I'll leave it to The Princess Bride Clergyman...
MAWWAIGE! Mawwaige is what bwings us togetherr today! Mawwaige, that bwessed awwangement. That DWEAM within a DWEAM....
And Wuve, Twue Wuve, Will Fowwow youuuuu, Foweverrrr..(Prince Humperdink says, "Skip To The End").....Have you da Wing?
NO LIVE CHAT OR POSTS AS I WILL BE IN EUROPE FROM SEPT 1-26th! Hopefully everyone will still come back to the site when I return and get back to reporting to you on the current state of the NYC real estate market and tips to best profit from it! In meantime, I'll try to put some pics of Prague and Italy up when I get a chance! Until then...
A: A very important post for those existing homeowners in NYC or anywhere actually, looking to sell their home and upgrade to a bigger one. This post doesn't apply as much to those looking to cashout and downgrade, leaving them with extra cash as 'extra cash' or lack thereof is exactly the purpose of this article. In a nutshell, SELL FIRST, then look to buy!
In the world of real estate, searching for a home is usually more exciting than selling a home; this rings true especially in today's market that is seeing a combination of rising inventory and slowing buyer demand. But, you MUST be careful not to fall into the very big trap of buying first and selling after; unless of course money is one luxury you do not have any worries about.
For the most part emotion plays a critical factor in this scenario as most homeowners who plan on selling hold off on putting their apartment on the market, and start to look for a 'place to go' first. That is fine and nothing wrong with that, except that if you are counting on the equity from the sale of your home to finance the new and bigger home, you could run into some very big problems. Mainly:
1. The Unknown Factor of Price - Before you buy a home you must always do the math! What do you have, what can you afford, what interest rate will you get, what will your monthly payments be, and is it feasible? First time homeowners with no home to sell must do this to make sure they are NOT buying too much house. Existing homeowners must do the same. Until you know exactly what price you will get for your co-op/condo/townhouse, you should NOT sign a new contract of sale!
Information is power! Lack of information puts you in a weak position. Before you do the math of calculating how much house you can buy, WAIT UNTIL YOU HAVE A SIGNED CONTRACT ON YOUR EXISTING HOME so you know exactly how much profit after the deal is left in your hands! You never know what the eventual sale price will be, especially in this housing market!
2. Longer Time on Market To Sell - A no-brainer here. If you have been reading ANY real estate section in any major paper, you will know that in the major markets housing is slowing, # sales are declining, inventories are rising, and time on market is growing. With this knowledge I ask you:
DO YOU REALLY WANT TO BUY FIRST AND BE FORCED TO SELL LATER WHEN YOU WILL NEED ACCESS TO YOUR PROFITS TO BUY THE NEW HOME?The answer is NO, you don't! The worst position you could put yourself in is buying a home first with the anticipation of using the proceeds from a later sale! What if your home doesn't sell in time? What if your home sells for a lower price? Too many what if's, and big ones too! Don't let your emotions take control of your financial decisions and be disciplined to pass on what may be the perfect dream home if you still haven't sold your home and are planning on using the profits for the next purchase! I know its hard, but at least you won't be in a position where you are forced to sell super fast and the only way to do that is to lower your asking price to way below market value to attract a fast buyer!
So what do you do? Assuming a 2-3 month timeframe between contract signing and closing, here is a simple 1-2-3 guide to use should you fit into the situation described in this post that will help you avoid making the mistakes mentioned above.
Existing Homeowners Guide To Upgrading
1. List Your Apartment For Sale & Learn Product Knowledge For Your Upgrade - Market your property and before you get a signed contract for your home, go out and learn product knowledge for the price point that you think you will fit into for the upgrade. If you are selling a 1BR, then learn what 2BR's are selling for in your neighborhood of choice. If your selling a 2BR, then learn what 3BR's are selling for in your neighborhood of choice; and so on. What are average monthly expenses for your price point? What amenities are you getting? Is light and views hard to find? Do most have light/views leading you to focus on a better location? What interest rate can you lock in? And so on.
NOTE: That I mention 'learn' product knowledge and NOT 'buy' on impulse! This first step is to simply give you an idea of what you might be able to get, and what it might cost you. In essence, you should become an expert on the new home you are planning to buy BEFORE you buy it.
2. Get A Signed Contract on Your Existing Home - List your apartment for sale, learn product knowledge of the price point you are thinking of buying later, and WAIT for a contract of sale on your existing home. This might take 2-5 months, so you have no excuses for NOT being an expert on your future home purchase before you buy. Avoid impulse buying and be disciplined to wait until your deal is done and you know your purchase price and the amount of profits expected that can be used for your future purchase!
3. Move Into High Gear & Go For It - The fun part. Now that you have a signed deal on your home and are an expert in your price point, go into full gear! Hire a broker (no fees) and tell them your ready to go ASAP, or spend at least an hour a day on your own looking at current inventory. Go to at least 4-5 open houses on Sunday's and try to see at least 2-3 places during the week! You are now free to make a bid and you can even use the contract of sale on your existing home as an asset on the board package to show profits expected.
NOTE: You are in a buyer's market and just like you most likely did when you negotiated the price of your existing home, you can negotiate the price of your future home! This really is an artform and you should structure your bids according to the ultimate purchase price you wish to pay for the new home!
Not rocket science I know, but something that existing homeowners sometimes fall prey to and look back on as one of their bigger financial mistakes! If you buy first, it better be because you have the luxury of unlimited funds. If you don't, then take my advice and SELL FIRST, BUY LATER! Ideally, you would like to sign a contract within 3-4 weeks of getting a signed contract on your existing property so as to co-ordinate the closing dates as close as possible. You might need to extend the closing date for your existing by 1-2 weeks and expedite the closing of your new home by 1-2 weeks to do so, but that is certainly something you can prepare for.
A: We hear all the reports of the housing slowdown, well here are some notable reductions that are worth noting for the higher end. Take specific note of the Chelsea House Condo's BIG price reduction of almost 35% on APT 3A & the 66th Street Townhouse that was reduced by $4.5M. It seems even developers and the super wealthy are starting to jump on the price reduction wagon; finally!
130 West 19th; Apt. 3A
Size: 1,571 SFT
# Beds: 2
# Baths: 2
RE Taxes: $83 (See my post on 421A Tax Abatement)
Asking: $1,575,000 (Reduced $370K from $1,945,000)
Price Per Sq. Ft.: $1,003 (for a new dev in Chelsea!!)
Marketed By: Chelsea House Condos
347 West 39th; Apt. 13E
Size: 1,420 SFT
# Beds: 2
# Baths: 2
Asking: $1,275,000 (Reduced $100K from $1,375,000)
Price Per Sq. Ft.: $898
Marketed By: Cynthia Dillon of CBHK
131 E 66th Townhouse
Size: 10 ROOMS
# Beds: 5
# Baths: 4.5
Asking: $12.5M (Reduced $4.5M from $17M)
Price Per Sq. Ft.: N/A
Marketed By: Robert Browne, Maria Pashby, & Chris Kann of Corcoran
A: Lets go outside the box today. Lets analyze what is happening in the geopolitical world and see how that might affect housing; if at all. Specifically, could the latest news out of Iran affect the price of oil, which in turn will affect inflation pressure, which in turn will affect the US economy, which in turn will affect the fed's future moves with interest rates, which in turn will affect purchasing power, which in turn will affect the buyer pool for housing?
In recent headlines:
Russia Still Seeks Iran Solution
Iran Tests Short-Range Missile
Iran: U.S. Mideast Plans "toppled"
Iran To Expand Nuclear Activites
...the most recent one titled "Iran says it's willing to resume talks" seems most optimistic. Included in this article are:
The Iranian government has provided a detailed written response to a package of incentives offered by the United States and other Western nations for Tehran to roll back its nuclear program.
So what if a resolution occurs. Here is a breakdown of what might happen for both case scenarios.
IRAN AGREES TO RESOLUTION & HALTS NUCLEAR DEVELOPMENT (in order)
Now the other scenario:
IRAN AVOIDES RESOLUTION & ACTION REMAINS POSSIBLE (in order)
Interesting? Yes to say the least. So, it does pay to take a step back and have a general understanding of what is going on in the real world that we don't have ANY control over. We just have to deal with the ramifications of either scenario and being educated on what will probably happen in both cases makes us all wiser for future investments that are made. Or, for at least risk assessment in our investments.
A: Existing Home Sales slumped to the lowest level since January 2004 and the inventory of unsold homes climbed to a new record, further indicating that the national housing cooldown is continuing. If we were to analyze the anatomy of a local housing market cooling down, what would it look like? Why would it happen? What forces are playing a role? Who are the winners and who are the losers? These are some of the questions that come to mind in the hopes of finding the best way to invest in housing cooldown!
According to Yahoo Finance:
The National Association of Realtors reported Wednesday that sales of existing homes and condominiums dropped by 4.1 percent in July from June to a seasonally adjusted annual rate of 6.33 million. That was the lowest level since January 2004. The inventory of unsold homes in July rose to a record high of 3.86 million. That represents a supply of homes still available for 7.3 percent of a month. That is the longest period to exhaust the supply of home since the spring of 1993.
HOUSING COOLDOWN: Well, I would describe it as a period of time in a particular local market where a combination of rising inventory, dampenening buyer demand, and increasing time on market occur at the same time. What forces are driving these three situations can vary, but the effect seems pretty obvious. The length of the cooldown is impossible to predict and is different for every market (For example: New York City's rising rents and shrinking vacancy rate are sure to help limit the length of a cooldown than say a city such as Miami that is ripe with speculative investors and new developments).
WHY IT HAPPENS
First of all, corrections in the housing market are completely normal and necessary to ensure longer term sustainable growth. For sake of dicussion, here are a few reasons why a housing market cools down.
1. Tightening Monetary Policy: As money gets more expensive to borrow, affordability drops and homeowners are forced to lower their budgets. Generally speaking, housing booms occur in historically low interest rate environments providing buyers with higher affordability. As buyer demand dampens, sellers are forced to lower their prices and/or respond to low ball offers.
2. Rising Inventory: As with most markets, when a boom becomes clear speculative investors jump in with the hopes of 'riding the wave'. Housing was no different over the course of the past few years. The combination of the average speculative investor (a.k.a. "real estate flipper") plus all the new developers with projects already underway are contributing to the # of sellers on the market. As inventory rises, buyers get more control with more choices for them and more competition amongst sellers. As long as this dynamic exists, the cooldown will continue.
3. Desperate Sellers: Due to in-building/general market competition, those sellers in dire financial situations will be forced to lower their asking prices to avoid going into foreclosure; Mis-management of funds, bad lending product decisions (3YR I/O Loan), or sudden layoff from work can all turn you into a desperate seller!
Now that we know some reasons why, let's see how it works in the real world:
SELLER OWNS 1BR/1BTH ---> LAST BLDG 1BR/1BTH SOLD FOR $575,000 ---> 2 1BR/1BTH's ON MARKET NOW ASKING $595,000 ---> SELLER PRICES AT $590,000 ---> 8 WEEKS LATER NO BITES ---> SELLER LOWERS PRICE TO $575,000 ---> 3 WEEKS LATER NO BITES ---> SELLER LOWERS TO $550,000 ---> BUYERS REALIZE A WEAK SELLER ---> 1 BUYER SUBMITS $520,000 BID ---> SELLER ACCEPTS ---> NOW, LAST BLDG 1BR/1BTH COMP IS $520,000 ---> OTHER SELLERS MUST COMPENSATE & LOWER PRICE TO $550,000!
If you don't think this situation exists and will continue to exist than you are living in a fantasy world. As you browse apartment inventory, you MUST keep tabs on those apartments that you really liked, but were a bit too expensive at the time you saw it. Have you checked the asking price lately? Is it lower?
And another thing, do NOT be afraid of submitting your highest offer that you can afford! Just disclose this when you submit the bid and tell them it is a 'take it or leave it' offer!
WINNERS & LOSERS
First the winners. Savvy buyers who know the inventory in their target price point and understand how to seek value based on permanent features such as location, views/light, and raw space will find real estate success long term by buying in cooling housing markets. This is also known as Contrarian investing, meaning you are buying into a market that is down and out. Now I wouldnt call the current NYC housing market as down and out, but buyers definitely have more control now and there are great deals popping up! Are you savvy enough to find the wreck that is asking $200 a sft less than every other apartment for sale in the same building?
Now the losers. Those current homeowners who will be forced to sell due to financial mismanagement/bad decisions, job loss or transfer, or lack of knowledge of lending product taken out. All of these 'losing characteristics' have a FINANCIAL ASPECT in common with each other whether it be your job and some type of sudden change, your own financial well being or lack thereof, or the financing product you took out. See a trend? The only way to sell quickly in a cooling housing market is to lower your price aggressively; not the best strategy for those with lofty investment goals! Ideally you want to have the choice of WHEN you sell your property, which leaves recognizing the selling opportunity as the next project on the list!
A: Want to live in NYC in a doorman building, on Central Park West, with a landscaped roofdeck but only have $250K to spend? No problem! Check this listing out.
225 Central Park West; Apt. 516
Size: 340 SFT
# Beds: 0
# Baths: 1
maintenance: $488 (Not bad!)
Price Per Sq. Ft.: $732
Marketed By: Dennis Colwell Jr. of Corcoran
EXPECTED MONTHLY COSTS w/ MIN DOWN PAYMENT = $1,550
*Pre-Tax costs assume 35% down and 30YR fixed at 6.75%
NOTE: That the minimum down payment of 35% limits the marketability of this property and might be a hint as to the toughness of the co-op board. When co-op board's require so much down, they usually also require tougher salary and liquid asset holdings to pass board review! A strict board that limits marketability means a lower price at resale for the homeowner; a double-edge sword for the prospective buyer!
A: With all the bubble talk and speak of a housing market doomsday, I thought it would be warranted to take a step back, and see why NYC's housing market is likely NOT to crash compared to other highly speculative local markets such as Miami, Las Vegas & Phoenix.
First of all, housing must NOT be taken nationally! What is happening in one local market might be the complete opposite of what is happening in another local market! For example, as the housing market in Miami continues to see inventory rising and speculators rushing to flip their already purchased properties, the housing market on the outskirts of Philadelphia are seeing more demand and increasing prices.
See Jonathan Miller's post: Real Estate Brotherly Love: 2nd Quarter 2006 Market Report For Philadelphia, PA
On UrbanDigs, I try to focus on the NYC housing market because it is so different than almost all other markets across the country and the fundamentals powering it standalone. Given current macro-economic conditions that include rising interest rates, high energy prices, geo-political tensions, and inflation pressures where would one look to mark strength in housing? Well, people need a roof over their heads and rental prices nationwide are on the rise! That's a start. But what else?
Here are 5 reasons why I think the NYC housing market will correct but will NOT crash as the housing downturn continues into the next few years:
1. Population Growth - According to www.census.gov, NYC's estimated 2005 population is 8,143,197! Just to give you an idea of the size of this number, here are some population stats for other major cities.
New York - 8,143,197
Miami - 2,376,014
Chicago - 2,842,518
Denver - 557,917
Las Vegas - 545,147
Boston - 559,034
NYC's population is still growing and buildable land is scarce! Housing will always be in demand and it will only be a matter of time until the rise in rental costs combine with a slowdown in housing put BUYING back in favor again! Read my post on "Rent-Hike Induced Housing Surge" for more info on this changing dynamic.
2. Rent Increases & Vacancy Rate Will Prevent A Housing Crash - Taking #1 a step further, NYC has experienced a declining vacany rate for the past 1-2 years or so mainly because of the housing boom and the conversions of rental buildings to condos to take advantage of market trends. The combination of high housing prices and lower inventory translated into a nightmare for renters; higher rental costs, less inventives offered, and little inventory to choose from!
Now, as the housing market continues to cool and inventory slowly rises more choices will be available to prospective purchasers feeding a buyer's market for years to come. Once prices start to come down as a result, I would expect more and more renters to convert to buyers to take advantage of the opportunity. This may not happen for another 1-2 years, but seems a very logical chain of events to predict given information at hand right now.
The skyrocketing rental market in NYC will be self-defeating and will contribute in providing a floor in the housing market downturn.
3. Lack of Speculators - Very interesting fundamental right here in that NYC is made up mostly of co-op's (aproximately 75% of NYC is co-op). As we all know, co-ops are private corporations that issue stock and a proprietary lease to the homeowner and generally have strict policies governing who is allowed to buy into the private corporation!
Since the other shareholders of the corporation have a vested interest in who becomes a stockholder, they can reject those who do not meet their financial guidelines or those who intend to use the property as a second home (pied-a-terre).
Speculative investors (a.k.a. flippers) do NOT like the co-op legal structure because it limits the marketability of their property and therefore goes againts their gameplan of buying and selling for a quick profit. In a nutshell, speculative investors go for condos! Since NYC is mostly co-op it is also protected against a large # of speculative investors which in turn will prevent a large # of apartments hitting the market at once as flippers run to 'cash out' before its too late!
On the other hand, a market like Miami is closer to 80% condo and allows a buyer to sell a pre-contruction unit even before they closed! That is speculator friendly and presents a very tough market to profit from when housing starts a downturn! Watch out Miami, San Diego, Las Vegas, and Phoenix!!
4. New Yorkers Earn $$$ - NYC is the financial Capital of this country and there is a ton of money floating around this city both to be made and to be spent! The median household income of a NYC family in 2004 was $50,731 as opposed to these other cities:
New York - $50,731
Miami - $37,025
Chicago - $40,656
Denver - $43,777
Las Vegas - $44,737
With the economy only now beginning to hint of a slowdown, NYC workers have had a very good run and incomes have risen over the past few years fueling the creation of a very large and suitable buyer pool. As the housing market cools and new workers save up for homeownership, I think all these dollars will be put to work via home ownership providing another floor to prevent any housing crash here in NYC!
The skinny: There is no lack of demand in NYC because people can't afford it! If anything, people are choosing to wait and save more to eventually buy down the road! In the end, there will be a very healthy and growing buyer pool waiting to put their money to work in NYC housing when an opportunity presents itself! NYC housing tends to have longer boom cycles and shorter bust cycles making it very hard to time the market perfectly.
5. Energy Prices & The Fed - I'm stretching a bit here on this one but I don't care. Its worth noting that living in NYC doesn't require a car! Everything is right at your footsteps here and if it's not, then your only a short subway/bus ride away; which is one of the main reasons why I love this city. The money you save on buying/leasing/financing car and the gas, insurance and maintenance fees are enough to rationalize moving to NYC! If you will save $800 a month by living in Queens but need a car to do so, then calculate what your spending every month on car expenses, gas, insurance and maintenance. I bet you it adds up to the difference in housing expenses saved! But, some people want a car and this argument won't apply to them. Fine. I'll stick to renting a car for $75 all in when I need to.
The there's the fed and their monetary policy. I reported last week on the fed's pause in raising interest rates for the first time in 2+ years. Good news for homeowners (especially HELOC owners) and potential buyers as mortgage rates dipped a bit in anticipation of this pause. The worst may not be over but its a start! With interest rates very close to their peak, money will still be historically cheap to borrow making homeownership possible for those who planned accordingly! While your monthly payments will be higher now than if you borrowed a few years ago, but hopefully the temporary decline in prices will be enough to offset the difference.
There you have it! My 5 reasons why NYC real estate will NOT crash. I do think a correction is already underway and that once the housing market makes that turn, it is very hard to stop it from proceeding down its chosen road. But you should all note that a correction in the housing market is a HEALTHY, NECESSARY STEP FOR LONGER TERM SUSTAINABLE GROWTH of housing. So, save up, get your credit perfect, and look for the opportunity that will both put a roof over your head and make you money!
A: A great tool for any potential homeowner. Simply plug in the #'s that correspond to your property and Calculate! Knowing your AFTER-TAX costs of homeownership will help you make an informed decision on whether to buy or rent, or if a property fits into your financial budget!
CCH Mortgage Tax Savings Calculator
Real Estate is such a popular investment vehicle because of all the tax benefits that come along with it. Do you know your AFTER-TAX costs of homeownership? Its 5 minutes of your time!
A: If you are stuck between 2 apartments, and not sure which one to take, buy the one that has the more space, is in the better location, and has the lower monthly charges. If one apartment has 2/3 of these factors in it over the other, than your decision is clear!
One of the hardest decisions you will have to make as a BUYER of NYC Real Estate, is: Which apartment do I take?
If your one of the lucky ones, then you will find exactly what you were looking for, which happens to be priced right, in the right neighborhood, has the right space, has low enough monthlys, and the perfect amount of light and views. In this case, its a no-brainer: Just Go For It!
But chances are this is not the situation you will find yourself in. So, we need to discuss what takes priority over what, and which amenities you should favor in making that final decision. As you read on, please know that I am assuming that the apartments you might be choosing between are all within your maximum budget! If you cant afford it, then you shouldnt buy it!
Since value of NYC Real Estate is measured mainly using an industry standard of price per square foot, RAW SPACE, should be the #1 factor in your decision. Since space is always an issue in this crowded city, finding the MOST space in the WORST condition in the BEST neighborhood is the religion of real estate masters. Let me repeat that:
...finding the MOST space in the WORST condition in the BEST neighborhood is the religion of real estate masters.
A very close 2nd, should be LOCATION. If you want to be near Central Park, and then find a great apartment that is only slightly too small than what you were hoping for, TAKE IT! However, if there is a noticeable disparity in size that is to be sacrificed for location, than SKIP IT! Use this formula to guide you in deciding whether LOCATION is worth it or not:
1BR / 1BTH
Under 100 Sq. Ft. Smaller ---> TAKE IT
Over 100 Sq. Ft. Smaller ---> SKIP IT
2BR / 2BTH
Under 175 Sq. Ft. Smaller ---> TAKE IT
Over 175 Sq. Ft. Smaller ---> SKIP IT
3BR / 3BTH
Under 250 Sq. Ft. Smaller ---> TAKE IT
Over 250 Sq. Ft. Smaller ---> SKIP IT
The final factor that should be used, and # 3 in my post here is MONTHLY CHARGES. It is vital to buy an apartment whose monthly charges are lower than its peers. I cannot stress enough the financial burden you will place on yourself by purchasing an apartment whose monthly charges (maintenance + TAXES) are much higher than any of its peers, and whose asking price WAS NOT REDUCED to compensate for affordability! Read my post, "High Monthly's! Find The Discount!" which talks about finding value in a property with higher monthly's whose asking price was reduced dramatically to compensate in a higher interest rate environment!
So, to sum up, here are the 3 most important factors to consider when making that final decision, in order of priority:
#1: RAW SPACE (Apartment + Outdoor Space)
#2: LOCATION (School District, Proximity To Park/Trains)
#3: MONTHLY COSTS (Lower Charges = Higher Value)
Factors that should NOT be taken into account when deciding between 2 or more properties are:
#5: Closet Space
#6: Desired Building / Friends in Building
#7: Gym/Roofdeck in Building
A: Another week, another set of some notable price reductions to bring to you. Not much to choose from this week as a lot of the price cuts still didn't present deals worthy of attention. However, here is the pick of the litter in my opinion should any be in your target neighborhood and price range.
STUDIO PRICE REDUCTIONS
60 East 9th Street; Apt. 330
Size: 460 SFT
# Beds: 0
# Baths: 1
maintenance: $448 (Below $1/sft!)
Asking: $330,000 (Reduced From $380,000)
Price Per Sq. Ft.: $717
Marketed By: Dee Simonson & Mary Anne Cotter of Corcoran
1BR PRICE REDUCTIONS
301 East 22nd Street; Apt. 8R
Size: 750 SFT
# Beds: 1
# Baths: 1
Asking: $549,000 (Reduced Three Times From $640,000)
Price Per Sq. Ft.: $732
Marketed By: John F. Benetos of Elliman
330 Third Avenue; Apt. 4B
Size: 750 SFT
# Beds: 1
# Baths: 1
Asking: $549,000 (Reduced From $565,000)
Price Per Sq. Ft.: $732
Marketed By: John Fisher & Larry Brookner of Elliman
A: The fed ended a 2+ year interest rate hike campaign today with a PAUSE and leaving the fed funds rate at 5.25%. However, they issued a statement saying, "some inflation risks remain and continued tightening may be needed"!
The decision was NOT unanimous (9-1) as one voting member of the fed wanted to bump up rates another 25%! Also, the statment was a bit on the dovish side as the fed stated that inflation expectations are for a moderation in inflation as past fed moves kick in and the economy continues to cool.
NOTE: A pause does NOT mean the fed is done completely! Yes, if the economy continues to slow, inflation will seem to dissipate, and the fed may have to cut rates to stimulate the economy again. But the timing of such rate cuts are probably further down the road than people think! For the short term, another future rate hike is much more certain as future inflation #'s will reflect the lagging effects of very high energy and commodities prices!
Plan accordingly and expect the last 3-4 fed rate hikes to still trickle through the economic system and affect all of us over the course of the next 8-10 months!
A: Here is the monthly report showing the # of NEW LISTINGS that have come to market across New York City. In the graph below I compiled data based on certain price groups and compared the # of New Listings that came to market in JULY vs JUNE. Not surprisingly, the number of new listings to market slowed across all major price groups except under $250K! NYC real estate is seasonal with slow open house activity and many new sellers waiting until after labor day to list their apartment for sale.
Neighborhoods Included: Battery Park City, Central Park South, Chelsea, Clinton, E. Harlem, E. Village, Financial District, Flatiron District, Gramercy, Greenwich Village, Harlem, Little Italy/Chinatown, Lower East Side, Midtown, Murray Hill, SoHo, Sutton Area, Tribeca, Upper East Side, Upper West Side, W. Village
CONCLUSIONS: Have you noticed less choices if you are looking to buy an apartment in NYC lately? It's not an illusion. The # of new listings in the month of July has decreased significantly across almost all price groups. I would think the slowdown in new listings is consistent with the seasonal market that affects NYC. I've said numerous times that the summer is not the best time to sell as open house activity is generally weak and buyers stay out of the heat and leave NYC during the weekends. That leaves sellers with less action and the likelihood of accepting a lower offer than normal; a good recipe for serious buyers.
Expect much of the same for next month's inventory report and and an uptick in listings inventory as we move past labor day!
CURRENT STATE OF THE NYC HOUSING MARKET: Exactly the same as last month's analysis! Most sellers are still in denial about the housing cooldown and price their property's at last years levels with the hopes 'their home' will get that perfect uneducated yet wealthy buyer. Not so. Time on market is still about 2-5 months or so as most seller's these days will lower their asking price at some point during the sales process. Buyers are very savvy and patient resulting in no bidding wars that I am aware of, and sellers should realize this dynamic sooner rather than later when discussing the future of their marketing strategy with their hired representative broker.
My advice to sellers: Give yourself time to sell your apartment in today's market. Should you HAVE TO sell right away, be sure to aggressively price your apartment otherwise it just won't sell as fast as you hope.
A: Turn the Dining Area into its own, expanded 2nd bedroom. Add a closet (small is fine) and add electrical switches/outlets. It should be as large as possible and use up what I consider to be non-useable space that lies between the alcove and the living area. Make the 1/2 Guest Bathroom into Full Bathroom if possible.
The logic here is that you will market this property as a 2BR/1.5BTH Apt. and you will be reaching a target group of potential homebuyers that you normally wouldn't, with a lot more money to spend.
NEVER ASSUME THAT THE BUYER OR BROKER WILL FIND YOUR LISTING FOR A 1BR / 1.5BTH, WHEN THEY ARE LOOKING FOR A 2BRYou need to get to that next level from a marketing standpoint, when it comes to the real estate game in New York City. Brokers do it all the time with the "cozy", "charming", and "spacious" talk. Im talking about doing it with the layout, the floorplan. Try to change the floorplan, in a very nice way, to create more of what is not there. This will catapult your listing into a higher bracket when you go and advertise it. In this case we are going from a 1BR apartment to a 2BR apartment, for what could possibly be only a $5000 job.
I find that marketing a 1BR property and calling it a Convertible 2BR is way overrated. In the end I dont think it sells as well as pure presentation. From a risk/reward perspective you are spending $5,000 with some imagination and creative touch, for a possible $50,000-$100,000 increase in selling price.
If you don't do the renovations and spend 4x as much money on redoing the kitchen and bathrooms, how much more will you really get considering the final cost? 10K? 30K?
Be smart. If there is a constant gap in selling prices between 1BR & 2BR property's in this city, sometimes as much as $400,000, then you need to get your property at the lower end of the 2BR stockpile. Psychologically your property will be viewed as a VALUE to those buyers seeking a 2BR property. To them, all of a sudden here is a 2BR / 1.5BTH (which is fine for an expecting family), that is priced about $150,000 under the rest of the 2BR's! Look at this # analysis if your having trouble catching on here:
AVERAGE SELLING PRICE 1BR / 1.5BTH CONDO IN UES
AVERAGE SELLING PRICE 2BR / 1.5BTH CONDO IN UES
AVERAGE SELLING PRICE 2BR / 2BTH CONDO IN UES
If you can make the 1/2 bathroom (Guest Bathroom) into a full bathroom using space adjacent to the bathroom, then DO IT! It will be a big headache and probably cost about $15,000-$20,000 when all is set and done with all the labor, construction, materials, board filings, department of buildings filings, and architect fees. But in the end, you will be able to add on a good $75,000, possibly more, to your purchase price and put your listing with the 2BR/2BTH's that are out there.
SOME JR'4s CURRENTLY FOR SALE (listings from Feb 19th, 2007):
201 East 79th - $995,000
1036 Park Ave - $975,000
200 Central Park South - $949,000
60 East 9th Street - $895,000
A: The fed meets next week to decide the next move with monetary policy, and I have to say that this meeting is by far the most confusing one in the past 2 years as to whether or not there will be an 18th consecutive 1/4 point rate hike or a pause. The markets are betting on a pause. Here is the skinny!
FED FUNDS FUTURES ARE 36% FOR HIKE & 64% FOR A PAUSE
The fed funds futures contracts are bets made by traders as to whether or not the fed will hike at their next meeting. Right now traders are betting on a pause!
This is mainly due to Bernanke's speech to Congress a few weeks ago where he mentioned that he believes a 'cooling economy will help keep inflation pressures at bay'. I do not agree but then again he is Big Ben and I am UrbanDigs.
All in all, the fed funds futures are betting on a PAUSE!
EQUITIES MARKETS RALLY AHEAD OF FED MEETING
The equities markets are rallying in anticipation of a pause at next week's meeting. A party too early? Perhaps! However, with the fed funds futures predicting a pause, money is following suit in equities. Should the fed pause, a slight temporary rally in stocks should be expected as the recent rally is already pricing in a pause. Should the fed raise 1/4 point, stocks will fall. Should the fed raise 1/4 point and issue dovish remarks (that means they mention the rate hikes are pretty much done), the equities markets will probably fall at first but then rally after.
All in all, the stock market is betting on a PAUSE!
BOND PRICES RISE AS YIELDS FALL
The bond market has experienced a runup in prices and a dropoff in yields as bond traders are predicting a pause at next weeks fed meeting! Remember, as bond prices rise yields fall and vice versa.
The 2YR, 5YR , and 10YR treasury notes all had a significant drop in yields as they predict an end to the 2+ year interest rate hike campaign and bet on a upcoming US recession (via an inverted yield curve) where the fed will have to cut rates to stimulate the economy.
All in all, the bond market is betting on a PAUSE!
MORTGAGE RATES & US DOLLAR DROP
Freddie Mac reports 30-year sinks to 6.63% on weak GDP numbers, warns that number will drift over next few months. The average rate on 30-year fixed-rate loans fell to 6.63 percent for the week ending August 2 from 6.72 percent the week before.
The weak GDP # technically means inflation is not as bad as first thought, that the fed can pause with a slowing economy, and therefore mortgage rates reacted as such.
Also, the US dollar has been getting hit as currency traders devalue the greenback as most other tradable markets predict a rate pause at next weeks meeting. Recall that the US dollar rises as the fed raises the fed funds rate and makes fixed asset investments more attractive! With a pause now predicted, the dollar is weakening.
All in all, lending rates and US currency traders are betting on a PAUSE!
The case for another 1/4 point hike is certainly very compelling given the recent jump in core inflation and the surprising strength in US manufacturing data; which shows inflation rising and US economy still strong. Recall that Bernanke started this whole PAUSE chain of thought by saying that a slowing US economy will keep inflation at bay! Oh boy, I hope he's right because most economists would agree that inflation is far worse than a recession, and should take priority as monetary policy is set to control price stability.
This is how I see it:
With the core inflation number well above the fed's stated comfort zone I just don't see how they can solely rely on a predicted slowdown in the US economy to ease inflation pressures on its own. An 18th consecutive 1/4 point rate hike is needed and will show the markets the hawkish nature of the fed and their willingness to fight inflation. That would be the right move. A fed funds rate of 5.5% is NOT restrictive historically speaking as we were at 6.5% in the mid 2000 when the fed tried to slow down the booming dot com equity markets. All homeowners should keep an eye on next week's move as it will eventually affect their monthly mortgage payments!
A: A Condop is the marketing term given to a Co-op that has rules and by-laws similar to that of a Condiminium. The freedom to sublet, put only 10% down at closing, and easy board approval are characteristics of a Condo that have been adopted by a Co-op. The subsequent term to define this type of entity has been "A Condop". Closing costs will be similar to that of a Co-op (significantly lower than Condo's) and you will be buying shares in a corporation rather than real property. *Although you are technically buying a Co-op (shares of stock), I will refer to a Condop as a Condop throughout this post.
Buying a Condop definitely has its advantages if you are lucky enough to find one in the neighborhood and price range that you require.
Financial: The closing costs will be much lower than if you were buying a Condo. Transaction fees usually end up being a lot more than most think at closing, and if your buying a Condo they could be twice as much as if you bought a Co-op. Talk to your real estate attorney before signing the contract to get a estimate of your closing costs.
Freedoms: Just like a Condo, a Condop allows you to sublet your property without restrictive policies; such as, 'Must Live-in 2YRS & then can Rent out for 2YRS' which happens to be a frequently occuring policy in Co-op's. Other freedoms condop's generally offer are no pied-a-terre policy, use of co-signer or guarantor, and parents buying for their kids.
Board Approval: Condop's usually take on the NO BOARD APPROVAL or EASY BOARD APPROVAL policy of only looking into a buyer's credit and criminal history when reviewing for approval. On the other hand, a Co-op Board process is very tough with customized financial and personal policies lowering the pool of potential buyers that the property can be marketed to.
Required Down Payment: Most Condop's take on the 90% financing allowed policy that is so common in Condominium's. Allowing a buyer to finance up to 90% of the purchase price is a big selling point of Condo's and opens up a larger audience of buyers that can possibly purchase the unit. Co-ops that require more than the traditional 20% down are restricting the group of people that can potentially purchase a unit (which is usally exactly what the board wants).
Median Valuation: Condop's are normally valued in between a Co-op and a Condo. If I were to describe how the same apartment would be valued, under each of these property tyes, it would look something like this:
500K --------> 550K ---------> 600K
Co-op --------> Condop ------> Condominium
Put all these characteristics together and you get a property type that will be very attractive to a first time buyer with limited funds, who needs to finance 90% of their planned purchase. With loans going out to anyone with a credit score over 500, the fact that there is NO BOARD APPROVAL is the next vital ingredient for the potential homebuyer who normally wouldn't have enough liquid assets after closing to appease the co-op board. Add in a valuation lower than a pure Condominium but higher than a pure Co-op, and you can see why Condop's have their own niche market.
Some Condop's To Note:
520 West 23rd Street
310 East 46th Street
333 East 46th Street
240 East 76th Street
300 East 85th Street
Building Data Courtesy of Streeteasy.com.
I finally upgraded to the newest Movable Type software so that I can control comment spam! I enabled comments again so please feel free to speak up and say whats on your mind! An open forum is a good forum for all of us and I hope to get more user participation to get different views on different subjects so everyone can be enlightened!!
Sites like BubbleMeter post once a day and get a ton of user comments that in my opinion are very educational if you can stand the harsh criticisms of some bubbleheads. You get to hear varying opinions on the same topic and think in a way you might otherwise would dismiss. Thats what its all about so, please, if you have an opinion then write a comment! Would love to hear from you!!