A new client of mine sent me todays’s James R. Hagerty Wall Street Journal article entitled The Brighter Side of Housing which suggests that many houing markets around the country have seen such increases in inventory and declines in prices that it may be an excellent opportunity for a buyer who was priced out of the market just 2 years ago.
And now for the heartwarming side of the housing bust: It’s helping some people buy homes that they couldn’t afford a couple of years ago.
Michelle Dudley for years commuted 50 miles each way to her job as a civil servant in Anaheim, Calif., because she and her husband, Don, didn’t feel they could afford a home near her office. This week, though, the Dudleys moved into a three-bedroom house in Anaheim that they recently bought for $390,000, down from the original listing price of $445,000 in November. Similar homes in the area were selling for as much as about $600,000 two years ago, says Erin Eckert, an agent for Redfin, an online real-estate brokerage that represented the Dudleys.
Don’t forget though that housing is made up of a plethora of micro-markets.
As usual, there is huge variation from town to town. In most of the country, inventories of unsold homes are no longer growing quickly, as they did in 2006 and 2007, but remain huge. The supply has shrunk modestly in Boston and Denver over the past year. But the number of for-sale signs continues to rise swiftly in the Portland, Ore.; Seattle; Raleigh-Durham, N.C.; San Francisco; and Washington areas.
Which brings me to my client’s question this morning: "At all true for NYC??" The answer: an unequivocal "Not really but it absolutely depends on the buyer’s and seller’s individual situations." That is supposed to be funny.
In Manhattan, the higher the quality of the buyer, the more leverage they have…sometimes. Of course the amount of leverage any buyer has is also dependent on the unique situation of a seller. For example, a solvent buyer with a credit score over 800 who is financing 70% or less with prudent liquid reserves after purchase may have a considerable amount of leverage should they encounter a seller who must sell because of a relocation or job loss. That same buyer may have to pay the asking price to the patient seller who is trading across the market.
There are a multitude of factors that determine the direction of the Manhattan real estate transaction::
- Terms of buyer’s offer: of course price, flexible closing date, contingent on financing or not.
- Solvency of buyers: how they present to the Board if a co-op, amount of financing, and liquidity position after purchase
- Seller’s motivation: relocation, job loss, upsizing, downsizing, geographical move within the city
- Seller’s perception of the market: does seller think they will get the same price that their neighbor did last year (in some cases they will and in others they won’t) or is the seller in panic mode fearing a future decline in prices?
So in Manhattan it remains difficult to gauge the current state of the real estate market as some transactions are taking place where buyers are experiencing some leverage and others see the sellers with the upper hand. Navigating this marketplace continues to be challenging but definitely not impossible and often fruitful for one or both sides of the transaction.