Mortgage Report: Week of April 24th - 28th

Posted by steve

Mon Apr 24th, 2006 02:57 PM

With all the reports coming out this week(Existing home sales,New home salses, GDP, ECI)we need to concentrate on one factor- inflation. Any signs of inflation in the economy will pressure Mortgage Bond prices lower and cause home loan rates to rise. There is some room for improvement in the coming week however it will all be based on how the news releases this week and what they say about inflation.

CPW Condo Value w/ Huge Terrace

Posted by urbandigs

Mon Apr 24th, 2006 09:27 AM


A: This good-looking property instantly caught my eye in Sunday's NY Times, so I figured to pass it on to you. Only 5 days on the market, this new 1,000 sft 1BR/1BTH Penthouse Condo is steps from Central Park and located at 30 West 90th Street. The pre-war elevator building does not have a doorman, but the apartment is unique enough to warrant serious consideration for buyers in this market!

Outdoor space is so choice in NYC. I strongly recommend buying it if you have the means! This terrace wraps around the entire apartment and offers great city and park views. When you go to re-sell the outdoor space will put your listing above the rest and probably get you more action during Open Houses (see my post on Outdoor Space: Find It!& Outdoor Space Landscaping)

According to the Halstead Listing: SUNNY GARDEN PENTHOUSE - Enjoy this prewar condominium just steps from Central Park, approximately 1000sf one bedroom. Spectacular, powerful city and park views. 10.5ft ceilings, woodburning fireplace, romantic solarium/formal dining room with large set back terrace facing sun-drenched south. Washer/dryer, jacuzzi, ample closets.

30 West 90th Street; Apt. PH-A

Size: 1,000 Sq. Ft. + Wrap-Around Terrace
# Beds: 1
# Baths: 1
maintenance: $939
RE Taxes: $389
Asking: $865,000
Price Per Sq. Ft.: $865 (excluding terrace!)
Marketed By: Louise Phillips Forbes, Sr. VP of Halstead

PH-A Floorplan


House-Hunting in NYC w/ $150K

Posted by urbandigs

Fri Apr 21st, 2006 11:08 AM


A: Check out what $150,000 buys you in Manhattan: 229 West 144th Street in West Harlem where the description is long enough to describe a 3,000 sq. ft. penthouse asking $5M!

Brand New to the market with the first showing at Saturday's Open House, this certainly is priced low enough to gather a significant crowd! This is 1 of 2 apartments that this Corcoran team are selling in the same building; Apt. 46 is asking $175K and has a slightly bigger floorplan.

According to the listing:

Nestled between two of Harlem's most prestigious neighborhoods...Sugar Hill and Historic Hamilton Heights you will simply not find more value for your dollar anywhere on the Island of Manhattan. Minutes away from many area attractions including Bradhurst Park where you can cool off in the outdoor pool open from July 4-Labor Day, St. Nicholas Park, Aaron Davis Hall at City College, The Alvin Ailey Dance Academy, and so much more! Supermarket shopping will be a breeze at the all new Pathmark Supermarket located at 145th Street and 8th Avenue.

229 West 144th Street; Apt. 41

Size: 426 Sq. Ft.
# Beds: 1
# Baths: 1
maintenance: $293 (LOW - includes taxes as well!)
Asking: $150,000
Price Per Sq. Ft.: $352 (See the value!)
Marketed By: Anthony Morris & Michelle Joyce of Corcoran

1 BR Floorplan


Rising Interest Rates & Your Plan

Posted by urbandigs

Tue Apr 18th, 2006 12:49 PM

A: When it comes to interest rates and the effect of rising borrowing costs on our daily lives, recent history probably carries much more weight than ancient history. In this post I will try to analyze the psychology behind a 'more expensive' world in the hopes of finding the best way to invest in it.

Ancient History will tell us that borrowing costs are still 'historically low' and that even if 30YR fixed rates climb above 7% we should be just fine. On the other hand, recent history tells us that those who locked in 30YR fixed did a very wise move!

Lets take a fictional property that sold for $520K 3 years ago compared to the same property that is asking $550K today with rates higher (the market slowdown started around June of 2005 so 3 years ago asking prices and lending rates were lower). Lets also assume the fictional buyer puts 20% down:

3 YEARS AGO $520K - $104K Down Payment (30YR Fixed @ 5.10%)

Monthly Mortgage Payment = $2,258.67

TODAY $550 - $110K Down Payment (30YR Fixed @ 6.375%)

Monthly Mortgage Payment = $2,746.47

Hmm...yea...interesting..the monthly payment for today seems kind of expensive compared to 3 years ago. It seems that RECENT HISTORY is more painful financially than something that happened 30 years ago! Heck, I'm only 30 years old why should I care if mortgage rates right now are still historically low? They certainly are a lot higher than they were a few years ago and will only continue to rise slowly over the next 12 months (since fed rate hikes take time to funnel down the economic system). By this time next year I wouldnt be surprised if 30YR fixed interest rates are around 7.25% - 7.5% or so (unless something unexpected happens that would cause the fed to lower rates).

But forget housing for now and lets consider credit card debt. Whether you know it or not all of these fed rate hikes actually do end up having a negative impact on all that debt you piled onto those Capital One cards! According to

Credit card debt is usually the most expensive kind of household debt, which is especially tough for consumers when interest rates are heading up. "Card rates are rising faster than the rise in general interest rates," said Justin McHenry, research director of the Cleveland-based survey firm.

The higher interest rates will add a few dollars to minimum monthly payments. But over time, that can add hundreds of dollars to consumers' debt loads. Interest rate hikes can actually sneak up on consumers. That's because most credit cards in use today carry variable rates, which card companies can change without notifying customers in advance.
What psychological affect will this have on people once they realize that they are living in a more expensive world? Did your minimium required payment increase in the past year (assuming your spending vs. payoff rate remained constant)? I'm betting it did!

If your housing + credit expenses have risen over the past few years than chances are you will be forced to sacrifice the luxuries in life that you may have gotton used to such as dinners out or weekend getaways.

: Rising Interest Rates affect more than just housing! Here's how I view it:


: Use the philosophy of 'If you can afford it, than find the deal and buy it". NYC Rents are rising to levels that in my opinion makes buying much more attractive. Plus rental inventory is so tight now (NYC Vacancy Rate at 0.89%!) that people are settling, instead of getting something they truly like. If you have a secure job w/ sufficient salary (see Brady's post on What Co-op Board's Look For), good credit, sufficient liquid assets, and a 3+ YR timeline to live there than BUY NOW! It is still a buyers market and there are deals out there. If you wait to buy for another year or so you will also have to hope that asking prices across Manhattan come down to compensate for higher interest rates (cause there going up!).

REMEMBER: With real estate you are being forced to save by building equity, you are entitled to tax benefits when you file your return and on gains when you sell, and you can live in and upgrade your investment!

If you plan to sell in 2 years or less now may not be the best time to be buying. I'm still flat to down on the NYC housing market for the short term and wouldn't be surprised if it remains that way the next few years. The only reason to buy now with a 2YR timeline to sell is if you find a deal that can't be missed!

: Be smart. Sacrifice living style and do what you can to get the lowest rental possible so that you can put the extra money AWAY in a money market account or CD. Interest rates are getting to very attractive levels these days with most 1YR CD's at or above 5.00% (WorldBank has 5-month CD at 5.01%). As much as it pains me to say this, tighten your spending habits and get used to budgeting for the next 1-2 years so that you can instead put away an extra few hundred dollars a month or use it to pay down credit debt quicker.

What you are doing is preparing yourself financially for your future investment of buying NYC real estate. By correcting your credit you will be able to get a better rate and save thousands over the term of the loan. By cutting back spending you are hopefully saving more and building up your liquid assets (Cash, Stocks, Bonds, CD's, Money Markets, etc.). After a few years both your credit score and net worth will be higher and you will be ready to afford a down payment without crippling your cash reserves!

Good Luck!

Fed Minutes Explained...

Posted by urbandigs

Tue Apr 18th, 2006 09:45 AM

A: Before you get all giddy from the fed minutes hints released today that interest rates are 'nearing an end', let me explain to you WHY the street is interpreting it this way: FED RATE HIKES TAKE TIME TO FUNNEL DOWN THE ECONOMIC SYSTEM. THE ACTUAL EFFECT OF ANY ONE INDIVIDUAL RATE HIKE IS NOT SEEN UNTIL ABOUT 6-10 MONTHS LATER!

I have preached this before on UrbanDigs and I will say it again! The fed minutes released today hinted that some fed governors believed that more rate hikes could ultimately hurt the US Economy because the effect of rate hikes done already is still yet to be known!

As I mentioned in previous posts:

The fed has a history of overshooting on interest rate hikes because hindsight is 20/20. Its easy to criticize a decision made 10 months ago when the results are finally known! Right now the fed will be acting on data available today, not data that is to come!

The problem is there are real concerns out there in the inflation world with red flags such as:

1. High Energy Prices (
2. High Commodity Prices (
3. Instability in Iraq (
4. Geopolitical Concerns in Iran (Salt Lake Trubune)
5. Rebel Wars in Nigeria (Reuters)

...all of these issues are contributing to higher inflation sensitive markets such as oil & gold. Think about this, if the prices of precious metals (gold, aluminum, copper, etc.) & oil continue to rise what will happen to the price of goods? Thats right, they will likely rise too! Hence, inflation concerns!

The reason I think we have MORE THAN 1 RATE HIKE ahead of us is because I do not see these inflationary concerns dissipating in the near future. In addition, it is becoming widely known that future fed rate moves will be more DATA DEPENDENT as opposed to rate moves already done.

I am still not buying into the fed minutes hints that rate hikes are close to an end. To me, 'close to an end' means 1 more and then we are through. If it works out that way it will be a pleasant surprise! I just dont think it will unless oil & precious metal prices stop rising. But thats just me. I would love to hear some more opinions on this and see if I'm alone or not in my thinking here.

~ Fed Minutes Hint At End To Rate Hikes

Interest Rate Watch: Oil Hits Record High!

Posted by urbandigs

Tue Apr 18th, 2006 08:23 AM

nyc real estate

A: Oil is still moving higher (dragging with it precious metal prices) mostly due to geopolitical concerns in Iran and rebel hostility in Nigeria. U.S. crude oil prices topped $72 on Tuesday, an inflation-adjusted record high, as Iran's pursuit of its nuclear program heightened fears the U.S. might take military action against the oil-producing nation.

I really do not see the US taking military action against Iran anytime soon, as we still have the war to finish in Iraq which is costing us billions. Starting another war with a Middle Eastern nation now just seems like an awful political move. Expect the US to try to handle this one diplomatically with more reliance on the IAEA this time around. Although according to todays article:

"The Iranian situation is making us all very nervous... We don't seem to be getting anywhere on the diplomatic solutions," said Deborah White, an analyst at SGCIB in Paris.
In any event, the crap is piling high enough in Iran that US leaders are having a hard time staying above it. I do know this, it will get worse before it gets better!

From a interest rate standpoint, I'm hearing and reading many experts say we have only 1 more rate hike ahead of us. I couldn't disagree more! In one of my previous posts I discussed how Fed chief Bernanke is actually finishing what Greenspan started and the importance of the issued statement that comes with each rate hike. In the past statement, there was no wording change to indicate that we have only 1 more rate hike ahead of us:
The statement retained language used last time that "some further policy firming may be needed." That language is seen by financial markets as signal that further rate hikes could occur.

The important thing to note is that THE FED DOES NOT WANT TO SURPRISE THE TRADABLE MARKETS WITH AN UNEXPECTED MONETARY POLICY MOVE! The few other important things to realize is that energy prices (Light Sweet Crude in this case) have risen, political tensions with Iran have escalated, and Nigeria is still not pumping the 500,000 barrels of oil a day that was taken offline by rebels!

What does this mean? There is NO WAY we have only 1 rate hike ahead of us unless a natural or unnatural disaster occurs which disrupts the US economy!

Expect at least 2 more 1/4 point rate hikes as I previously noted, possibly more. If all the concerns I mentioned above (oil, Iran, Nigeria) do not correct themselves over the course of the next few months, than there is a possibility Bernanke will raise rates even further! definitely something to keep an eye out if you intend to borrow money for capital investments!

What to do? In this interest rate rising environment you should:

1. Pay down credit card debt as much as possible.
2. Refinance short term loan debt that may be expiring soon (although if you got in early the cap may save you!)
3. Lock in your mortgage rate NOW rather than later if you know you will buy soon.

As always, I will continue to give you updates as they occur on UrabnDigs so that you can plan your investment strategy accordingly and wisely given what the fed is expected to do. As equity traders will tell you: DON'T FIGHT THE FED!; except on easing cycles when near term growth is pressured. It gets a bit trickier on rate cut cycles.

~ It's A Record; Oil Tops $72 Overseas

Mortgage Report: Week of April 17th - 21st

Posted by steve

Mon Apr 17th, 2006 03:22 PM

Speculative buying has driven housing prices to nosebleed levels -- giving rise to fears that there's a bubble and that rising interest rates will be the pin that makes it explode. However thirty-year mortgages are still pretty low, interest rates aren't spiking; the economy is still relatively robust, and the job market remains solid. At most, we're going to get two more moves from the Fed. So rates get up to the 6 3/4% to 7% range on mortgages and, as a result, we think the market stabilizes. The Fed will stop short of crippling the housing market. They simply want to slow it down. For this week expect the Fed to release the minutes of it's most recent meeting and if they are overly concerned rates won't react well and you can expect more Fed hikes soon. It's employment that really counts. The underlying fundamentals of real estate are still very positive. Job creation and household formation drive housing.

Feds Approve 2nd Ave Subway

Posted by urbandigs

Mon Apr 17th, 2006 09:25 AM


A: NY Post today confirmed: "the feds have green-lighted the long awaited Second Avenue subway"! The FTA plans to announce today that the massive project's first $5 billion section meets the criteria for going into final development.

I reported on this last week with some help from Glenn over at NYC: The Oil Drum. Here is the NY Post's image of the planned first section:


Here are some points from today's article:

" can start spending the $1.3 billion in federal funds set aside for the first phase of a transit line that will eventually run from East Harlem to the Financial District."

"...The next step: breaking ground. The hope is that the first leg from 63rd to 96th streets, will be ready for use by 2012."

"...the feds estimate that the first phase will take 6-12 years to complete. They also predict that, when completed in 2030, the new line will save riders collective 62,300 hours per weekday by cutting their walk and transfer times."

"...the idea of a Second Avenue subway is hardly new -- it was first proposed in 1929."

~ NY

NYC Co-ops More Protected Than Condos?

Posted by urbandigs

Mon Apr 17th, 2006 08:13 AM


A: What a great topic to discuss as the housing market continues to remain flat-to-down across most parts of the country. In New York City there are basically 2 property choices for most buyers: Co-op or Condo. Should the housing market take a short term temporary hit down the road, what apartment type do you think will be more protected? I'm going with liberal Co-ops.

Here are some reasons why I think sellers of condominiums might have to stretch lower than sellers of Co-ops should the housing market hit a rough patch down the road.

1. Speculators/Foreign Investors Buy Condo's NOT Co-ops: For those speculative investors in New York City, buying a condo is a must due to the liberal transaction process associated with the legal structure of condominiums. Most condos allow the buyer to put ONLY 10% DOWN, SUBLET THE PROPERTY, experience NO BOARD INTERVIEW, and a RIGHT OF FIRST REFUSAL APPROVAL PROCESS (rather than passing the co-op board members) all of which allows the seller to market the property to a much larger buyer pool.

According to

Prospective buyers lacking U.S. citizenship will find that New York condos give them the chance to own a U.S. apartment without having to suffer from a weak dollar, along with potential for short and long-term appreciation.
Whenever you are talking about buying a property for investment purposes rather than to live in for the next 15 years (especially one in a foreign land), you must also consider the prospect of hard times and being forced to sell should something not turn out as expected! It only adds to the list of condo owners in NYC that might be forced to sell in a housing correction.

2. Financially Weak Homeowners Buy Condos: Lets face it, if you know you are going to buy rather than rent in NYC but don't have enough assets to put 20% down and still have enough to show a co-op board, than you will learn quickly that you will have to sacrifice space or location and buy a condo; your only other choice is to find a condop or a sponsor sale. However if you have a secure job with rising salary, sufficient liquid assets, and low debt than you are in good position to pass most co-op boards and less likely to be forced to sell in hard times.

Using this logic you could predict a situation in a rising interest rate environtment where more condo owners will be forced to sell their apartments. Any homeowner who has to sell for financial reasons usually has to sell quickly; to sell quickly you MUST price below market value!

3. Most New Developments Are Condo: Think about all the new development that has taken place in New York City over the past few years. Now think about all the development that is almost finished and about to start! As the market cools, are these guys going to be able sell their units for $1,300+ a square foot when premium exisiting products go for much lower? Percentage wise, new developments will have to lower prices more aggresively than existing co-op owners who are already offering discounts simply because they are co-op. Some developers refuse to lower their pre-construction pricing which will result in unsold units all the way to the occupancy date; where does that leave the speculative investor who paid $1,300/Sq. Ft. in the first round of pricing a year earlier?

Considering these 3 concepts I would think that liberal co-op buildings (those co-ops that allow 80%+ Financing, subletting, pied-a-terres, parents buying for children, and guarantors) to be well protected as owners will be LESS LIKELY to be forced to sell once the actual decision to sell is made. Any homeowner that has more time to sell can afford to keep their property on the market long enough to 'get their price'. Maintaining building pricing is very important as future sales are largely priced based on the most recent closed deals in the building.

If condo owners are forced to sell at way below market value simply because they need the money or want to cash out, it will hurt the building as a whole and particularly hurt those who are looking to sell soonafter as appraisers will wonder why some units sold for much less!

2 UES Greenmarkets Very Close

Posted by urbandigs

Wed Apr 12th, 2006 09:12 AM


A: Thanks to Glenn over at The Oil Drum for attending another UES community meeting last night and providing me with this update on the 2 planned greenmarkets for the UES in which Eli Zabar is the lead opposition!

According to Glenn

It was quite the scene tonight at the Community board meeting - many colorful characters, including Eli Zabar turned out. The upshot is that we may have two new greenmarkets on both ends of East 82nd Street.

According to his post
Regular readers know that I've been agitating to bring more locally grown food to my neighborhood for quite some time. This is because locally grown food consumes a lot less (about 25% less) fossil fuels than factory farm, industrial agriculture from long distances. This will be important as energy prices increase in preserving local farmland and decreasing the lines of supply for our food. Well, that dream just got one step closer to becoming a reality tonight: The Streetfair committee of Community Board 8 voted in favor of both locations - PS 6 (82nd bet Madison & Park) AND St. Stephen's church (82nd bet 1st & York).

The final vote by the Full Community Board will be next week on April 19th at 6:30pm at Chapel of the Good Shepher Church, 543 Main Street, Roosevelt Island, The Community Room. It should be interesting!

Greenmarkets are always good for the neighborhood in my eyes and to hear Glenn discuss the relation of locally grown food to efficient energy use is an extra bonus given my concerns over energy prices these days. Lets see what happens at the final vote next week as it was noted that the ultimate locations of these 2 greenmarkets may be changed.

~ Upper East Greenmarkets Very, Very, Close

Black & White Report Released

Posted by urbandigs

Wed Apr 12th, 2006 08:41 AM


A: The Citi-Habitats Black & White Report is a comprehensive analysis of the Manhattan Residential Real Estate Market released semi-annually. This 8th report from the fast growing company covers JULY - DECEMBER of 2005.

Knowledge is power and the executives behind Citi-Habitats, Inc. know this philosophy very well; which is why they invest in understanding every aspect of Manhattan Real Estate and analyze every piece of available data that has to do with Manhattan Real Estate. The Black & White Report allows them to actually see the changes that are occurring in this great city as they are happening.

Here are some details directly from the report that you may find educational about the current state of New York City Real Estate:

~ Vacancy Rate in New York City dropped to 0.89%: NYC vacancy rate is down from June's rate of 1.01% and is currently at a 3 year low. Not only is the majority of newly constructed buildings condo rather than rental, but many rental buildings have been converted to condos to take advantage of sales trends. This means fewer and fewer rental apartments for an ever-expanding NYC population.

~ East Village & Murray Hill Sees Increased Renters: The two areas that did see an increased number of renters in the second half of 2005 were the East Village & Murray Hill.

~ Studio & One Bedroom Apt's Rents Rise City-Wide: The most pronounced of which occurred in the East Village studio category and Murray Hill one bedroom category.

~ Median Price of Condos Increase City-Wide: This was the case for studio and one bedroom co-ops as well. East side studios and one bedrooms saw healthy gains too at 16% and 9.6% respectively. For condos, the other standout gains were seen by downtown one bedrooms which rose 24% from a median price of $588K in the previous reporting period to $720K in this reporting period.

The complete Black & White report is available for download on the website.

Speculative Real Estate Investors: What Now?

Posted by urbandigs

Mon Apr 10th, 2006 12:37 PM


A: With interest rates rising, inventory rising, and a longer time on the market before selling, speculators are facing some tough fundamentals that all signal red flags for this type of investment strategy. The days of buying, renovating, and flipping for a quick profit are over. So, what is a speculator to do?

This post really affects housing markets OUTSIDE of NYC more as New York City is made up mostly of Co-ops, which we all know from my past posts are not speculator-friendly investments because of their restrictive policies. NYC real estate is blanketed, so to speak, from the prospect of a rush of inventory coming to the market by speculative investors looking for a quick profit.

Back in March one Detroit developer offered a free car with the purchase of one of their properties. According to the

Last fall, Seville Homes in Clinton Township began tempting home shoppers with choices that include a 52-inch TV, a stove-refrigerator-microwave package, a $2,500 Art Van Furniture gift certificate and free hardwood floors and granite countertops.

"We're doing whatever we can to get them to buy," said Bob Mitchell, director of development for Seville Homes.

Now the builder is planning to offer a new buffet of incentives that would allow buyers to get into a new home without paying closing costs, a down payment or mortgage payments for the first six months if they finance through LaSalle Bank.

And I recall this post about a Free Vespa Scooter for purchasers & brokers who sell the remaining units at 154 Attorney Street.

While now is probably not the best time to be a speculative investor in real estate for some pretty obvious reasons, let's discuss what a speculator might want to do now to adapt or hedge their bet should the housing market remain slow. Here are some ideas:

1. Change Location - Buy Bulk Instead of Premium: Why not? Coastal reeal estate is still very expensive and doesn't seem to me to be the best place to make money in the short term. So why not buy more land/real estate for your money and take a more longer term approach to your investment strategy. Markets such as Philadelphia, Dallas, Houston, Indianapolis, Raleigh, and Pittsburgh are way undervalued compared to markets such as New York City, Boston, Miami, Los Angeles, & Naples and offer some great buying opportunities in times like these. In Philadelphia for example, you can probably buy 2 or 3 properties for the same price you could buy 1 in Los Angeles! Just seems like a lower risk, higher reward situation to me.

If you do want to stick with these higher quality markets, buy a few cheaper properties instead of 1 big one. Spread out your risk in a few neighborhoods and look to rent out your properties and hopefully get 80-85% of your total cost back in rental income until you decide to sell. Even with rents rising lately in NYC you shouldn't expect to buy a new property and make money renting it out immediately. If you do, you got a great deal!

2. Write Calls / Buy Puts in New Housing Futures: The quickest and easiest way for a speculator to hedge their bet should they lay a lot of money down in a high risk/high reward market such as Miami or Las Vegas, is to Write A Call Option or Buy A Put Option on the new Housing Futures traded at the Chicago Mercantile Exchange. Both of these trades would mean you are placing a bet that housing will fall and will MAKE MONEY if it does within the timeframe you bet on.

Buy A Put Option: In general, the buyer of a put option expects the price of stock to fall significantly, but does not want to sell the stock short because that could result in large losses if the stock does go up anyway. For housing futures, buying a Put option basically means you are betting the housing market will fall.

Write A Call Option: The purchaser of a Call buys the option contract from the Writer of the Call option, and is betting that the underlying security will RISE before expiration (time value against them). Therefore the WRITER of the Call contract is betting the underlying security will FALL and has time value working with them. For housing futures, writing a Call option basically means you are betting the housing market will fall.

*Options trading are very risky and should be investigated thoroughly before investing. Use of options as a hedge against another investment will cancel out potential losses should the market go against your initial investment. Always contact your financial advisor before buying any housing futures so that you fully understand what your risks are!

3. Create Separate LLC To Minimize Equity Risk: Many speculators already do this so I am really reaching out to the average investor here who may not know about this concept.

Put each individual property into its own separate entity, such as an LLC, and try to withdraw as much equity as you can from the property. Should the property fall below the face value of the mortgage, you can declare banktrupcy and walk away leaving the bank holding the asset. The bank will be left exercising the lien on the property as it takes control of the asset. Your loss is the only equity you put into the property. Your credit will be seriously affected for a period of time, but you won't suffer as much financial loss.

This is what speculators did in the 1980's & early 1990's which pre-empted the Savings & Loan Crisis and resulted in the formation of the RTC.

Resolution Trust Corporation (RTC)
: A corporation formed by Congress in 1989 to replace the Federal Savings and Loan Insurance Corporation and respond to the insolvencies of about 750 savings and loan associations. As receiver, it sold assets of failed S&Ls and paid insured depositors. In 1995 its duties, including insurance of deposits in thrift institutions, were transferred to the Savings Association Insurance Fund.

REMEMBER: Contrarian real estate investors pay MORE attention during housing slowdowns as deals start to pop up. You know what is out there and if something is a good deal or not; check out at least 10-12 properties in your target market to get a good idea of what is a deal and what isn't. Are you ready to jump on a property once the price gets reduced enough to reflect its current market value? Looking short term I think there will be a plethora of nice deals popping up!

A Home for Rover

Posted by Toes

Mon Apr 10th, 2006 08:46 AM


New Yorkers love their dogs. They're everywhere. Considering how difficult it is to find pet-friendly rental buildings in Manhattan, where do all these canines live?

In a recent apartment hunt for a client with *two* 40 pound dogs, I'd estimate that at least 65% of rental buildings in Manhattan don't allow dogs. Another 15% only allow dogs that can be transported in an Louis Vuitton bag of some kind. Basically, if you have two 40 pound dogs, you don't have a whole lot of options when looking for a rental.

Enter the world of new development. Developers seem to have caught on that Fido is important to home buyers and some new developments are actually catering to dog lovers.

505 Greenwich, a relatively new condo development, has its very own "Pet Spa." A doorman reports that a clear majority of the building's residents have dogs and that the pet spa gets frequent use. There isn’t anyone on staff at the spa, and owners have to bring in their own supplies (and clean up after themselves). The building's condo board has even formed a pet committee that will interview dogs as a part of the board approval process.

205 East 59th Street, a 27-story condo building, has a dog park by its mosaic garden. The website refers to the dog run as a "secluded puppy park!" (I mean, really!) More than half of the apartments have been sold and prices begin at $1.46 million.

55 Wall, the Cipriani Residences, has a list of amenities a mile long, including "pet-sitting and animal grooming," as part of the "Cipriani Club." The first two years of membership in the Cipriani Club will be free.

Ariel Condos on West 99th Street will also have a "pet grooming salon for the family's best friend."

It's wonderful that many new condos are catering to dog-lovers. But do buyers really care? I asked a client if pet amenities would make her more likely to buy in a certain building. "I could never get rid of my puppy, so I have to live in a pet-friendly building," she said. "But I could care less about a pet spa. I send my dog out to be groomed."

3 Reasons The Fed Will Raise Rates

Posted by urbandigs

Fri Apr 7th, 2006 08:17 AM


A: Rising energy prices, rising precious metal prices, and continuing geo-political concerns in the Middle East are all valid reasons for the fed to continue with its rate increasing campaign. Anything less than 2 more 1/4 point interest rate hikes should be viewed as a surprise at this point!

1. Rising Energy Prices: The price of Light Sweet Crude surpassed the $68/Barrel mark today dragging the prices of gold and silver up with it. According to Yahoo Finance:

According to Leonard Kaplan, president of Prospector Asset Management, there hasn't been a close correlation between energy prices and gold prices for a long time, but the rationale is that rising energy prices will cause inflation, and inflation boosts precious metals.

"It's money chasing money," he said, adding that commodities across the board, from copper to zinc to sugar, have seen big increases without any fundamental reason. "Money is pouring into them simultaneously, without cause or concern or interest in what the values are, or what it's going to be used for. It's all momentum -- it's the flavor of the year."

2. Rising Precious Metal Prices: Gold Futures have now topped $600 an Ounce which will could only lead to a more volatile trading atmosphere for the weeks to come. Expect sharp movements and heavy volume! According to
Gold for June delivery rose as much as $9.40, or 1.6 percent, to $601.90 an ounce on the Comex division of the New York Mercantile Exchange, surpassing $600 for the first time since Jan. 6, 1981. Funds have been the biggest buyers of gold this year, outpacing purchases by jewelers, who accounted for 73 percent of demand last year, the London-based World Gold Council said in a March 29 newsletter. Investors typically buy gold as inflation increases, to preserve purchasing power. The precious metal surged to $873 an ounce in 1980 in New York, when consumer prices jumped more than 12 percent.


Right there is the meat of what you need to know about Gold in times like these. It's considered a safe haven with so much uncertainty floating around. If its going up now, just wait for when a rate cutting cycle gets started.

3. Continuing Geo-Political Concerns in Middle East: Both the fed and tradable markets HATE UNCERTAINTY! Geo-Political dramas unravelling in Iran, Iraq, Nigeria, & North Korea are only adding to the uncertainty of what is actually going on in these countries. Expect the energy markets to rally as a result of uncertainty in these countries, which will lead to higher precious metal prices, which will lead to higher inflation concerns, which will lead to the fed raising rates more to deal with it. Read that again if you didn't understand the chain of events that ends with the fed's next move.

NOTE: I just heard on CNBC that the Oil Minister of Nigeria expects 500,000 barrels of oil a day to be back online by the end of the month. However, Nigerian rebels are also threatening the lives of any Nigerian oil worker that returns to work when systems are back online. Should the 500,000 barrels a day expectation come true, that should ease supply concerns a bit and help stabalize the price of crude.

Bottom Line: We need to hit the source. The political uncertainty in the Middle East must change drastically over the next few years or else energy prices will continue to remain at historically high levels.

Now I know I'm just an observer and that I should probably bring up points on how to resolve these issues rather than complaining about it, but honestly I have no clue! Do you? How do we ease tensions with North Korea? How do we fix the recently criticized public opinion on the war in Iraq? How do we stop the militant attacks on oil pipelines and systems in Nigeria? How do we do all this when we have no money?

Did you know that our Current Debt Down To The Penny Right Now is $8,388,876,683,304.95! Did you know that we currently spent $271B on the Iraq War to date based on this running scale!

UrbanDigs Says: Its no surprise that institutional investors and hedge funds are looking to the security of Gold, Silver, Copper, etc. these days. And one thing you can count on is that the fed is watching all of this. Until we see Bernanke change something up, we must stick with the thinking that at least 2 more hikes are ahead of us. Plan accordingly and AS I SAID IN PREVIOUS POSTS, LOCK IN YOUR MORTGAGE RATE sooner rather than later if you know you are close to signing a contract!

~ Gold Futures Top $600 an Ounce

The $250K & Under Crowd

Posted by urbandigs

Thu Apr 6th, 2006 10:16 AM


A: Need to buy a doorman apartment in New York City but only have a Max Budget of $250K! No Problem. Here are 2 listings that might interest you. *Halstead Listing removed because of Contract Signed Now Listed on Website.

339 East 58th Street; Apt. 1K

Size: 350 Sq. Ft.
# Beds: 0
# Baths: 1
maintenance: $653 (high for a studio this size)
Asking: $240,000
Price Per Sq. Ft.: $685
Marketed By: Edward Johnston III of BrownHarrisStevens

25 Tudor City Place; Apt. 410

Size: 350 Sq. Ft.
# Beds: 0
# Baths: 1
maintenance: $418 (Now we are talking!)
Asking: $249,000
Price Per Sq. Ft.: $711
Marketed By: Richard Peterson of Douglas Elliman

Good Luck! And be sure to tell them Large Marge sent ya!

2nd Avenue Subway Update

Posted by urbandigs

Wed Apr 5th, 2006 09:04 AM


A: Believe it or not the 2nd Avenue Subway project is alive and well as we near the beginning of tunnel construction below 96th Street on 2nd Avenue. Although I missed the community meeting on Monday, PeakGuy did go and found out that construction is set to start in 40 Months!!

Tunnels are expected to begin construction in 3 1/2 years from 92nd Street to 62nd Street with new stations at 96th, 86th, 72nd, and expansion of a existing Lexington Avenue/63rd Street station. Also set begin construction are track and systems from 105th Street to aproximately 62nd Street. Download the .pdf from MTA site.

Here is a conceptual drawing of Phase 1:


In case you missed the Discovery Channel on how Tunnels are built, they will be using a boring machine that looks something like this and will use the streets as entry points 1 section at a time....


According to Wikipedia: Tunnel boring machines are used as an alternative to drilling and blasting (D&B) methods. A TBM has the advantages of not disturbing surrounding soil and producing a smooth tunnel wall. This significantly reduces the cost of lining the tunnel, and makes them suitable to use in built-up areas. The key disadvantage is cost. TBMs are expensive to construct, difficult to transport and require significant infrastructure.

A conceptual drawing of the boring process:


What To Expect During Build: Streets to be completely demolished during the boring process and tunnel build. Local businesses on 2nd Avenue will have a rough time and will most likely go out of business temporarily with some type of city support program kicking into effect. A few years of loud noises, construction barriers, air pollution, and big time machines.

What To Expect Upon Subway Completion: A spike in real estate values for properties surrounding this brand new, technologically superior subway line to ease congestion on NYC's eastside. Buying a property that is discounted because it is too far East right now is probably a very wise idea when the subway construction begins; York Avenue & East End Avenue are my sleeper picks for 8-10 years down the road when subway is complete.

A conceptual drawing of what the 2nd Avenue Subway line will look like when it is completed in the summer of 2065; sorry couldn't help it.


Thanks to Glenn over at The Oil Drum:NYC, a great blog covering the energy markets, for going to the 2nd Avenue Subway community meeting Monday night and providing me with this latest information:

* They are going to have to reclaim some street space at the 96th Street station entrances to make it fit. Entrances on 93rd (east and west sides) and then another on the West side of 96th street. Either they are taking out parking or they might have to take out a lane of traffic. I'm guessing the parking...

* Because the 96th Street station is close to the surface (Cut and Cover technique) there is going to be massive construction for the 96th street station in the middle of the street for many months. This will create traffic chaos unless they do something to reduce the number of cars coming into Manhattan. Perhaps they could divert it to the FDR or York. Lexington Ave is already a disaster area.

* The 72nd Street station will be very deep and will not require the cut and cover technique. Entrances on 69th and 72nd. One of them will occupy where Patsy's Pizza is now. They are going to have to tear down a building on the NE corner of 72nd street for ventillation.

* There will be a meeting in May to discuss the 86th street station.

* Bids are going out in December and construction should begin in 2009 and last for 2-3 years. I think they said the first phase (96th to 63rd) will be done in 2012-13.

Bids Submitted No Longer Confidential

Posted by urbandigs

Tue Apr 4th, 2006 12:05 PM


A: I read this post on The Walk-Through, a blog hosted by the NY Times that has become a daily read for me. Apparently, as of January 1st of 2006 agents are required to inform clients that their offers might not be kept confidential!

Its a tricky business that personally I feel should have been left alone by the NAR. The way I do business is that I only inform the seller of the bid submitted and keep that info confidential from my colleagues and other direct clients that may have been interested in the property for sale. My rule of thumb was quite simply "..the bid submitted is information for the buyer, the agent, and the seller ONLY".

The practice is reffered to as "shopping offers" and is a strategy that has as many risks as it does rewards. For example, if I receive an offer of full asking at $500K, and then start shopping around, I may get another offer slightly higher which may not be as qualified or as serious as the original full ask offer. In the end, I can lose the original offer and be forced to reject the slightly higher offer as a result of this greedy behavior.

I understand the seller has every right to try and get the highest price possible for their property, but there should be some level of ethics and professionalism when it comes to accepting and distributing bids received. It appears now that there is no such thing and the only thing I can say is both "Buyer & Seller Beware".

According to the article

Effective Jan. 1 of this year, buyers' agents in all member states, including California, are required to inform clients that their offers might not be kept confidential. Although many home buyers may not realize it, the terms of the offers they make may be revealed to other clients in a practice that the real estate industry commonly refers to as "shopping offers." And although many Realtors purport to find the practice distasteful or even unethical, others point out that negotiation styles and markets differ. In other words, shopping offers is part of marketing - the name of the game in selling a property. "It's all marketing," adds June Barlow, vice president and general counsel of the California Assn. of Realtors, part of the national association. "It depends on the market, how desirable the property is, the number of buyers - all of that plays into it. It's an art, not a science."

While I agree with June Barlow's comment above that "...It's an art, not a science", I believe that any buyer submitting a serious bid deserves some type of respect from the professional that was hired to sell the property. If that bid is acceptable (and the seller broker usually knows what price point is acceptable) than it should be proposed to the seller ONLY and not to other potential clients that have expressed less interest in the property. This practice has higher risks and lower rewards for the seller and could very well disrupt a deal should the broker come back to the original buyer and say we now have a bid that is $5K higher than yours; either come up with your offer or lose the deal.

But thats just me. It complicates things and poses a risk for such little money. For seller brokers who are dealing with multiple bids, it seems to me a Best & Final declaration with a clear deadline is the best way to go, rather than sneaking around and quitely disclosing to any interested buyer what bid was just received in the hopes of getting a slightly higher one. But this is a SHADY business and if you are a shady broker there is not much I can do to change that. Shame on the NAR for allowing this to pass the board of directors. They should have shot it down like they did in 2004:
But although the addition to the Realtor Code of Ethics is new, the practice of revealing competing offers on a property - and the debate it generates - has gone on for years. The same addition was proposed and defeated at NAR's annual board of directors meeting in 2004 after opponents argued that notification might imply endorsement of the practice.

UrbanDigs Says
: Brokers should stay ethical & not interpret this allowance by the NAR as an endorsement of this type of behavior in a service business where clients rely on professionalism and ethics. If you have more than 1 bid submitted declare a BEST & FINAL deadline and tell all parties interested that their best offer must be submitted by the deadline. This will achieve the same goal while protecting the buyers interest and still satisfying your fiduciary responsibility to the seller.

~ There Are NO Secrets
~ The Bid Whisperers

NYC Housing Still Pushing Higher

Posted by urbandigs

Tue Apr 4th, 2006 10:14 AM

A: In today's NY Post, there is an article stating that Manhattan's residential real estate market is still strong despite a slowing nationwide housing market. The report is sourced from BrownHarrisStevens and it should be noted that the data could be skewed towards the upside as BHS handles alot of the high end inventory in New York City. Nevertheless, the numbers don't lie and this report shows continued strength in the NY markets.

According to the article:

Four of the city's top real-estate brokerage firms are reporting increases in many housing categories, including a record price per square foot, higher apartment prices and, according to one report, a 47 percent increase in condo sales over the previous quarter. The latest numbers released by Brown Harris Stevens show that the average Manhattan apartment is $1.258 million, 15 percent higher than the last quarter, and 8 percent better than the first quarter in 2005.

While this report shows a rosy picture for NYC real estate, it also addresses some of the changing fundamentals that are hitting our housing market; such as rising inventory and longer time on the market before contract signed. Specifically, the article mentions:
But among the numbers that might not bode well is the listing inventory, which is 59 percent higher than last year, and almost 16 percent more than the previous quarter. Also troubling is the average 138 days it takes to sell an apartment - 44 days longer than it took to unload a flat during the same period last year.

I've reported on this change in fundamentals before and it shouldn't be a surprise; read my posts on Contrarian Investing and see if this investment strategy is for you. More importantly, buyers and sellers in NYC should understand and accept that a correction in housing is completely normal and a healthy sign of a generally bullish longer term housing market.

A snapshot of the pricing breakdown in NYC as reported in todays NY Post and cited by BrownHarrisStevens:


~ City Apts. Defy U.S. Bubble Trouble
~ 1Q 2006 Manhattan Market Overview

Mortgage Report: Week of April 3rd - 7th

Posted by steve

Tue Apr 4th, 2006 10:01 AM

Chairman Bernanke came out last Tuesday and flexed some muscle against inflation and hiked the Fed Funds rate another .25%. He indicated that there were still some inflationary concerns and the hikes may not be over just yet. Mortgage bonds declined and home loan rates increased by about .125%. For this week, the Jobs report number on Friday will be closely watched. A super hot Jobs number will be good for stocks and pull money away from bonds causing home loan rates to rise again. So, Friday's highly anticipated jobs number(198k) will likely dictate the next course of direction for home loan rates.

Energy Still Up; Inflation Still Contained

Posted by urbandigs

Mon Apr 3rd, 2006 10:23 AM


A: Light Sweet Crude topped $67/Barrel today despite doubts that Iran will not cut off oil supplies with the West. Add in supply outages in Nigeria where militants have attacked platforms and pipelines and its hard to imagine a huge drop off in energy prices in our near future. On a side note, Personal Income grew at 0.3% (below Wall Street estimates) and US Consumer Spending rose 0.1% (a sharp slowdown from January but slightly above expectations) as inflation still seems to be contained from higher global energy prices.

The economic reports showed inflation as being contained but higher energy prices and continuing geo-political concerns in the Middle East will take center stage as the Fed continues to combat inflation fears down the road. According to the article:

Over the last 12 months, inflation eased to 2.9 percent from 3.1 percent in January. Core inflation, the price measure favored by the Federal Reserve, was steady at 1.8 percent.

On the economic reports side I found it interesting that the Savings Rate was negative for the fourth straight month at -0.5%:
...meaning Americans spent all of their income and more in February either by borrowing or cashing in savings. The saving rate has not been positive since March 2005.

Moving on to oil, we are rapidly approaching that all important $70/Barrel tradable high that usually is a sell sign for short term profit taking. As oil approaches $69.50/Barrel expect a number of sell side orders to automatically kick in and bring a short term correction in these markets. Should oil bull right past $70/Barrel and not correct at all, expect a few extremely volatile weeks as 1 oil magnate recently predicted the possibility of $100/Barrel oil prices. I recall the CNBC guest as saying "...all it takes is 1 thing to go wrong in either Iran, Nigeria, Iraq, or Saudi Arabia to disrupt oil supply enough to spike the tradable crude markets to $100/Barrel". Something to keep in the back of your mind.

Looking at where we are at right now and relating it back to you for real estate strategy, I suspect the Fed is continuing to raise interest rates mainly because of higher energy prices affecting the global economy. As long as energy prices remain this high and geo-political concerns remain this fragile, I do not see the Fed stopping with their rate hikes. The only thing that could cause the fed to pause is the FACT that interest rate hikes take time to funnel down into the system and their true affect on the economy usually is not seen until about 6-10 months down the road. Will the Fed overshoot with rates again? Probably, because this time they have real concerns to address.


WHAT TO EXPECT: 1/4 Point Rate Hike Brings Fed Funds Rate to 5.0%. I am about 95% sure of this rate hike unless a natural or unnatural disaster occurs by then.

WHAT TO LOOK FOR: Change in statement issued that would tell the tradable markets that only 1 more 1/4 point rate hike is in store for the following meeting. Should no wording change occur, Lehman Brothers could be right with a target Fed Funds rate of 5.5% before a pause.

~ Income, Spending Gains Slow
~ Oil Tops $67 on Doubts Over Iran

The Final Walk-Through

Posted by urbandigs

Mon Apr 3rd, 2006 09:10 AM


A: The Final Walk-Through actually doesn't happen as often as it should in New York City for some reason, as I recall a number of my clients telling me that they didn't mind going right to the closing and getting the keys to move in. However, for all those buyers out there that want to be as scrupulous as possible here are some things to look out for the day before the closing.

The final walk-through usually happens 1-2 days before the scheduled closing date for the property transaction. The buyer broker should contact the seller broker to co-ordinate the final walk though and be present with their client during the inspection. Here are a few things to look for.

1. Damage to Walls & Floors During Moveout - Chances are the last time you saw the property was with the seller's furniture inside. So, be sure to check that no damage occurred to what will soon be your new home as a result of the moving company. Be sure to check the floors and walls for major damage.

2. Appliances in Working Order - As noted in the contract of sale, are ALL appliances in full working order? Be sure to turn on and check the stovetops, oven, microwave, refrigerator/freezer, air conditioning systems, and W/D if any. Should you close the deal with one of these guys broken its now your problem!

3. Electrical Outlets Working - Bring a portable lamp or stereo so that you can plug in and check ALL the outlets to see if they function properly. If an outlet doesn't work, you are responsible for the electrician's bill!

4. Apartment / Storage Space Cleaned Out - Did the owner leave anything that you don't want? If so, its your job to pay for its removal. Be sure to check that the closets and individual storage units that may come with the property are checked and cleaned out.

If you are planning to use the final walk-through to get out of the deal or to renegotiate the purchase price, don't get your hopes up. Most attorneys would agree that unless major damage has occurred to the property since the contract was signed there is little that can be done to back out or get a lower price. Most issues turn out to be only minor scratches and defects which would be classified as normal 'wear and tear' and are relatively inexpensive to fix.

If you do indeed find a major defect or problem with the property NOW is the time to bring it up to both your buyer broker and your real estate attorney. It might delay the closing by a day or two but at least you know that you are being delivered a property that is in the same condition as it was when you signed the contract!

: For Minor Wood Floor Scratches: Get the Miniwax Wood Finish Stain Marker that matches your wood floor color. It is a stain pen that easily covers up small blemishes. Just be sure have paper towel with you when you apply to the floor and wipe off RIGHT AFTER you stain the blemish. You can get this at most hardware stores.