Mea Culpa, Mea Culpa

When investing in real estate, it’s difficult to know whom to trust. Josh Barbanell’s Sunday New York Times article about the perceived demand for Manhattan condos Are There Enough Buyers To Go Around? is a good example of how developers and appraisers see the same market from different perspectives.

There are some amazing condo projects nearing completion, and Gary Barnett of Extell Development was very enthusiastic about the condo market, saying "New York is the epicenter of the world, and everybody wants to own something here." But, not all developers are that optimistic. In my opinion, Barbanell got the best information from appraisers Jonathan Miller and Jeffrey Jackson. Both of these guys are on the front lines and have reputations for speaking candidly and honestly about market conditions.

Jeffrey Jackson, the president of Mitchell, Maxwell & Jackson, an appraisal company, said he had been consulted on half a dozen projects that may be postponed or converted to rentals…

…Jonathan J. Miller, an appraiser and the president of Miller Samuel, said he believed that many prospective buyers were ready to act but were holding back because of market uncertainty. At the same time, he said, Manhattan developers were holding the line on prices, confident that the new condos were worth their high prices.

"There are a lot of buyers, with money to spend, on the sidelines," Mr. Miller said.

With Goliath development companies like Related building hybrids containing both rentals and condos, as well as the chatter about other condo projects coming on the market as rentals, many believe that there are not enough buyers to go around. Until those buyers with cash on the sidelines who are waiting to see how the market shakes out feel comfortable jumping back into the game, the market will remain cooler than it has been in the recent past.

Because buyers are waiting for the condo market to develop, Miller is correct in saying that buyers should not assume that they always have to pay the asking price in this market. That doesn’t mean buyers should expect to "steal" a property either. I believe that as some of these projects come to market as rentals, others don’t come to market at all, and buyers begin to realize that developers are more reasonable about negotiating, the Manhattan real estate market will normalize and continue to be a great place to call home.

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