last year, up 45.6% from last quarter
2) Corcoran: Down 38% from last year, up 16% from last quarter
3) Halstead/BHS: Down 25% from last year
Here we go again!!! How can the biggest players in the Manhattan real estate market come up with such differing reports of what has happened in the marketplace (big emphasis on "has")? I still have never received an explanation for this that made any sense.
All of this said, I think it is very fair to say that the deep and rapid price decline that happened over the last 18 months has slowed. Activity for me and all of my colleagues has definitely picked up as sellers have accepted market conditions and some buyers feel that now is the time to grab their piece of the Big Apple.
So where is the market heading? That is the billion (let’s say trillion) dollar question and I still believe that we may see another 10% decrease in prices before we stabilize for a period of a few years. If I’m wrong, it will only mean that the economy has become healthier more quickly than anticipated, banks are more freely lending (uh oh), and a huge influx of cash will pump up prices again. That sounds a bit eerily familiar no?
This enormous sign was placed outside of my office on the corner of 83rd Street and West End Avenue to ANNOUNCE an open house last night. I haven’t seen this ever and it has been 15 years since I remember similar "marketing" attempts as flyers were taped to light posts. I’m off now to Marshall the 3rd running of The Hamptons Marathon…go all you crazy runners!!!
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As far as who is more realistic in terms of their expectations in today’s Manhattan real estate market, the scale has definitely tipped toward sellers. Before you get all crazy on me, here me out. I’m not AT ALL suggesting that it is a seller’s market…because it’s not. That said, it also is NOT the buyer’s market that many believe it to be.
With prices down between 10 and 40% from peak levels across the city, buyers are again sweeping in to snatch up what appear to be bargains relative to the recent housing boom. But navigating today’s real estate market has become incredibly confusing for buyer’s and their agents as media reports trumpet that "now may be the time to buy." That may indeed be the case for some but the major obstacle that I’m observing today is the misinformed buyer.
Most sellers and their agents have already adjusted asking prices to reflect recent depreciation. Of course some are still delusional but it seems to me that asking prices are down almost the same 10-40% from peak levels. Buyers bidding another 20% below these already adjusted prices are experiencing overwhelming frustration at the inability to negotiate with sellers. Few are successful and most can’t understand why their ultra low offers aren’t being at least countered.
It has never been more important than it is today to analyze an apartment’s price and how it compares to peak pricing levels as well as recent sales and contract signings. If a property is priced properly based on recent market depreciation, an ultra low bid is likely to be met with silence from the other end.
The recent increase in sales volume is largely in part to more reasonable sellers finding sophisticated buyers who recognize a property’s value relative to the recent boom. Although I personally think we are likely to see another 5-10% decline in prices before stabilization and sideways movement for a few years after that, a psychological bottom is being explored. Anecdotal evidence is showing that aggressively well priced properties are receiving multiple bids which may indicate that we are nearing the "bottom." Just last week a buyer of mine had an offer accepted only to be gazumped by another bidder a day later. That property had languished on the market for 6 months. Once the price reached what buyer’s perceived as "bargain level" (20% below the original ask and 35% below peak pricing) the sellers received 3 bids in 2 days.
So despite the fact that we have witnessed one of the most rapid price declines in housing market history, buyers must take into consideration that many sellers have finally accepted this fact and adjusted prices accordingly. That said, buyers need to do their homework and bid appropriately if they want to own a piece of the Big Apple.
Happy New Year!!!
I’m no longer going to apologize for my lack of blogging because i sound like a broken record. It’s been a busy summer (more like a Spring market) with a couple of long vacations and now I’m the lucky recipient of an IRS audit that is consuming blogging time.
Speaking of the IRS audit, this is exactly how I reacted when I got the news:
I have since accepted that it is more of a nuasance than anything but can’t help but being a bit aggravated that trillions of tax dollars have been handed out to banks who still aren’t freely lending and I’m being audited. Just seems odd to me. But c’est la vie!
Hope to have some time to blog in the days after Labor Day but making no promises.
A colleague of mine recently received a phone call from a seller whom he is representing with a disturbing question. His home is currently in contract with a prospective purchaser and he asked, "Should I reach out to my co-op board and ask them to turn down this buyer?" For those outside of Manhattan, 75% of NYC housing is co-operative in which a Board of Directors must approve any prospective owner/shareholder.
My guess is that the impetus for this question is the plethora of media reports that we have reached the "bottom" of the housing market. These reports are also laced with hopeful pearls that we may be nearing a recovery. Yes we indeed had a very busy month of June and July here in the Manhattan real estate market after a sluggish start to 2009. That said, volume is still half of what it was same time last year.
This particular seller is not unlike many in today’s real estate market place who are reeling from the pain of selling their homes at a significantly lower price than what they paid just 3, 2 or even 1 short year ago. I get it as I wanted to sell my family’s 3BR condo in the Spring of 2008 when I would have likely received more than 20% more than what I could sell our home for today. I was fortunate enough to not have to sell and since I would have likely invested the equity aggressively in the stock market, it was probably a wise decision.
Another seller of mine called last week expressing the desire to sell the apartment that he bought 2 years ago because he is spending less time in the city than he was in the past. His response to my pricing opinion was a very simple "ouch!"
For each of these sellers, the decisions they made to sell their homes in a softer real estate market were born from motivations specific to each of them. Both have left Manhattan for housing markets that are more greatly depressed and although the sell/buy trade from Manhattan to their new more rural locations seems like a win, the sting of losing hundreds of thousands of dollars in just 2 short years is numbing. But both are forging ahead and continuing on with their lives.
Of the 14 transactions on which I am currently working, 7 of those sellers are leaving the city for housing markets in which they can parlay their Manhattan dollars into a palace. Hopefully that palace will take away some of the pain of their recent NYC real estate losses. As for the others, they are moving from one part of the island to another in an effort to swap neighborhoods and capitalize on the reduction in prices.
What are the banks doing with all of our bailout money? Getting fat and making the borrowing process miserable even for those with stellar credit, great jobs, and high liquidity.
A current buyer of mine is supposed to be closing this coming Friday on a $1.7M condo in a new development project that is almost entirely sold. She could pay cash for the property but decided to take out a small loan for some tax relief.
Last week we found out that her lender, Wells Fargo is being hamstrung by Fannie Mae. Fannie Mae is insisting on reviewing the condominium’s operating budget which is not typically made available for review. The building’s financial statements which have been delivered to the lender show a healthy reserve fund in excess of $1.2M and an operating profit (many buildings run at a deficit). Fannie has decided that unless the managing agent will supply a letter attesting that the operating profit will be transferred to the reserve fund, they will NOT fund the loan. Here’s what Wells Fargo must comply with according to Fannie Mae:
- Lenders must review the homeowners’ association budget (the actual budget for established projects or the projected budget for new projects) for all projects except two-unit to four-unit projects. This review must determine that the budget is adequate (i.e., it includes allocations for line items pertinent to the type of condominium), provides for the funding of replacement reserves for capital expenditures and deferred maintenance (at least 10 percent of the budget), and provides adequate funding for insurance deductible amounts.
We are being told that no exception can be made to this policy therefore Wells Fargo is not permitted to fund this loan through Fannie Mae. So a buyer putting more than $1M down on the purchase of a $1.7M home finds herself without a mortgage and possibly unable to close this week.
I ask you this…If this buyer isn’t approved for a loan, where is all of that TARP money?
My buyer wants some TARP!
