Buyers, sellers, and renters alike continue to corner me at cocktail parties and call me daily asking me the all important question, "How’s the market?" It is a very difficult question to answer because for each the answer differs. It’s also challenging because as I see in my daily review of real estate trade publications, it is possible to "spin" the answer any way you like to give ’em what they want to hear.
On any given day I could provide you with a plethora of links suggesting that you:
Weeding through the information on a daily basis makes my head spin and presents a regular challenge of determining exactly what is going on in our "local" real estate market. Here on True Gotham, I provide concrete (yet anecdotal) evidence of exactly what is happening TODAY in the Manhattan real estate market through my personal experiences in the marketplace and those of my colleagues (the ones that I trust anyway).
So "How is the market?"
Buyers Exercise Patience: Depending on your current living situation, how interest rate sensitive you are, and where you believe interest rates are heading, you may want to sit tight until this summer. The current market is as frenzied as the first few months of 2006 and my clients who waited to buy last summer did better from an investment standpoint than those who bought during the chaotic early months of 2006. One of my clients closed in November on a 9 room apartment for $3.1M that they could easily sell today for $3.7M (not a bad return). I see buyers everyday who are throwing the proverbial kitchen sink at sellers in the heat of competition to call a home theirs.
Sellers consider selling before the summer months: If you are planning on selling your current home, the market right now is desperate for inventory. NO BS. Money has poured into the real estate market since January and there doesn’t seem to be enough product on the market to satisfy these buyers. It is imperative that I also state here that NOT EVERYTHING is flying off the shelves. It must be a desirable property in a good location that is also priced right.
Renters…Do the Math: Again I have to reference the Christine Haughney article in Monday’s New York Times suggesting that many renters are fed up with paying landlords. Some renters have great deals and it just doesn’t pay to move…so don’t. Others may find that they could afford a home for not much more than what they currently pay in rent. Just go to any number of mortgage calculators to figure out what you can afford. WARNING: In NYC this may be a terribly painful revelation.
Bubble Talk?: I have no clue! Only time will tell but given the data that I have been reading regarding development paired with the influx of people (900,000) expected in New York City in the coming years, I’m cautiously optimistic that Manhattan will continue to be a sought after place to live for more people such that demand will continue to outweigh the supply.
This brings a whole new meaning to architecture!
Bryan Berg, cardstacker (Courtesy of Boing Boing)
Given the reported decline in the housing market across the country, I’d bet many feel like they are living in a "House of Cards."
The Carnival is up at The Real Estate Zebra. Check it out.
Many of us are faced with a decision when we decide to renovate as to how extensive we will go. Jeff Opdyke of RealEstateJournal.com (complete with Podcast)shares his personal experiences with renovation and points out that it is a decision that involves both emotional and financial considerations.
Much of the debate — as with cars or vacations or any big-ticket items — comes down to affordability. But when you’re talking about your home, the rules take on a different dimension. This is your castle. The last thing you want to do is look at your home every day and think: If only we had done….
And thus the challenge so many of us face: When remodeling your house to meet your dreams, do you pursue what you want, or simply settle for what you need?
Part of this debate is financial, part is emotional.
Unlike spending money on, say, a car, remodeling a house is an investment in a generally appreciating asset. If you’re lucky, you will be able to recoup some or all of — or even more than — your costs when you resell the house.
Yet it’s the emotion that drives most homeowners. Most of us are spending the money with an emotional, not investment, return in mind. We want something nicer than we’re currently living with.
Whether or not you also are considering resale value largely depends on your time line. In a market that is as transient as ours in New York City, perhaps the most important factor to consider is the length of time in which you "think" you will be staying in your apartment or house. If you, like Mr. Opdyke, believe that this is your last move for a long time and finances aren’t a major consideration, then by all means, create your "castle." If you have even the slightest desire to recoup the money that you put into the renovation, then it is my belief that you should steer clear of super personalized touches that may not appeal to the masses.
This leads me to those of you who are in a property that is a step on the continuum to your next home. If your horizon is 3-5 years, try to pick finishes that you love but that are also somewhat neutral and appeal to the masses. For example, don’t wall paper your entire apartment and expect buyers to "adore" what you’ve done 3-5 years down the road. In my experience, wall paper screams "renovate me!" That said, the option always exists to remove the wall paper or even paint over it (they make some fancy new paints that actually have a chemical reaction to the wall paper and adhere it further to the wall when painted). Another example would be that if you paint, stain, or pickle your floors, you may also be decreasing the pool of buyers who may be interested in tackling the reversal of what you have done. Also, consider neutral colored stones and ceramics when doing kitchens and baths. In essence, try to stay away from super taste-specific type renovations.
Other than those few tips, I am a firm believer in creating the home of your dreams within your financial means. Now if only my wife and I could get our acts together so that I could walk the talk. I promise when we do, I will give you the complete scoop on all of the pros and cons of living through the process.
I received this email this morning from a regular reader of TrueGotham:
Good morning Mr Heddings,
I would like to start off by saying that I love True Gotham and I read it every day. Your insights, tips, and advice really help someone like me who is totally new to the real estate game.
The reason I’m writing is because I’ve been looking to purchase a condo in the NYC area for quite some time. Earlier this week, I found what seems to be the perfect one. The one caveat is that the condo is still under construction.
I realize that in this crazy market, purchasing a home even before the construction is complete is commonplace. However, I’m a bit apprehensive about making an offer just based on the floor plans and the designer’s renderings. Don’t get me wrong – the floor plan and the renderings are fabulous, but just how accurate are renderings? Have you seen instances where renderings are completely different from the finished product? Are they generally pretty on target?
I will be attending the first open house for this condo complex this weekend. Because the building is still under construction, the broker warned us that this open house is just to check out the neighborhood and to get any other information. Are there any questions you recommend that I ask?
Thank you so much for reading this and I’d appreciate any insights you have into my questions.
Thanks,
Jenny
My response is below and would be my advice to anyone purchasing in a new development project. Keep in mind that the reputation of the developer, architect, designer, and marketing agent are all important and that most of these parties want to continue their work in the city so it is unlikely that they will do anything on purpose to tarnish their reputations. My response:
Good Morning Jenny,
Thank you so much for the kind words about TrueGotham. Precisely the type of email that makes me feel like the blog is worth the effort. Greatly appreciated!
If you actually let me know which project you are considering, I would be more than happy to give you my professional opinion of the project, developer, neighborhood, etc. That said, is there no sales office yet showing finishes (kitchens, baths, common areas)? People purchase off of floor plans all of the time. I actually have a colleague who emails floor plans to overseas clients and they buy based on that and the agent’s analysis of the project. But since it sounds like you will actually be living in this unit, here are some tips that i would recommend:
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It is imperative that you investigate the reputation of the developer and see how their previous projects turned out. If this is their initial foray into Manhattan, see if they have a reputation elsewhere and what that reputation may be.
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You should also investigate the architect. A well-known architect is less likely to "embellish" a floor plan than a no-name (and I’m not suggesting that this would ever be done intentionally as everyone has their reputation riding on a development project).
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This is also true with a designer. In my 15 years, most building renderings are quite accurate but make sure that amenities that they are promising are actually indicated in the offering plan. I know of instances where developers have promised a 4 star restaurant in the building and it never came to fruition.
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Also investigate the company handling the marketing of the project. How experienced are they? What is their reputation as far as honesty and integrity in representing when a project will begin closing and how it will look upon completion (they obviously control neither of these elements but companies like The Corcoran/Sunshine Group, Brown Harris Stevens and Prudential Douglas Elliman have a lot riding on their reputation)?
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And the last thing that I would recommend is to get the best grasp possible of how big the rooms will be in the finished project. Perhaps laying out some of the dimensions in masking tape in the largest room of your current apartment. Be mindful that floor plans can make a space look larger than it will upon completion and take into consideration things such as ceiling heights which can make a room look larger (a good thing).
I really hope that this is helpful to you and I wish you the best of luck with your search and this project should it come to fruition. Again, feel free to provide me with additional information regarding the project, it’s developer, architect, designer, marketing agent and anything else you like and I would be more than happy to give you my opinion on the project as a whole.
Thanks again for reading TG and please tell all of your friends about it.
All the best,
Doug
I just spent the last hour blogging about the Ask Curbed question today, "Is There a Frenzy in the Market?" My answer: yes. I think I tied in some nice advice on pricing in this type of market too. That said, I don’t have a split second to attempt to do it again as our company servers went down momentarily and logged me out before I could save my post.
See you tomorrow and I sincerely apologize.
Being that the Dirty Real Estate Tricks segment of TrueGotham gets the most visits per day and people stay on the site the longest when they are reading them, I couldn’t resist sharing the following "multi-level marketing" licensing "course" being offered by Nouveau Riche University. (via Cockeyed.com). It seems that Nouveau Riche University which is totally unaccredited by anyone is offering to take thousands dollars from wannabe "apprentice" real estate investors to "teach" them how to get rich in real estate. Ok. So another company is making promises about how much money you can make as a real estate "professional" by overpaying them for information that is already available to anyone who’s interested in learning "the game." It sucks but big deal. Shame on those who actually pay this company for their classes. And people are evidently signing up as cockeyed reports:
The recorded voice on the other end sounded serious, but didn’t identify herself. The message invited me to become a successful real estate investor, and let me know that I could do just one or two deals per year and exceed my current annual income.
She continued that their program focuses on six main areas:
find, fund, fix it up, tenant, manage and sell.
She used "tenant" as a verb, meaning "secure a tenant".
She was looking to build a team, and was looking for someone who was "coachable", "teachable", could follow instructions, and was available for a group interview on September 2nd.
I didn’t go to the group interview, but subsequent calls revealed the name and nature of this enterprise. "Nouveau Riche University" was signing up students. Real estate students.
That said, this is further evidence that the real estate industry is perceived by many as an easy way to earn easy money. For those who actually believe that, get your real estate license and give it a shot. Or don’t even bother with the license. Perhaps you, like Casey Serin, can figure out how to defraud the banking system and dig yourself into a deep financial abyss. You have got to check this out. Mr. Serin purchased 8 properties in 8 months with no money down and now may face jail time for admitted mortgage fraud. Check out "Why Should I Go To Jail for Mortgage Fraud?" on his blog I am Facing Foreclosure.com. Casey Serin is alleging on his blog that what he did was "gray area" that he believed most in the industry practiced. Today’s entry on his blog informs his readers that he found attorneys who have given him the green light to leverage some more. Is this guy for real? Unfortunately yes! Reminds me of the guy who called me to boast that he had manufactured a multiple bid situation on his own home and 6 months later became a real estate agent.
I just had to add this from Housing Panic granting insight to how our brains determine that we should become investors.
Check out some of these great posts around today’s real estate blogosphere:
On February 6, I blogged about The Art Of Pricing Property. Shortly after posting this piece, I was perusing my friend Noah Rosenblatt’s blog, Urban Digs and noticed that he was a step ahead of me (actually a day ahead of me on February 5) when I read his post Pricing Your Way to a Sale. What’s my point? Well, it’s no secret that writers and producers are using the blogosphere as an additional means of generating articles for their respective mediums. In fact, I have been contacted by many to further discuss some of my blog topics on news programs or in newspapers or trade magazines. So I can’t help but wonder if Teri Karush Rogers of The New York Times didn’t get the idea for her Psychology of Pricing article from the blogosphere. Maybe not from me or Noah, but perhaps from any number of other intelligent bloggers out there who have so much to offer in terms of solid information and insight into an often confusing marketplace. Rogers’ angle is a bit different in that she approaches the concept of pricing as a psychological endeavor.
IN a market where buyers and sellers circle one another warily — each certain that he or she is being taken advantage of, no matter what the conclusion of a deal — the asking price of a property is rarely a straightforward reflection of comparable values. While comparables may be a starting point, the price at which a seller offers a property is often also based on wishful thinking, propaganda and ploy.
Buyers, in turn, parry by deconstructing the price. They aim not merely to assess a dwelling’s fair value but also to plumb a seller’s bottom line and vulnerabilities. How a price tracks with similar properties, how large and hasty any reduction is, and even how parsed or rounded a number is — all these are grist for concluding, rightly or not, whether a price is firm, desperate or a sign of painful dealings to come.
I absolutely agree that there is some psychology involved in pricing and in the negotiation process between buyers and sellers. That said, much like the therapist who over analyzes every aspect of his/her life and everyone else’s for that matter, the buyer or seller could also make to big of a deal about what a price "means." Particularly in a marketplace with so many unseasoned professionals who will tell a seller whatever they want to hear to lock up an exclusive listing. Remember that pricing is indeed an art that is supported by some scientific means. It’s imperative to interpret market data properly and to select a price in the most objective manner possible. All the rest is psycho-babble.
Oh well…this blog is approaching its one year anniversary and today is the first weekday that I "almost" didn’t blog. Well, the guilt is killing me and despite the fact that I’m recovering from shoulder surgery thus typing with one hand and I’m heavily drugged, I couldn’t let the day pass without a little something. So here goes:
I MISS HENRY!!! As many of my readers know, I was introduced to the blogosphere last March by my very good friends, Henry and Jessica Abbott of Gekko Blogs. Henry convinced me that blogging was not only a lot of fun but could be good for business. It is indeed both! That said, Henry’s blog TrueHoop was purchased 2 weeks ago by ESPN and he has been hired to run that blog and assist ESPN with other blog related matters. Now he’s my friend so I am so excited for him and his family, but I miss him terribly. See, when I began TrueGotham, I would write and Henry would do the rest including editing, posting, and all of the administrative and back end tasks that I am slowly learning now. TrueGotham is now a one man show and I ask that everyone bear with me as I get up to speed.
Time to take a nap. I will be back Monday with something "real" estate. Have a wonderful long weekend!
