Full service real estate agents across the country will be heard partying into the wee hours after the announcement that Foxtons is DEAD! Another discount model goes belly up. Check out Foxtons done in by housing slump (Asbury Park Press)
Foxtons, a West Long Branch-based real estate company that made a splash with its discounted commissions, said Wednesday night it is closing because of a downturn in the housing market.
The company said it is contemplating bankruptcy for an orderly shutdown, and it will continue only with a skeleton crew; it is laying off 350 of its 380 employees.
"The plain fact is that we have been battling against a real estate market that recently has turned into a sharp decline, and the company no longer has the liquidity to operate as a going concern," said John D. Blomquist, Foxtons’ senior vice president and general counsel.
A quick Google search of Foxtons turns up a plethora of dissatisfied customers who were the victims of a weak business model.
See also:
So Long, Foxtons (via NJ Real Estate Report)
Foxtons may file for bankruptcy (via Newsday.com)
UPDATE: Foxtons Shuts U.S. Operations, Blames Housing Slump (via Bloomberg)
Making sense of the state of the market in Manhattan has proven to be a daily challenge. Talk of Wall Street layoffs and meager bonuses, the current credit crunch, and Fed attempts to buoy the economy are just some of the topics to consider when trying to determine our state of the market. So what is the current state of the market? A undercurrent of anxiety pervades buyers, sellers and real estate agents as we all await Wall Street bonus numbers and any indication of a shift in inventory. Transactions continue to take place with regularity as long as property is priced appropriately, which brings me to the topic of this post.
One thing I’m noticing as I peruse the listings database is that almost all of the property that is coming on the market at ridiculously high prices is being handled by agents with fewer than two years experience in the real estate industry. As I have written recently, realistic pricing is perhaps the most important factor in determining whether or not your apartment will sell in any market much less one so full of uncertainty. So my frustration mounts as sellers with unrealistic expectations continue to find agents to represent their over priced property.
It’s no surprise to me that their are a plethora of real estate agents who will take an exclusive right to sell a property at any price. Particularly suspect are the newer agents who so desperately need business that they will accept the overpriced property just to have something on their web page and a means to generate buyer leads for other properties. What does surprise me here is that sellers would ignore concrete comparable sales data and select an agent who tells them whatever it is they want to hear regarding price. It happens all the time but I guess I thought that most sellers could see through this type of sales tactic. Remember the story of the agent who secretly laughed at the seller who fell for her overpricing technique?
So how many sellers have to learn the hard way that the overpricing of their property is often an act of desperation by a novice or even unethical agent to procure buyers and exposure for the agent at the expense of the seller’s property sitting on the market? Seller beware.
For some tips on pricing your home check out The Art of Pricing Property.
And remember sellers, make your agent come up with an asking price before suggesting to them what you think it’s worth. Don’t do their job for them…make them prove their expertise and pay close attention to how they generated the suggested list price.
Ray Rivera of The New York Times reports that the City Council has voted unanimously to limit high rises on the Upper West Side.
The City Council unanimously passed a rezoning plan yesterday that limits the spread of high-rise buildings along 51 blocks on the Upper West Side, an area that officials say has undergone a significant increase in development.
The plan is intended to preserve the physical character of the community. It generally limits buildings to 14 stories along Broadway; 10 to 11 stories along the other avenues; and 6 to 7 stories on the side streets. Additionally, it imposes design restrictions so that new developments more closely match the neighborhoods around them.
The rezoning area is bounded to the west by Riverside Drive and the east by Central Park, and to the south by 97th Street and the north by 110th Street.
A perfect example of government controlling housing inventory.
Like most guys I know, I’m a huge fan of technology and this week’s clip from OpenHouseNYC delivers some fun stuff to "trick out da crib" (did I just type that?) with the latest tech gadgetry:
In this Floorplan segment, George Oliphant takes us inside smart homes. George meets with Richard Hollander of IVCi home to explain the different options for home automation solutions. According to Richard, these core systems centralize control for lighting, air conditioning, shades, security and media. Installation can take anywhere from 12 weeks to 24 weeks and cost $3000 and up, but once completed the systems can be accessed from any room in the home and remotely on the web.
After talk with Richard, George meets with one of his happy customers, George Walden. George shows off his favorite smart home features including a live feed in the master bedroom of the security camera overlooking his pool. Though his installation cost $250,000, his home boasts features that can fit any budget. Check out this edition of Floorplan to see some smart choices for your home…
I can’t wait to add this type of technology to our apartment! But first we have a kitchen to do.
Friday’s post has generated a bit of buzz regarding seller’s expectations in softer real estate markets. Coincidentally, Austan Goolsbee wrote A Reality Check for Home Sellers for The New York Times this weekend. So why do seller’s often choose to ignore basic market indicators when selling property in a softening market? It’s a puzzle even for economists.
Classical economics can’t explain this behavior. That’s because people who refuse to sell their houses for less than they paid for them are violating a cardinal rule of the market: stuff is worth what it’s worth. It doesn’t matter what you paid for it. But when Professor Mayer and his co-author, David Genesove, a professor of economics at the Hebrew University in Jerusalem, studied the Boston condominium market in the 1990s — scene of one of the biggest real estate busts in recent American memory — the actual patterns of human behavior did not seem to follow the standard rules at all.
From 1989 to 1992, prices in Boston fell sharply, with condominium prices dropping as much as 40 percent. For a great many of those who bought condominiums during that period, selling could be done only at a significant loss. And, basically, many people refused to sell.
Certainly my anecdote from Friday was not meant to instill panic, nor do I believe that this is the intent of the New York Times piece. Having said that, it’s abundantly clear that those who want to sell in a soft or stagnant real estate market can’t ignore what’s going on around them. So for the seller that I wrote about on Friday who thinks he will sell for 20% more than the other 8 overpriced apartments in his building, pay attention to this:
What is to be done? Well, if you are holding out for an above-market price to recoup your losses, perhaps you would do well to hear the advice that Professor Mayer gives his own family members.
“If you want to sell your house then you list it at the market price and you sell it,” he said. “If you don’t really want to sell then don’t put it on the market. But don’t say you want to sell and then set the price so high that you spend the year cleaning up every morning, having people walk through your living room and look in your medicine cabinets and reject you. That’s just painful — and expensive.”
His research offers a simple lesson for everyone out there waiting for a high price to push them back into the black: Get real.
It’s quite simple. Pay attention to what is actually selling and going to contract and take note of the prices of property that remain on the market. If you don’t like what you see, evaluate whether or not you really want or need to sell.
At the end of the day yesterday I received a phone call from the son of prospective sellers who own a luxury one bedroom condominium on the Upper West Side of Manhattan. This is precisely the phone call that I and my colleagues are most happy to receive…at least that’s been the case for the past 10 years. This call was a bit worrisome however.
The owners (their son actually) of the property contacted me because I am currently selling a similar property in their building. They were excited by the video tour that I was using to represent that property and encouraged further when I informed them that the apartment was currently in contract and likely to close in the next couple of weeks. All seemed well as our conversation progressed and we discussed recent sales in the building, current signed contracts, and similar apartments that were actively being marketed in the building by other real estate agents. All was well until I shared the price at which I thought this seller could actually sell their apartment. My price opinion was met with stone cold silence. "Hello…hello, you still there?" I said. "I’m here…uh…um…my parents were thinking of a much higher number."
No kidding!!! Here’s the important info that I provided when completing my comparative market analysis to come up with my pricing opinion (btw…he insisted on me doing this over the phone which I never like to do):
- 15 similar one bedroom apartments have sold in the building since January with an average price per square foot of $1,142.
- 1 similar one bedroom (on a lower floor) is in contract (I’m the seller’s agent) for $1,139/sf.
- 8 other similar one bedrooms remain on the market for months at an average asking price of $1,331/sf.
- This seller’s apartment is 847sf.
I also felt it imperative to explain to this prospective seller that:
- Because the location of their building is in very close proximity to several new development projects, their is an inventory issue: more inventory for the lux condo buyer to choose from in this specific area than others in the city.
- The 8 similar one bedrooms in the building at $1,331/sf are creating a building specific inventory issue aside from what exists outside of the building.
- Lastly, the majority of "flippers" in this particular project are barely breaking even and many are losing thousands of dollars.
Again I was met with deaf ears as this gentleman proceeded to explain to me why his parent’s believed that their apartment was worth $1,416/sf or more than 20% more than everything else that has recently sold or gone into contract in the building. This gave me a flashback! Circa 1992.
Back in 1992 when I began in the real estate industry, sellers often called our offices begging us to market their properties. Often times…not always…but often, we would suggest ways in which they could market the homes on their own so we wouldn’t get "stuck" marketing an overpriced property for up to 2 years. That’s right…I said 2 years! It wasn’t unusual to have an exclusive on a property for 1 year at a time and to still be marketing an apartment 20-24 months after your initial conversation with a seller. Buyers were hard to find and thus they were golden. Sellers were a dime a dozen and those who had unrealistic expectations outnumbered the realists. A solid, qualified buyer was what every agent sought. They were our life-line. Back to 2007.
For the past 10 years, buyers have been treated like second class citizens (I’m guilty too!) as property was KING and if you had an exclusive right to sell a property, you were just about guaranteed to earn your commission. So perhaps now you can see why the conversation that I had with this potential seller yesterday scares me. At $995,000, this seller could actually procure a buyer (possibly more than 1) and sell at $1,174/sf or more which is still better than the average of what has recently sold. He wanted me to take the exclusive right to sell at $1.2M or $1,416/sf. No thanks. My response to his request to list his apartment 20% too high:
"With all due respect, I’m sure you will find an agent out there who will be more than happy to market your apartment at that price. In fact, there are 8 such agents who are actively marketing other overpriced apartments in your building. If, however, you decide you really want to sell the place, call me and we’ll discuss price again. If you choose to list at $1.2M, my guess is that you may be calling me next year. My next guess is that my market analysis next year won’t be a whole lot different than the one I just provided. It could be a little better…it could be a lot worse. Feel free to touch base with me at anytime if you have further questions. Best of luck!"
I have received so many emails in the past 24 hours from readers, clients, friends and family regarding the David Leonhardt story in The New York Times, Will the Fed Reverse the Housing Slump?
The Federal Reserve sent the stock market soaring yesterday (Tuesday). So can it stop the decline in home prices, too?
Don’t count on it.
From the late 1960s until 2000, the price of the typical American home and the income of the typical family moved almost in lock step. House prices rose a bit more quickly than incomes during the occasional real estate boom, but would always settle down again. In 2000, the median home cost about $130,000, roughly three times the typical household income — almost precisely the ratio that had held since the ’60s.
Then came a real estate boom unlike any before it. By last year, this ratio of prices to incomes had suddenly shot up to 4.5. For it to return to its old level, home prices would have to fall by an almost unthinkable one-third, and probably more in California, Florida and the Northeast.
I’m sitting in my office right now listening to two of my colleagues on the phone as they share their predictions with prospective clients regarding the possibilities of a Manhattan housing slump. All of this is so amusing to me as so many factors come into play in determining what direction the Manhattan housing market will trend. Of course both national and local economies play a large part as does foreign investment and the perceived health of Wall Street . We would be fooling ourselves to think that our local housing market is immune to a slump but the anomaly that has been a healthy Manhattan market is hard to ignore.
Truth be told, I just don’t know what to make of all of it. I will say that it appears we are seeing some increase in inventory locally but not sure how much effect it will have on market. I think weak Wall Street bonuses and layoffs will have the greatest effect on stagnation this winter but having said that, I know a lot of people (well qualified and not Wall Streeters) who are just waiting for an opportunity to buy. In the meantime, I’m keeping my fingers crossed for a slight market softening that increases inventory as well as number of transactions.
In my 16 years in the Manhattan Real Estate industry, I have sold numerous apartments to next door neighbors so that they could expand their square footage and stay in their current zip code. This week’s OpenHouseNYC episode provides some valuable insight into the logistics and practicality of merging multiple apartments.
If you’re expanding your family, running out of storage space, or merely want to increase the square footage of your apartment, then we have the answer for you on this week’s edition of Floorplan. Watch as OpenHouse NYC host George Oliphant uncovers a means to stay in the city while increasing the value and size of your living space.
George first talks with Jacky Teplitzky, the Executive Vice President at Prudential Douglas Elliman. Jacky discusses the recent trend in expanding one’s living space by combining two or more apartments and further extrapolates on its advantages and practicalities.
Next George visits with Steven Kratchman of Kratchman Architecture to get his expert advice on how to architecturally plan and execute a successful apartment combination. After hearing from Jacky and Steven, it’s time for George to execute their advice and knock down some walls. For this part of Floorplan, George seeks out Keith Steier of Knockout Renovations for his advice and manpower. Keith points out the precautions one must take before demolition begins, the typical project budget, and the differences between renovations in a prewar building and a new condo.
Click on the video to see George in action and to get a tour of a completed combined apartment…
Great stuff!
This is precisely what is WRONG with my industry!!! I just received this email in my In-box for the 3rd or 4th time in the past several days:
Subject: "Price reduced by $2 mln….MUST SELL!!!":
REDUCED FROM $6,400,000 to $4,500,000 (Bad math no? Isn’t this $1.9M or is it just "understood" that we all lie about everything anyway?)
SPECTACULAR ATLANTIC OCEANFRONT 2-STORY PENTHOUSE IN MIAMI!!
***MUST SELL!!***
OVER 5,000 SQUARE FEET
22 FOOT FLOOR-TO-CEILING WINDOWS
SWEEPING OCEAN VIEWS FROM EVERY WINDOW
4 SUITES + 5.5 BATHS
6 SPACIOUS BALCONIES
SUMMER KITCHEN
THIS IS THE MARKET FOR A STEAL!!!!
IF YOU WANT A DIRECT OCEANFRONT
PROPERTY AT A BARGAIN PRICE,
CONTACT:
This is a limited time promotion. Restrictions apply.
Information is beleived accurate (spelling is not…for that matter, neither is price reduction amount) but is not warranted.
If you wish to be removed from this mailing list – please notify us. (I’m taking care of that now…or maybe I shouldn’t so I can get a laugh every now and then)
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Make your little one a shining star! Shine on! (What is this?)
I have nothing more to say as this just about says it all.
It’s no secret that a large contributing factor to the strong Manhattan real estate market has been Wall Street’s success. So it’s no surprise that we are eagerly awaiting earnings reports this week from the major Wall Street brokerages to give us some sense of how bonuses will affect the Manhattan real estate market this Winter. So Lehman announced a 3.2% decline in earnings this morning which topped expectations (via Wall Street Journal):
Lehman Brothers Holdings Inc. reported a 3.2% drop in fiscal third-quarter net income as more than half of the firm’s revenue came from overseas, kicking off an intensely anticipated earnings season for brokerage firms navigating turbulent mortgage and credit markets.
The results calmed some investors’ nerves, sending the stock higher in premarket trading to $61.60 from Monday’s closing price of $58.62.
For the quarter ended Aug. 31, the investment bank reported net income of $887 million, or $1.54 a share, compared with $916 million, or $1.57 a share, a year earlier. The results show how quickly the markets have turned for brokerage firms. In its fiscal second quarter, Lehman booked record quarterly net income of $1.27 billion.
This is significant as Lehman is one of the Street’s biggest underwriters of mortgage backed securities. Expectations of low bonuses remain however and rumors of major layoffs are permeating the industry.
Last year we saw a significant increase in activity in the housing market in mid October after most Wall Street bonuses were initially reported. It took no time at all for Wall Streeters to begin shopping with that anticipated bonus money. This year is likely to be quite different and it will be interesting to see how the local housing market weathers a weak bonus season. One saving grace for our local housing market is the still weak dollar but can that alone keep our market buoyed?
If you haven’t checked it out already, you must read New York Magazine’s piece on Best and Worst Case Scenarios for the Manhattan Real Estate Market.
