BUY NOW!!! SELL NOW!!! DO ANYTHING!!! JUST DO IT…NOW!!! (I’m kidding…kind of)
I have always told my friends, family and client base that I would welcome a bit of a market correction here in the Manhattan real estate market. The thought being that any "shakeout" would result in some sort of increase in inventory (wishful thinking?) and perhaps an increase in transactions. I’ve been sharing this "theory" for three years now and nothing of the sort has happened…yet? That said, if the October and first week of November activity are any indication of what’s on the horizon for the New York City real estate market, that correction may indeed be just around the corner. I’m not prophesying by any stretch here as that always gets me into trouble but this has been the quietest October I have seen in the past 10 years.
Some anecdotal evidence:
- Many sellers remain reluctant to reduce prices even after their properties have been on the market for quite some time (8-10 weeks).
- One of my buyers has his eye on 3 properties with stubborn sellers and all 3 remain on the market unwilling to accept reasonable offers within 5% of their asking prices.
- That particular buyer is in a "holding" pattern, has rescinded his offer and now expects to obtain one of these 3 properties for a discount of 10% or more off the asking price (only time will tell)
- Another buyer has rented for the time being in order to "shop patiently" for the right "deal."
- Another buyer has given up on Manhattan and purchased a single family home outside of the city.
- I have taken 3 properties recently that were marketed unsuccessfully by my colleagues (hope that I can do better?)
- I keep a dry erase board of transactions on the wall behind my desk and the property section has decreased (only representing 5 active properties) while the buyer segment of the board has increased exponentially to 10 buyers (90% of my business over the past 10 years has been representing sellers…that has changed in the past couple of months)
Again, these are simply anecdotal examples of what I’m seeing on the front lines and many of my colleagues are reporting similar experiences. We all await Wall Street bonus reporting with expectations that numbers will be 20-30% less than bonuses last year. Let’s not forget that last year was a record bonus year though and we are all wondering how the hit to Wall Street is going to effect Q1 2008. For now, we, and many of our buyers and sellers wait.
I don’t typically blog about restaurants but thanks to my wife’s awesome job at Food and Wine Magazine I often get the chance to preview a place before the rest of the public. It’s not often that I feel compelled to share my experiences with my readers and it’s not because the experience isn’t wonderful but more because we eat at so many different places that i can’t keep them all straight in my head. And oh yeah…I write about real estate!
That said, last night my wife and I had the sincere privilege of dining at the "friends and family" opening of the newest Mermaid Inn located on Amsterdam between 87th and 88th Streets on the Upper West Side. The first Mermaid Inn is located in the trendier East Village and has been a smashing success. After last nights experience from the ambiance of the space to the deliciousness of the food, I suspect this location will also thrive. Those who live on the Upper West Side know how completely "starved" the area is for good food. So welcome to the Upper West Side Mermaid and all of you Upper West Siders get out there and support her…she’s a catch!
On a completely different note, our dining experience last night was a bit of a trip down memory lane in terms of the gentrification of this area of Manhattan. You see, I used to live in a 600sf 2BR (yes 2BR’s in 600sf) in the tenement walk-up building just adjacent to the Mermaid Inn. I think my roommate and I paid $550/mth. We often passed drug dealers and users in our vestibule going about their "transactions." Once my girlfriend (now my wife) and I pulled up in a taxi to have an undercover cop point his gun through the rear windows of our cab in an effort to bust one of our neighborhood dealers. That was nearly 20 years ago before the Upper West Side morphed into the trendy stroller-laden haven that it is today. Some mourn the loss of character that existed back then, and others like myself see The Upper West Side as a safer, cleaner, and better place to raise our families. It seems that now we can also FINALLY support good restaurants (and there are more to come!!!) Thank goodness!
UPDATE: Since it appears that many are visiting my site after Googling "Mermaid Inn Upper West Side," here’s the contact info:
Mermaid Inn is located at 568 Amsterdam Avenue (between 87th and 88th Streets) Give a call and check it out at 212-799-7400
Last week in our 4th episode of TGTV’s 5 part series on Square Feet we delved further into understanding why consumers can’t seem to get an accurate approximation of square footage for the properties that they are seeing.
In our final episode of this 5 part series our panel discusses possible regulation of methodology and approximation of square footage with suggestions on just who should police those responsible for overstating and how they could go about doing so. Check it out:
As I stated last week, I could do weekly episodes on this topic forever (or at least until the problem went away) but I’m eager to move on to other interesting content. The surprising conclusion that I have drawn from this eye-opening series is that the methods of measuring are already relatively standard (with the exception of new development condos) and the discrepancies in stated square footage almost always come from me and my colleagues.
The first step to correcting these gross inaccuracies is to hold accountable those who overstate square footage by a certain amount (do we say +-5%?). I believe that all real estate agents should be mandated to have their properties measured by an "approved" entity (licensed architect, floorplan illustrator, appraiser). Furthermore, they should be required to share that precise measurement with the consumer. In time, I believe you would see fewer discrepancies and more honesty surrounding stated square footage.
Exaggerating square footage isn’t salesmanship, it’s lying.
A double dip of OpenHouseNYC this week as I couldn’t resist sharing both of these incredibly useful episodes.
First is a piece that shares how to prepare an emergency plan for you and your family:
As our host George Oliphant notes in this edition of Floorplan, New York is the safest big city in the world, but that doesn’t mean that you shouldn’t have a plan ready in the event of an emergency or disaster.
To help devise a plan, George visits with Diane Hoch. Diane is a homeowner and mother of three daughters, but doesn’t know a “go bag” from a golf bag and sadly is unprepared for the worst case scenario. In order to help Diane (and all other viewers of OpenHouse NYC), George visits with Amber Greene of New York City’s Office of Emergency Management for the three essential steps to get your home ready.
According to Amber, every resident must:
Get informed about potential risks
Be Prepared—Make a “go bag”
Make a plan for evacuating your home
Amber also suggests including 3 days worth of food and water as well as flashlights and important documents in a go bag for EACH member of your home. A lot of people who remember to make “go bags” often only have one for the entire home—when each resident really needs an individual bag.
After Amber helps George build his “go bag” he slides down the pole to meet with Anthony Mancuso of the FDNY. Mancuso reminds George that every home needs a working smoke alarm, an extremely familiar knowledge of the exits and an alternate exit plan through a fire exit or escape ladder.
Once George is a trained escape artist, he heads back to the Hoch home and helps them practice their emergency plan.
Do they learn well? Are you ready? Watch the video and find out…
The second episode is chock full of tips on making our kitchens and baths safer for our children:
In this floorplan episode, George Oliphant meets with Geoffrey Belle of the inimitable New York Kitchen and Bath for some new interior design features that can make your kitchen and bathroom safer and child-friendly.
In the kitchen, Belle shares some new devices that are both technologically advanced and functionally safer. He shows George a new electronic locking function on stovetops that prevents accidental hot surfaces. He also demonstrates a new rotating oven control panel that is built into the oven display. Even the most mischievous of children will be unable to fire up the oven without proper parental supervision.
In the bathroom, some of the NYKB touches are more old-school than gee whiz, but still can make any bathroom safer. Belle suggests a matte tile or grout mixed with mosaic tile and then installing grab bars and safety bars in the bathtub and shower.
So no matter if you’re high-tech or low-tech, these tips from NYKB will undoubtedly make your home much safer!
If you haven’t seen OpenHouseNYC yet, check it out every Sunday on NBC4HD at 8:30am.
Broker/Buyer Incentives Surfacing?
I’m sitting in my office right now listening to the live broadcast of our weekly business meeting. I couldn’t resist blogging about something I just heard. Avonova, one of the latest condo conversions on the Upper West Side located at 81st and Broadway is launching a new program offering broker and buyer incentives for upcoming sales. Buyers will receive a $10,000 gift certificate towards the purchase of California Closets and their agents will receive a full 4% commission and an additional $2500 American Express gift card at closing. The reason I share is that incentives are rarely seen in a hot market where demand outweighs supply. Perhaps this is a sign that the Fall market isn’t providing the demand that sellers and developers had hoped for. This time last year many Wall Streeters began shopping for apartments that they would buy with their January/February bonus money. Not so much this year…so far. Perhaps this incentive is just an isolated incident or perhaps it’s a sign of things to come? Only time will tell.
UPDATE: Just received email from The Atelier offering a trip to St. Thomas ("airfare included"…that’s a good thing) to the agent who sells the most units between now and December 31st.
More Square Footage B.S.
As most of my readers know, I’m on a mission to try to solve the problem of square footage inaccuracies. Check out TrueGotham television (TGTV) for our 5 part series discussing methodology, accountability, and policing. Episode 5 airs this Thursday.
The impetus for the TGTV series was both buyer and broker frustration. Many of my readers are as "mad as hell and they just aren’t gonna take it anymore!" (Network)
A reader of TrueGotham who also was a recent bidder on a property of mine just sent me this floor plan of an Eastside property that is being marketed as 800sf!
By my calculations (and I’m being VERY generous) I get approximately 560sf. They are overstating the number my more than 40%!!!
Anybody out there see how this space is 800sf?
Location, Location, Location is undoubtedly the most oft-recited mantra in the real estate industry. Just look at the housing markets across the country (plural because there is no singular "housing market") and you see evidence of the importance of where a property is located. In each micro market that is experiencing a housing slump, there are areas that are less effected or even unaffected based on their proximity to water (beach, lakes, etc), transportation, schools, etc.
In my humble opinion there is perhaps no better illustration of the BIG PICTURE of how important location is than what has been happening in Manhattan versus the rest of the country. Not only is it the financial capital of the world but it is seemingly the most desirable US city for foreign investment and thanks to decreasing crime and increasing cleanliness it has become evermore attractive as a place to start and raise families.
Although I often daydream of what my apartment proceeds would buy me somewhere else, my wife and I ultimately come to the same conclusion. We can’t imagine living anywhere else without the conveniences that New York City provides. Having said that, I still love Anna Bahney’s column in The New York Times What You can Buy for $X. And it occasionally inspires me to entertain the thought of an exodus from Manhattan. The thought is almost always short lived when I do more research on the particular area that has piqued my interest.
Case in point…my mom and step dad were visiting this weekend and brought along a copy of the real estate section from the Baltimore Sun newspaper. Perhaps they are somewhere deep down thinking that my wife and I could be persuaded to move their grandchildren closer to them but I think it was more of just a fun comparison. On the front page of this Sunday’s Baltimore Sun real estate section was Baltimore’s Top Selling Property (unclear for what period???). This 7,291 square foot 6 bedroom with 4 full and 3 half baths in Reistertown, MD just sold in August for $1.75M. Take a look.
And to think that $1.75M doesn’t get you much more than 1500sf (if you’re lucky) here in glorious Manhattan. So for now I will just keep dreaming of that big house and until they let me build it on The Great Lawn in Central Park, I and the family will continue to squeeze into our small 3 BR apartment for the conveniences and excitement that Manhattan living offers.
Adam Lisberg of The Daily News wrote today that the Buildings Dept. vows crackdown on unscrupulous builders. Sounds like an excellent idea to me as it seems like everyone and their brother thinks they are an investor/developer these days. I can’t tell you how many phone calls I have received from friends and family asking me to find them a "deal" somewhere so that they can either convert, build, or renovate and flip the project. 99% of these people have absolutely ZERO experience with projects of this type. They all have one thing in common though and that is that they believe you don’t need experience to make money in this real estate market. Unfortunately, that has been true up until now but who wants to buy from an investor/developer who has no proven track record? Check out what the Buildings Dept. is finding now that they are actually delving into the inner workings of some of these projects.
Buildings Commissioner Patricia Lancaster said a special excavation task force has issued stop-work orders on 167 sites – more than 20% of the ones it inspected – and a team now visits sites to ensure the orders are followed.
She said the department also is cracking down on architects and engineers who build illegal eyesores by abusing their right to certify their own plans.
When the Buildings Department audited 155 of those plans, it found problems with 80% of them.
As someone who has watched projects from beginning to end with fascination at their seemingly shoddy construction, this really doesn’t surprise me. I also don’t pretend that I’m any sort of expert on construction but I can see the difference between a project completed by Extell or Related versus Joe Schmoe who builds 10 units in the form of an upside down "L" over an existing tenement building.
The desire to capitalize on the booming Manhattan real estate market has unfortunately brought out the worst in some people as they have cut corners and bent rules and regulations to suit their wallets. No big surprise here. What is rather disconcerting to me is that the Buildings Dept. is only now taking an active role in policing these projects. What happens to all of those who bought property in these projects already built by "unscrupulous builders?" What is the Buildings Dept going to do to those builders and for those who were taken advantage of by purchasing in those buildings?
Now that the housing boom is over in much of the country and slowing significantly in our back yard (my opinion of course…I must still say that inventory remains ridiculously low and many of my buyers remain frustrated that they can’t find a home…the difference is that these buyers are patient), it seems that various agencies are ready to go after the "sleazy" who profited during this time. Check out Jonathan Miller’s post today at Matrix regarding the Federal government’s plan to create oversight of the mortgage broker industry. Nice timing! What were these agencies doing when all of this fraud and unscrupulous behavior was taking place? I just don’t get it!
Last week on TGTV we discussed the various methods by which square footage can be measure with an emphasis on the liberties that developers sometimes take in adding common areas, etc to an apartment’s stated square footage. Don Meade also shared that he has been asked by real estate agents to provide a measurement from outside walls which would obviously yield a higher number than measuring the interior perimeter.
Check out this week’s episode as we travel further down the path of who seems to be responsible for the overstating of square footage as we determined that the physical measurement (at least by our panel) was calculated using very similar methods of measuring the exact same interior space. There does seem to be some confusion however on exactly what is defined as gross living area (click the link for the Google search and check out the definitions and some of the forums for appraisers who even question the definition) Gross living area for a house seems to be different than gross living area of an apartment…
On the final episode of this TGTV series on Square Feet we will explore ways in which to hold accountable those who grossly overstate square footage in the real estate industry. It’s a shame I can’t do another 25 episodes on square feet because this issue has a lot of holes and loose ends that definitely need to be addressed and tied up. Will do a little bit of that next week.
It’s no secret that the bottom continues to fall out of the housing market in most places across the country. The credit crunch has directly effected both sub prime and prime borrowers as well as earnings, Wall Street bonuses, and employment numbers (lots of layoffs on the Street as well). So why do I continue to receive to good to be true mortgage offers in my inbox every morning?
Carroll Lloyd of SFGate.com recently wrote an excellent explanation of What’s behind the continuing bombardment of too-good-to-be-true mortgage solicitations? Check out the post in it’s entirety but here’s a peak at some of what Carroll has experienced:
In the past few weeks, the mounting offers have formed a mountain on my desk, each offer promising a mortgageable moon, each aiming for a creative slant on the old chestnut "Here’s a deal you just can’t pass up." (Or as Lenox Financial — the controversial "no closing costs" (i.e. higher interest rates) lender likes to put it in its radio ads: "It’s the biggest no-brainer in the history of mankind.")
Some offers focus on turning the idea of equity into a lifelong solution for any problem. A mailer from US First Credit Union unfolds into a 16×24-inch blueprint of a fabulous house. On the house plans, various rooms are labeled according to what they can buy you: a new SUV, a college degree, bill consolidation, etc. All you need to do is take out a home equity line of credit: a 15-year fixed for "as low as" 7.49 percent. And because they "want to wake you up to days full of excitement and possibilities" (Hey, who wouldn’t want that?) the company is including a "FREE 3Day/2night Getaway" to 22 destinations.
Other companies focus less on the life of infinite possibilities and more on the world of insurmountable woes. A notice "from the desk of Angie McGuirt" at Wachovia bank, informed me that I was "pre-selected" (always good for your self-esteem) for an equity line of $250,000 with a variable rate of Prime minus 0.5 percent — now amounting to about 7.75 percent. If this sounds like a so-so deal, Angie reminds me that it’s "far less than you’d pay for most credit cards or other personal loans." (In other words, "You’re probably hemorrhaging money every month, let us stanch the wound.") Um … yes, but you can’t lose your home using a credit card. I call Angie to learn more about the deal, but the broker informs me that no one will speak to me because I’m a journalist. "We refer all journalists to the Web site," she says. What about Angie? "She doesn’t take incoming calls."
She shares another recent offer for a 1% loan regardless of credit history or bankruptcy. Just this morning I received an e-card from Countrywide suggesting that now is the time to refinance and their website touts Low rates may not last. Don’t wait, refinance today. So that’s not as bad as the 1% loan offer but as Carroll Lloyd points out, refinancing to pay bills isn’t always a wise move. You won’t lose your home from credit card debt.
To answer the question of why these solicitations continue to bombard us, Carroll suggests that you have to understand how mortgage brokers are paid.
There are primarily two ways brokers are paid. One is through "points," in which a home owner pays a percentage of the purchase price up front at the time the loan closes. A 1-point loan means a 1 percent fee. Another more often misunderstood means of paying the brokers is "yield-spread premium." In this scenario, the borrower pays a higher interest rate for the life of the loan in exchange for a "zero-point loan." The broker gets the "spread" — i.e. the difference between the "wholesale" rate from the lender and the rate that is passed to the consumer, which can vary from as little as .5 percent to more than 1 percent.
Need I say more? As Robert Youngjohns states in Carroll Lloyd’s article:
Youngijohns suggests that complex commission structures often lead to what he calls "bad behavior." "I was raised Quaker and so I was taught to see the good in everyone," he says. "Until it comes to people’s commissions — then you have to assume they’re fundamentally evil."
Now although I completely understand and appreciate where Mr. Youngijohns is coming from, I have a little bit of a problem with this generalization and feel like it was used more as an "exclamation point" for the end of the story. I have worked with a multitude of mortgage brokers over the past 16 years and have no doubt had some "interesting" experiences but that’s another story. The greater percentage of those who have done loans for my wife and I, my colleagues, and many of my clients have been very clear about the costs involved when borrowing. And I also think it should be mentioned that 99% of the unsolicited email, faxes and "snail" mail that we receive goes directly in the garbage. It also appears that nothing will put a stop to this barrage of offers more than consumers not responding to them..
It’s up now at r.e. revealed. Do I see an underlying sub-theme of how agents should go after buyers?
