Loan Choice: 15YR vs 30YR

Posted by urbandigs

Thu Mar 29th, 2007 04:54 PM

A: Extending the mortgage posts a bit longer here, I want to discuss the possible advantage towards choosing a 15YR Jumbo mortgage over a 30YR one. If feasible based on your income and liquid assets after closing, a 15YR Jumbo loan might be a wise investment option.

No one knows where rates are going in the near future let alone 7-15 years from now. If anything, the environment right now is filled with so much uncertainty that the fed really could go either way based on incoming data. But people want security. They want little risk. So, to keep your investment decisions clear and to avoid making things more complicated, lets forget the adjustable rate mortgages (ARM) for now and take a look into whether or not a 15YR Jumbo loan might be a better choice than a 30YR one!

According to, the rates on both the 15YR & 30YR Jumbo loan & their 1-Year charts are:

15 YR JUMBO LOAN - 5.69%


30 YR JUMBO LOAN - 6.03%


Now lets do some math. Lets assume that you are buying a $650,000 condo with 10% down and are doing an analysis on what the advantages of a 585,000 loan would be for a 15YR loan over the 30YR option in terms of monthly payments and interest saved.


While statistics show that most homeowners wind up selling or refinancing in less than 7 years, take a look at the incentive in interest savings if you live in or rent your home 15 years! Of course, this is entirely dependent on whether or not it is economically feasible for you to pay that extra $1,300 a month.

But if you can pull it off through the decision of buying a property that is well in your budget rather than at the top end, you will end up saving a bit less than $400,000 in total interest paid to the lender over the life of the loan.
But wait, there's more to look into.

What about the higher expense that you pay monthly to get that advantage? Lets do some more math:

180 months (15 years) X $1,300 in extra monthly payments = $234,000 over the life of the loan

So, thats $234,000 more money that you are paying out of pocket over the life of the 15 year loan in order to save about $395,000 in total interest paid to the lender. In reality, that $234,000 more money is a bit less because in this example I didn't take into account tax benefits offered to homeowners!

UrbanDigs Says: For all those who have high salaries and are buying a property well within your budget, I say to consider the 15YR loan option with your lender and see if it is both economically feasible and consistent with your timeline to own! If you plan to grow into this new home, than it becomes a very attractive loan option. To determine if its economically feasible, check your debt/income ratio and see whether or not the higher loan payment will keep this ratio below 33% or so; and if the board will allow that. You might want to make up that expense by cutting down your costs somehow if you are closer to 33% to rationalize the decision. In the end, you could save some big bucks in total interest paid to your lender even after calculating in the total extra money you need out of pocket to carry the loan! You can quickly build wealth by using a combination of live in / rent out investment strategy over a 15YR term and at the end of the day have a great debt-free asset in your portfolio!

Ahead of the NY Times - New Dev Sizing

Posted by urbandigs

Thu Mar 29th, 2007 08:47 AM

A: Thanks to an UrbanDigs reader turned buyer client for pointing this one out to me! On March 25th, the NY Times published a story titled, "The Danger in Fine Print" that discusses the dangers of estimates and approximations listed in the 2-inch thick offering plans of new developments. As the project completed and began occupancy, past buyers found that their units were smaller than what they expected, appliances aren't delivered as told, and the view is not quite what they imagined them to be. Well, New York is a buyer beware state!


In my post titled, "New Dev Sizing: Double Counting", I discussed the trend that some developers take in adding the common elements to the marketed square footage of specific units. I published this post back on January 19th, 2007 as I observed the practice in real time with my buyer clients. The next step for me is to bring it to light for my readers!

In my post, I mentioned:

When it comes to the quoted size of a new development condominium property, some developers include the portions of all common areas such as hallways, elevators, lobby's, roofdecks, etc. that are allocated to an individual unit; also known as 'common elements'.

Be sure to ask the sales team if the new development you are thinking of buying into has included the allocated common elements into the unit you are considering. Your attorney could explain this in more detail especially when the offering plan is reviewed before you sign any contract of sale!

And dont forget Jonathan Miller's (Matrix) statement verifying this:
The % of common elements is based on the total square feet of the unit / total square feet of all units in the building. This percentage is then used to allocate expenses. Lately we have been reading about developers who have been taking liberties with including common area in the square feet calculation, (double counting), so it makes the square feet look larger, driving down the ppsf.

Even Christine Toes got in on the act reporting on new developments that have been leaving out furnishings! Check out her post titled, "$900K & No Shower Door: What Gives?".

The recent NY Times article states:
Rooms are often smaller than advertised. The Viking stove isn’t there, but a stove described as being of “similar quality” is. The view is not at all what the buyers imagined.

Were they deceived?

Not necessarily. In many cases, neither they nor their lawyers read the offering plan carefully.
So what to do about it? Well, one buyer found a way out. As stated in the article, one unsatisfied pre-construction customer did the following:
As soon as they could, they took advantage of an escape clause that allowed them to walk away from the deal and get their deposit back because the building was not ready for occupancy when it was supposed to be, by the end of 2006.
Hmmm. Sound like justice to you? Perhaps, but this buyer and more importantly their attorney should have been more inquisitive earlier on in the buying process. By simply asking the sales team if 'the interior square footage being marketed includes the common elements' they could have found out before signing any contract if the unit will be smaller than the total size originally mentioned.

Other more commonly missed details include:

1. Lot-Line Windows - if neighboring lot is developed in the near future the view will be lost and the windows will have to be bricked up

2. Air Rights - did the new development buy the nearby air rights to protect views of the residents

3. Mechanical Vents - Could be installed on terraces or in view of your exposures; depending on building design and your view. Could make noise and cut outdoor space in half

4. High Ceilings Interrupted - More mechanical vents or structures might alter the ceiling height promised to you. Be sure to check if anything is planned.

UrbanDigs Says: First off, its encouraging to see that trends I report on here are later on being turned into full fledged stories on major media outlets such as the NY Times. I assure you that I will continue to report anything that I observe/learn that includes tricks, potential pitfalls, and other trends that might affect your investment! Second, please be sure to use a reputable real estate attorney who does good diligence on your behalf before you sign that contract. Having a educated real estate broker representing you is another good idea as they might ask questions in your best interests that you wouldn't normally think of. In the end, you MUST be educated about every aspect of the real estate investment you are about to make so as to limit any surprises down the road!

NEWS BREAK: FBI Investigates Beazer

Posted by urbandigs

Tue Mar 27th, 2007 04:21 PM

A: And the sub prime mess gets a little uglier. Breaking news on CNBC reports that the feds are now investigating Beazer Homes for lending fraud. Is this just an isolated investigation or the beginning of a new trend in the extension of loan worries that may expedite lenders into tightening standards?


CNBC reports that the FBI has opened an investigation into home builder Beazer Homes for acts of mortgage fraud in predatory lending practices. Already lending woes are starting to prove deeper than originally expected as now the homebuilders are at risk for more investigations.

Expect the home builder stocks to get hit and tighter lending practices to be put in place throughout the entire home building industry earlier than expected as a result of this fed action. And the hits just keep on coming!

Beazer Home's Stock price (BZH: NYSE) is down about $4.31 in after-hours trading.

Do You Know About Your Loan?

Posted by urbandigs

Tue Mar 27th, 2007 11:15 AM

A: Gosh, I can't even remember the last time I did a mortgage do's or don'ts post here on the site. I realize that I have been discussing the fundamentals about the sub prime mess more than about tips to understanding what loan may be right for you. So, when I read this article on Yahoo Finance by's Elizabeth Razzi, I certainly was surprised. Most homeowners don't have a clue about their loan, when the rate expires, and what they might do when this occurs! Ahh, the American Dream!

"34 Percent of homeowners are clueless about their mortgage"

According to the article on Yahoo Finance:
In the survey conducted by Gfk Roper, homeowners with mortgages were asked what type of mortgage they had. A stunning 34 percent of the homeowners had no idea.

"That's a symptom of the complexity of the mortgage market today," says Ken Wade, chief executive officer of NeighborWorks America, a nonprofit organization that provides financing and training to neighborhood-based housing organizations.

Younger borrowers, and those with less experience as investors, can find the array of loan choices particularly confusing. Anthony LaGiglia, managing director of J.J. Burns & Co., a financial advisory firm in Melville, N.Y., says such borrowers have fewer benchmarks against which they can judge loan products. "They don't know what the market can be paying them in interest, and they don't know how much they should be paying on loans, either. That's a situation ripe for abuse by unscrupulous mortgage people."

Check out the pie chart showing this surveys results; its quite amazing:


OK, so 34% of homeowners in this survey just have no clue about the biggest loan they have taken out in their lifetime. I don't see any major problem with that, do you? So, what happens when the loan resets, if its an ARM? Well, lucky for us there was a question on the survey asking that as well.


Well that certainly doesn't help! Again, 34% of homeowners have no idea what they will do. Talk about thinking ahead!

The problem with this country is that too many people get involved with big investments without understanding all the aspects/costs/penalty's of their decision making. Hence the goal of!


That means not only knowing product knowledge, finding value, what to pay for, and what you can afford, but also knowing what type of loan to take out and the characteristics of that loan!

For example, when I first bought my property on E 93rd street I did NOT take into account that my real estate taxes might increase as the housing market appreciates. Well it did! My real estate taxes went from $450/mth to $800/mth because the increase caused a shortage spread and I had to make up the shortage of payments from the previous year! After a year of making up those payments, my real estate taxes were $8100/annually or $675/mth. So, now I keep in mind that some things I think will not change just might.

Have you considered what might happen to your monthly costs if:

  • your building has a major renovation in need and maintenance assessment is put in place

  • if real estate appreciates and taxes are raised again in the years to come

  • if your loan resets at a higher rate and your payments shoot higher

  • Just be educated about all contingencies that might arise that will affect your monthly payments! Especially in your loans! If you don't know about your loan, what rate you have, or when it might reset, then call your lender today and find out some answers!

    Here are some of my previous posts on Mortgage Do's & Dont's:

    When an ARM is a Good Idea?

    Interest Only Loans: Are They For Me?

    Lay Off The ARM's

    PH Dreams? Its Yours For Only $18,000,000

    Posted by urbandigs

    Mon Mar 26th, 2007 02:17 PM

    A: No one ever said high quality living comes cheap! Check out this new to market Penthouse unit at 135 W 70th street; a 10-ROOM, 5-BR, 5.5-BTH + 2 large terraces asking a wallet emptying $5,455/sft! So, who wants to start a fund to buy this baby?

    THE PYTHIAN CONDO (135 West 70th Street)


    One of the city's most fabulous buildings, the Pythian is richly decorated in brightly colored, glazed terracotta embellishments depicting figures of antiquity.

    It was designed by Thomas W. Lamb, one of the country's foremost designers of movie palaces, most of which, sadly, have been destroyed. One of his other works in New York is the Audubon Theater and Ballroom building on Broadway and 165th Street.

    "Hollywood may have had its Grauman's Chinese, but New York has its Pythian Temple! Hidden on an anonymous side street, this opium-smoker's dream is best seen from across the street- or better still from someone's upper floor-apartment to the south," wrote Elliot Wilensky and Norval White in the excellent book, "The A.I.A. Guide to New York City, Third Edition," (Harcourt Brace Jovanovich, 1988).

    What $18,000,000 Can Buy You


    First Came on Market: 3/19/2007
    Asking Price: $18,000,000
    maintenance: $3,354
    RE Taxes: $3,628
    Size: Interior Aprx 3,300 SFT + 2 Large Terraces
    PPSF: $5,455
    Marketed By: Rina Schafman of BrownHarrisStevens

    God I hope there is an Open House so I can check this one out!

    The New Fed: Who Are They...?

    Posted by urbandigs

    Fri Mar 23rd, 2007 07:59 PM

    A: I feel the need to defend myself. Exactly six days ago I went on record as saying, "If I'm right, than in 4 weeks the 10YR Treasury yield will be at least 25 basis points (0.25%) higher...". Then, four days later the fed announced no change with monetary policy but a change in statement. The fact is, after digesting the statement over the past day or so many economists, anaylsts, and traders are getting to know the new fed chairman is different than what we first expected. This is a new fed, and we MUST learn to live with the idea that we may not know what all the statement changes mean for a while. That is exactly what happened in the past few days; here is why.

    Here is what I said back on March 17th:

    The 10YR yield ended the week at 4.54%. If inflation fears start to come out again as I expect them to, the yield on the 10YR will be closer to 4.75% by mid April to account for the possibility of more fed rate hikes down the road.
    Bam, there it is. On the record is my thinking based on the fundamentals I noticed at the time; inflation pressures were just too high to consider stimulating economic growth through easing monetary policy.

    But this fed is not the old fed. Its an entirely new fed that is yet to distinguish its true character to the tradable markets. We don't know Bernanke yet! And with their most recent NO CHANGE IN INTEREST RATES but change in statement issued, we are beginning to wake up to this fact; we don't know what the capabilities of this new fed are yet.

    Here is the statement that was removed in this weeks fed statement that caused such a stir on the street:
    "The extent and timing of any additional firming that may be needed to address these risks will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information."
    Here is the change that they hit the markets with a few days ago, as they removed the above sentence and replaced it with:
    "Future policy adjustments will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information."
    Ahh, right there! ...FUTURE POLICY ADJUSTMENTS will depend on the outlook...With this statement the stock market immediately interpreted it to mean that the fed has switched from a tightening interest rate bias to a neutral interest rate bias; the clear first step on the way to a fed cut.

    As for me, those of you who actually read my stuff know that I am an inflation hawk and believe very strongly that the fed's # 1 job is to fight against inflation. But what is the real job of the fed?

    Here is what I found on their site at the mission page:

  • conducting the nation’s monetary policy by influencing the monetary and credit conditions in the economy in pursuit of maximum employment, stable prices, and moderate long-term interest rates

  • supervising and regulating banking institutions to ensure the safety and soundness of the nation’s banking and financial system and to protect the credit rights of consumers

  • maintaining the stability of the financial system and containing systemic risk that may arise in financial markets

  • providing financial services to depository institutions, the U.S. government, and foreign official institutions, including playing a major role in operating the nation’s payments system

  • So what did the fed really do? Upon further digestion of this first ever radical change in statement issued with the most recent fed decision, it's hard to ignore the newly inserted line "...the Committee's predominant policy concern remains the risk that inflation will fail to moderate as expected...". Although it originally seemed that the removal of the 'any additional firming that may be needed..." phrase was thought to meant imminent rate cuts, look at what the 10YR did over this 5-day chart taking note of the move AFTER March 21st and a day of digesting the change in statement:


    The initial FALLOFF in yields and SURGE in stock prices was the immediate reaction, prompting me to write this "Ben Bernanke's Mistake - Dissing Inflation" post. My first prediction of higher yields due to the fundamentals happen to be more accurate than I thought after this fed statement was issued. I felt like, 'this is the fed, they know their sh*t, I must learn as quickly as possible what they do and how they do it for future references and investment decisions'. But looking at what the 10YR did and how the yield responded back to what is really going on in the world makes me wonder what this fed is really up to! Honestly, I have no clue.

    They can either:

    CUT RATES - Because they feel that protecting economic growth is more important than current inflation indicators and that a cooling economy would in effect lower inflation pressures.

    HOLD RATES - Because they don't know their true identity yet and what might unfold in the near future. Likely course.

    RAISE RATES - Because they still admitted that their #1 fear is that inflation will not moderate as expected. What I think will happen.

    Hence my prediction BEFORE the fed meeting of 10YR yields at 4.75% by mid April. Since the fed meeting and AFTER the initial reaction, 10YR yields went from a low of 4.52% to a close of 4.613 2 days later. Quite a move.

    This tells me my initial feelings are reasonable and that many people may be mis-interpreting this move by the fed to mean rate cuts are in the works. I just don't see it. As before, inflation didnt ease in the past few days, it remains exactly the same. The only thing that changed is that we realized that this fed is a mysterious one and that we are still learning what their actions mean.

    UrbanDigs Says To Those Fed Watchers: This is the first major change worth noting what the ultimate reaction is! Take note, is all I can say so you will be wiser when a similar situation comes up down the road and this same fed does a duplicate maneuver.

    Sell-Side Marketing Launches

    Posted by urbandigs

    Thu Mar 22nd, 2007 11:11 AM

    A: Its been 20 months since I started blogging here on UrbanDigs, and its been one hell of ride. I have to say, that I learned a lot over this time from all the feedback, live chat questions, and comments that you guys left to help increase my knowledge of New York City real estate. I hope that you found the posts helpful during the buying or selling process, and that you made a little bit more money because of it. That is what it is all about; making more $$$! So, after a year of planning and fine-tuning, I decided to introduce my 3 step approach and service for sellers of Manhattan real estate.

    I have to admit, I was VERY worried about introducing this service onto the blog; for fear of ruining the open atmosphere and ultimate goal of this site which still remains, 'to discuss how we all may be able to better profit from our New York city real estate transactions'. I had to come up with some way to continue my daily postings on the site and keep the discussions going, continue to grow my own business through savvy investment strategies, and extend that philosophy of transacting real estate without any application loss so that you can work with me.

    So after months of planning I bring to you strategic marketing services focused on providing maximum exposure through creative and standard marketing techniques to ensure maximum profit at resale! On this page you will find my last three customer testimonials describing their experience with me during the selling process of their property.


    Sell-Side Marketing

    STEP 1: Property Valuation / Listing Agreement - A free no-obligation property valuation for those ready to sell their Manhattan real estate. Paul & I will meet with you to evaluate the open market value of your property and provide you with past sales and current competition that is so vital to your specific selling strategy. We will also consult with you on how to get your property in the best condition possible at the lowest cost to you to maximize resale potential.

    STEP 2: Strategic Marketing Services - Citi-Habitats will hire a professional photographer to shoot your property in the best possible light. A virtual tour will also be done to maximize the details of your property to web seekers. We will run a Sunday NY Times print ad every week and hold open houses until a contract is fully executed. Additional marketing strategy will be discussed when I meet with you. The property listing will be distributed to the entire Manhattan brokerage community without any time delay to ensure maximum exposure. In addition, your property will be advertised on:

  • NY Times Online



  • International Herald Tribune


  • STEP 3: Buyer Pre-Qualification / Board Package - All bids received will be forwarded to you for review until a contract is fully executed - without exception! Before a bid is submitted, I will make sure the prospective buyer provides a thorough financial snapshot and pre-approval letter so we can pre-qualify based on your building's specific board policies & requirements. Any signs of weakness that pose a potential risk to board approval will be pointed out to you before entering the negotiating process. We will oversee completion of the board package to be sure that all items requested are delivered in a timely manner.

    So, there it is! I will continue to focus on writing content and the live chat for so that you are always given street level information as it happens in the world of Manhattan real estate!

    In meantime, if you or someone you know is thinking of selling their home and would like me to meet with you to discuss property valuation, marketing strategy, the selling process, tips for preparing your property for maximum showing effectiveness, weekly print advertising, etc..please just tell them to click on the SELL-SIDE MARKETING link on the right side of ALL pages:


    In case you missed some of my posts advising sellers how to efficiently market their property for maximum resale, here they are:

  • My Apartment Won't Sell: Help!

  • Don't Mess Up In Here

  • Pricing Your Way To A Sale

  • New To Market? Delay & Generate Interest

  • Part 4: Contract Signed in 3 Weeks

  • MTA Signs 2nd Ave Contract - Really!

    Posted by urbandigs

    Thu Mar 22nd, 2007 07:28 AM

    A: Finally! I was beginning to feel like this would never happen, AGAIN! Actually, the contract signing comes one week ahead of schedule and brings to reality the dream that was dreampt, delayed, forgotten, and then revitalized. Groundbreaking ceremony set for April.


    According to AM New York:

    The $337 million contract with S3 Tunnel Constructors, a joint venture of the firms Skanska USA Civil Northeast, Schiavone Construction and J.F. Shea, came in about $3 million more than expected. The MTA must also pay about $54 million more than forecast in real estate acquisition costs.

    Phase one of the line's construction, which costs $3.83 billion and should be done by 2013, will create three stations on 96th 86th and 72nd streets. It will then connect to the Q train at 63rd Street.
    According to 1010 Wins:
    The MTA said this is the first of six construction contracts for Phase I of the project to be awarded. The remaining contracts include the 96th Street Station, the 86th Street Station, the 72nd Street Station, the 63rd Street/Lexington Avenue Station Rehabilitation, and the Systems contract which includes the track, power, signals and communications work.
    Groundbreaking is expected for April as construction will begin between 92nd & 95th streets on 2nd avenue where a hole will be dug to install a tunnel boring machine.

    Some of my previous posts on the 2nd Avenue Subway project:

    2nd Ave Subway: Only Weeks Away

    2nd Ave Subway Work Set To Start

    Feds Approve 2nd Ave Subway

    2nd Ave Subway Update

    And lets not forget my predictions for during construction and after completion:

    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 will make it hard for sellers directly on 2nd avenue to get top dollar early after construction begins.

    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. All of a sudden these homes are not so far from the subway!

    Ben Bernanke's Mistake - Dissing Inflation

    Posted by urbandigs

    Wed Mar 21st, 2007 04:28 PM

    A: Ben Bernanke & Co. DISSED Inflation pressures today in favor of US economic growth concerns as the fed left rates UNCHANGED. A mistake showing that today's fed is not about fighting inflation, the stated #1 job of the federal reserve, rather is about bringing stability to capital markets and providing a psychological floor should a slowing US economy take place.



    Future policy adjustments will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information.

    Recent readings on core inflation have been somewhat elevated. Although inflation pressures seem likely to moderate over time, the high level of resource utilization has the potential to sustain those pressures.

    Well, my last post on a hike in interest rates to combat inflation fears goes out the window as the fed dismissed inflation fears by leaning towards a NEUTRAL bias with regard to future monetary moves. Its not that inflation pressures are easing, actually they are rising, but its that the fed basically removed any chance of a rise in interest rates in the near term to fight these fears. In fact, one can now argue that the fed is preparing the markets for a future rate CUT as they move their bias from TIGHTENING closer to NEUTRAL; a step closer to the midway point between a tightening and easing bias.

    I don't like it. I think the fed folded to the markets and put themselves in a tougher position should inflation pressures not go away in the near term. Maybe the fed knows something the markets don't? Maybe they didn't want to mess around with a tightening bias in the face of subprime woes? Maybe they know that the US economy is slowing faster than everyone else thinks? I doubt that. Corporate earnings are still strong and the unemployment data soon to come will be a very interesting data point to analyze to see if the labor market is worsening. If so, that would validate today's move as a slowing economy should help ease inflation pressures and a rate cut will be the likely medicine to pump ummph back into the US financial system.

    Hats off to Nouriel Roubini, long time bear and blogger of RGEMonitor, who called it exactly right and predicted in this video (17 min long) that the fed must acknowledge the slowdown in housing, the slowing US economy, and change the bias towards a neutral or rate cutting one. Exactly what they did! VIDEO REPORT

    Learn as we go with this new fed chairman. One thing I do know is that inflation hawks HATED today's statement by the fed, including me, who fears that inflation can cause way more damage than a recession could!

    The stock marked SURGED today as the fed abandoned the tightening bias and interpreted the move as the clear step towards a future rate cut; something equities like to see to stimulate future economic growth. Recall my last post on why lower rates might not be good though as if the fed does cut rates it is because the economy is slowing and jobs are being lost!

    For Buyers - Don't expect lending rates to go up anytime soon! Expect them to stay put or trickle down a bit in the near future. No rush to lock in a rate.

    For Sellers - It's a bit worrisome that the fed stated, "...the adjustment in the housing sector is ongoing", a clear acknowledgment that housing still has major hurdles against it down the road. While NYC remains strong and is isolated from the nation-wide slowdown, it's narrow minded to think there will not be any correction at all to Manhattan real estate. If you are thinking of selling, take advantage of the current strength in our marketplace and sell sooner rather than wait for the generally slow summer months.

    New & Notable: Some Inventory Relief

    Posted by urbandigs

    Wed Mar 21st, 2007 03:54 PM

    A: Sorry for the time lapse between this week's new & notable listings and the last one. I actually see 383 NEW listings in the past 7 days and that is excluding Financial District, Little Italy, and Upper Harlem. This # is a bit higher than most week's that I check and tells me that the current hot Manhattan real estate market is bringing in more inventory to take advantage of the trend. Economics 101 as the supply/demand imbalance works to correct itself. Here are some of my top choices of the new inventory in the past 10 days.

    70 East 10th Street; Apt: 10D


    First Came on Market: 3/09/2007
    Asking Price: $940,000
    maintenance: $995 (under $1/sft)
    Size: Aprx 1050 SFT
    PPSF: $895
    Marketed By: Judith Thorn of Warburg Realty

    225 East 74th Street; Apt 3B


    First Came on Market: 3/16/2007
    Asking Price: $599,000
    maintenance: $1,095
    Size: 750 SFT
    PPSF: $799
    Marketed By: Josh Frank & Laurie Press of Halstead

    334 West 87th Street; Apt: 4B


    First Came on Market: 3/18/2007
    Asking Price: $995,000
    maintenance: $1,053 (again, under $1/sft)
    Size: 1,100 SFT
    PPSF: $905
    Marketed By: Debbie Isaacs of Corcoran

    Chelsea Modern - First Thoughts

    Posted by Toes

    Wed Mar 21st, 2007 10:20 AM

    Chelsea Modern has just opened their sales office to the public. The building is located at 447 West 18th Street and is scheduled for completion in spring of 2008 (plan for late summer 2008 just to be safe!). The building is 12 stories with 47 units - 3 have sold and 3 are in contract, so buyers getting in now are still getting in on the ground floor. The building will have a unique, gorgeous facade of undulating glass windows, combining art and sculpture. The windows are also functional - they open horizontally, allowing airflow on all sides. The building is eligible for a 421a tax abatement.


    There are only 5 apts per floor on the lower floors and only 2 apartments per floor on the higher floors. What I loved about the apartments is that they have scrimped on NOTHING. As you may have noticed from my post earlier this week, many developers seem to be cutting out details in order to save on construction costs, but Chelsea Modern has spared no expense.

    The kitchens have SubZero, Viking, and Miele appliances rolling wine cabinets and a recycling center integrated into the cabinetry. There are double sinks in the baths - even in the one bedrooms, shower stalls and soaking tubs (next to a huge window... Great for exhibitionists!).

    They also have towel bars and toilet paper holders, fog-free mirrors, huge vanities with more than enough storage space for a couple, and there is a built-in alcove in the shower for shampoo bottles. There is a washer/dryer in each residence (not just a hook-up for one!).

    These finer details are not as expensive you might think.

  • 872 - 915 sq foot one bedrooms (only 7!) range from $1M to $1.2M (approx. $1,150 a sq ft, which is not bad at all for new construction)

  • Two bedrooms of approximately 1300 sq feet start at $1.6M ($1,230 / sq ft)

  • Two bed, 2.5 bath units of approximately 1,400 sq ft start at approx $1.9M ($1,350 / sq ft).
    Eight penthouse three bed, three baths with triple exposures for around $3.5M for 1887 - 1,979 sq ft (these come at a premium! Approx $1,850/sq ft! YOWZERS !). But many have balconies, private terraces, and roof decks (not sure you really need all this outdoor space considering the Highline is going to be down the block, but if you love to entertain, this building is for you!)

  • The ground floor has one bedroom, two bath duplexes (perfect for an art-collector) with 240 sq foot gardens (approx $2.225M)

  • The developer tried to keep common charges down by keeping what I would consider near useless amenities out of the picture. No dog runs, pet spas, putting greens, co-ed jacuzzis, or the like. There's a doorman, fitness center with steam room, outdoor lounge garden and lawn with reflecting pool, fountain, and rock garden, and a landscaped roof deck lounge, bike room, cold storage (it is just east of 10th avenue, so buyers will probably be in need of Fresh Direct), package room and storage space (for purchase).

    Overall, I give this new development two thumbs up for quality, but I just don't love the location. There are sooo many new developments in Chelsea (555 W 23rd, Onyx Chelsea, Chelsea Stratus, Chelsea House, Sky House Condos, 520 West Chelsea, Loft 25, and probably another 5 that I'm forgetting to mention) that I wonder how these units are all going to sell!

    Recession Coming? Just Check Lumber

    Posted by urbandigs

    Wed Mar 21st, 2007 09:49 AM

    A: This is why I LOVE blogging. If I weren't a blogger, I wouldn't be opening up my daily reads to sites like RGEmonitor or Calculated Risk. The latter happens to be a very high quality read from a retired corporate exec who just enjoys talking about what he knows. And Bill of Calculated Risk knows the economy and how to interpret data. Check out his latest blog entry on the relationship between lumber prices and recessions, based on real time information from a friendly insider in the lumber industry!

    The forward thinking concept of analyzing what trends are occurring right now that might later produce a economic slowdown include those in the lumber industry.

    According to CR:

    Our business is a large hardwood sawmill (sawing oak, maple, cherry, ash, etc.), for the furniture (read: HOUSING) industry. We usually enter recession five to six months ahead of the rest of the economy. IT'S HERE! Prices for green and finished lumber are falling at a faster rate than at any time since 1974
    Thanks to a comment on the post, I found this chart of lumber prices over the past 6 months showing the dropoff in lumber prices.


    CR Concludes:
    Lumber, along with New Home sales, and starts and completions all tell us basically the same thing; the housing market is in a deep recession - and we should be concerned about the general economy

    Some Housing #'s - Expect Strong NYC #s

    Posted by urbandigs

    Tue Mar 20th, 2007 08:59 AM

    A: While actual construction of new homes across the country rebounded in February, building permits dropped with the Northeast especially hard hit with a 30% decline in permits issued. Building permits are more of concern for us over here in NYC as this sharp decline shows that builders are scaling back a bit on future construction projects; although this drastic decline could also be weather related its important to step back and take a look at the 12th decline this number has had in the past 13 months - looks like a trend to me.

    According to Yahoo Finance:

    The Commerce Department reported that construction of new homes and apartments rose by 9 percent in February to a seasonally adjusted annual rate of 1.525 million units. That represented a better-than-expected rebound after construction activity had plunged by 14.3 percent in January to the slowest pace in more than nine years.

    But builders' applications for new permits, considered a more reliable gauge of future activity, continued falling in February, dropping by 2.5 percent to an annual rate of 1.532 million units. That marked the 12th decline in the past 13 months in building permits and underscored the construction industry's steep slump.

    With all the action over the past few months in New York City real estate, one has to expect that the sales numbers and pricing numbers for Manhattan apartments will come in strong. So, when it does happen try not to get caught up in the idea that New York City housing is beginning a new round of a bull market. Rather, sellers should be very happy with the performance of NYC real estate in the face of a nationwide slowdown and all the mortgage woes out there. As I noted many times here, NYC real estate is seasonal and the months of JAN - MARCH are typically the most active months of the year and the best time for sellers to get top dollar for their homes.

    For buyers, this is the time of most competition, packed open houses, less negotiating power, and bidding wars. If you have been an active buyer for the past 8 weeks, you know what I mean!
    If possible, try to wait 3-5 months when the market typically dies down during the hot summer months with the understanding that inventory will be tighter and you won't have as many options to choose from!

    Built-Ins Come With A Price

    Posted by urbandigs

    Mon Mar 19th, 2007 11:56 AM

    A: When discussing renovations that pay off well at re-sale, the first things that come to mind are kitchens, bathrooms, and hardwood flooring. But what about built-ins? In my opinion built-ins are more for your own personal needs rather than for investment purposes at resale as this generally pricey renovation cuts into showing size, appeases to very few buyers, is considered an added expense to the ultimate buyer to remove, and rarely fits the taste of the buyer should they decide to leave it. Originally Published July 19, 2006


    If your planning on buying a home to 'live in' for the next 15+ years, than this post really doesn't apply to you. But for those of you that read my blog, you know Im really trying to bring out the investment side of real estate and how best to profit from it. So, when it comes to resale value built-ins just dont make any sense to me. Here are my thoughts on the negative aspects of built-ins when buyers come to view your property:

    1. Raw Space Seems Smaller - The biggie. Not only are built-ins a costly renovation, but they cut into your living space making the room appear much smaller than it actually is. When buyers come to view the apartment they will be unable to visualize the actual space the apartment once was without the built-ins there. This artificial tightening of the floorplan would be enough to restrict bids submitted and/or the amount a buyer is willing to pay for your property. When they see the actual square footage listed on the webad or showsheet, it will immediately seem much smaller than other apartments they have seen already!

    2. 9/10 Buyers Don't Want Built-Ins - OK, I have not done a collegiate study on this but from my experience out in the field I find that about 9/10 buyers do NOT like built-ins. Rather, they view it as an added expense to remove the renovation work while they grapple with the fact that they pay for this renovation in the purchase price of the apartment. It's hard for buyers to rationalize paying money for renovation work that they will need to pay more money to remove!

    3. Taste is Hard to Predict - Lets say you are fortunate enough to find a buyer that is willing to pay a higher price for your property and the built-ins that come with it. Built-ins are not like paint on the walls! It is not an easy thing to change. If your built-ins are dark walnut and the buyers furniture is all on the light side, than its going to clash! Buyers think this way when they decide what initial bid to submit and having built-ins that are rationalized but not perfect may not get you the higher price you first thought.

    4. Removal Expense: The removal expense is really not that bad for built-ins and your building super/manager probably can organize it for under $1,000 or so. The reason is they are more than happy to take the furniture and sell it somewhere or use it for their own needs, which keeps the removal expense down. From a seller's standpoint, I would use this fact as a marketing tactic when showing the property and explain to buyers that the built-ins can be cheaply removed restoring the apartment to its original size and condition.

    According to my colleague Brady Titcomb who has had his share of exclusives with built-ins:

    My experience with built-ins is that because they are mostly custom built, they are tailored to a specific taste which may not appeal to many buyers and can also date an apartment. Because they are bulky they make the space look smaller and most buyers don't realize how inexpensive it can be to have them removed.
    UrbanDigs Says: Stick to kitchens, bathrooms, and hardwood flooring if you are going to renovate. If you love built-ins, fine, but do so knowing that most buyers will not prefer this renovation at re-sale at will not pay top dollar for it. Putting 20K into kitchens, bathrooms, and flooring will most certainly get you all or more of that expense back. Not so for built-ins!

    Interest Rate Talk Likely To Begin Again

    Posted by urbandigs

    Sat Mar 17th, 2007 01:12 PM

    A: I hate to say it, but get ready for a whole new round of fed talk to start brewing in the blogosphere and media as inflation begins to rear its ugly head again. Even with the slowing housing market, sub prime worries, and recent stock declines that have been pricing in future risks, the fed's #1 job is to fight against inflation; and that may mean HIGHER RATES!

    If I'm right, then in 4 weeks the 10YR Treasury yield will be at least 25 basis points (0.25%) higher. So, lets play a game and take a look at the 10YR Treasury Yield over the last month with the week ending yesterday:


    The 10YR yield ended the week at 4.54%. If inflation fears start to come out again as I expect them to, the yield on the 10YR will be closer to 4.75% by mid April to account for the possibility of more fed rate hikes down the road.

    If anything, there is NO WAY the fed will cut rates anytime soon! Not with inflation risks out there. I don't care if the economy looks like it is slowing, housing is worse than expected, or if sub-prime woes continue to get worse. If the fed ignores inflation concerns and starts targeting growth or housing woes, than we will be in for even deeper trouble down the road! There is a reason that the controllers of monetary policy has a #1 job to control inflation and pricing stability. Here is the data that I saw come in a few days ago:

    Fuel, Food Prices Push Higher

    Higher gasoline and food prices pushed the cost of consumer goods up in February, according to a government report that showed inflation pressures roughly in line with Wall Street forecasts.

    The Consumer Price Index, the government's main inflation gauge, climbed 0.4 percent in February, after a 0.2 percent rise in January. Economists surveyed by had forecast a rise of 0.3 percent.

    Wholesale Prices Shoot Higher -
    Wholesale prices shot higher in February, according to a government report Thursday that showed much greater inflation pressures than had been forecast.

    The Producer Price Index rose 1.3 percent after a 0.6 percent decline in January. Economists surveyed by had forecast a 0.5 percent rise in the overall measure of prices paid by businesses.

    Stocks Slump As Hopes For Rate Cut Fall -
    Wall Street slumped Friday after another reading on inflation deflated hopes the Federal Reserve will start moving toward an interest rate cut when it meets next week.

    Inflation concerns remained entrenched on Wall Street Friday. The Labor Department's report that its Consumer Price Index rose by 0.4 percent in February renewed some of the concerns that dogged stocks on Thursday. Wall Street had expected an increase of 0.3 percent. The rise was double that of January and the largest rise since a similar increase in December. Rising costs for gasoline, food and citrus crops helped boost prices.

    So what does this all mean? Well a few things!

    1. Stocks are falling due to risks to the future of US economic growth, the fact that inflation is still an issue and the fed will not be cutting rates, and housing woes.

    2. Bond Yields didn't rise as much as expected given the inflation data because stocks have fallen in the past week.

    3. Rates are definitely NOT going down, and in fact might be going up first.

    4. If inflation remains or gets worse, rates will definitely go up and housing woes and lending issues will deepen.

    Thanks to CR I noticed that Macroblog also has a take on this in their latest post titled, "The Inflation Report: Just Not Getting Better".

    Lets not forget what I said back on Aug, 8 2006 when the Fed finally Paused with their slow and steady 2+ year interest rate campaign. I remember everyone already planning on early 2007 interest rate cuts and the media was all over this consensus. That lead me to say...:
    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!
    UrbanDigs Says: Keep a close eye on the 5YR & 10YR Treasury yields in the coming weeks for any signal that the street is beginning to expect a rate hike down the road. If yields start to rise, than the likelihood of higher interest rates goes up. I hope this doesn't happen but with inflation pressures not going away, we investors have to watch out for anything that might cause a change in monetary policy and plan accordingly.

    Views/Truths About Sub-prime & Economy

    Posted by urbandigs

    Fri Mar 16th, 2007 10:42 AM

    A: Nouriel Roubini is a Professor of Economics & International Business at the Stern School of Business at New York University. He is also a blogger and publishes the RGEMonitor, a global economics blog, where he discusses many topics (mostly gloomy yet to me is a realist) including the fundamentals behind why he expects an economic hard landing and a more severe housing downturn. His latest blog entry is particularly interesting and I would like to share it with some of my thoughts here on UrbanDigs.

    FIRST OFF - I understand that sub-prime borrowers are only a small portion of all loans outstanding and do not represent the whole. However, it is the side effect of this major problem that worries me. I feel that what we are seeing in the sub-prime world is just the tip of the iceberg and that this disease has already spread to some prime lenders but is yet to show its surface marks. The real issue is any change in lending standards that comes as a result of this problem! If regulations are put in place to protect the consumer and the industry itself, than that means a credit crunch as tighter lending standards will restrict purchasing power and help sustain the housing downturn. That is my worry.


    His latest post, "Ten Faulty Consensus Views about Sub-prime and Soft-Landing..and the Ten Ugly Truths about the Coming Economic and Financial Hard Landing" is a great read from a respected economist. Here are a few selected items from the Top Ten List of his stated consensus views, ugly reality, and then my two cents:

    Consensus View #1: The Housing recession is bottoming out.

    Ugly Reality #1: The housing recession not only is not bottoming out; it is getting worse and it will be the worst housing recession in the last five decades

    UrbanDigs $0.02: The housing recession nationally has some serious issues. Things will get worse before it gets better and NYC will lag in this slowdown as it always does. However, I don't expect it to be as catastrophic as the professor states; but then again, he is a professor and I am a lowly real estate agent and blogger. Nuff said.

    Consensus View #2: The subprime carnage is only a narrow and niche problem; other mortgages are fine. So there is no risk of contagion to other mortgages.

    Ugly Reality #2: The same garbage lending practices used for sub-prime - no/low down-payment, no/low documentation of income and assets, interest rate only, teaser rates, negative amortization, option ARMs - were prevalent among near prime and other (option ARM) prime mortgages. These risky mortgages add up to about 50% of originations in 2005 and 2006

    UrbanDigs $0.02: Its very optimistic and narrow minded to think this problem will not infect prime lenders and Alt-A lenders (in between sub-prime & prime: credit score driven loans / lack proof of income). I've been talking for a long time that those who used risky mortgages to rationalize a purchase price above their means will meet with major problems in the years to come. And I expect 2007-2009 to bring these weak players out. How the industry adapts is what I am not sure of yet. I worry about regulations being put in place that might hurt purchasing power.

    Consensus View #3: There may be a credit crunch in subprime but not generalized credit crunch in the mortgage market.

    Ugly Reality #3: Not only there is a severe credit crunch in subprime (30 plus lenders out of business); there is also the beginning of a generalized credit crunch for the broader set of near prime and other risky prime mortgages. Default and foreclosure rates sharply up in all mortgages, including near prime such as Alt-A. Lenders and regulators are seriously tightening standards for all mortgages. There is now a sharp swing from very loose to very tight lending behavior by every type of mortgage lender.

    UrbanDigs $0.02: Sup-prime is definitely adapting to this changing world as tighter lending standards are put in place and weak borrowers are being handed a tough time securing a loan! Many are facing the reality that they cant get a loan. No doubt about it. However, prime lenders have yet to significantly tighten lending standards. Will my fear play out? Probably, but I hope not as that is not good for anybody except those who have been waiting years for a housing downturn that has legs.

    Consensus View #10: The recent financial markets turmoil is a temporary blip; the financial party will happily continue.

    Ugly Reality #10: Previous market corrections were temporary blips and market opportunities because macro fundamentals were sound. The spring 2006 “inflation scare” turned out to be a “scare” without basis; thus markets recovered after a brief turmoil. Today we do not have a “growth scare”; we have US growth fundamentals that are severely weakening and leading to the risk of a hard landing. In that scenario the market will not have a brief correction; instead all sorts of risky assets – equities, commodities, corporate credit risks, emerging market assets – will have a severe downturn once sucker rallies following expectations of a Fed ease will run out of steam when the reality of a hard landing sinks in.

    UrbanDigs $0.02: The stock market is already pricing in for risks. The fallout from restricted consumer spending from the slowing housing market and falling prices cannot be discounted. If people feel less wealthy, they tend to cutback in spending. There are serious issues that are yet to show their full spread. I agree that US growth fundamentals have changed in the past few months and equities have priced in these risks accordingly. It really will depend on the depth of this mortgage meltdown. If it spreads to prime and the problem turns out to be far more widespread than first thought, the future growth expectations of the US Economy will have to be re-assessed to the downside and that means lower stock prices.

    It's important to note that recessions DO occur. Housing downturns DO occur. And its extremely important to acknowledge that things happen that are sometimes not forecasted that changes everything! I am very curious to see what happens in the near future and I am doing my best to keep the focus on housing, and specifically NYC housing. But with all these threats in the air, I have to discuss them on the site. I still see tighter lending standards and future job losses from a slowing US economy as the two biggest direct threats to NYC housing. I also think that out of all the markets in this country, Manhattan real estate is one of the safer places to be and that this market generally lags in slowdowns and leads in recoveries.

    What do you think? Housing gloom or Housing Boom?

    $900K & No Shower Door...What Gives!

    Posted by Toes

    Fri Mar 16th, 2007 09:04 AM

    About 15 months ago, a buyer (and friend) of mine put down a deposit for an 787 sq ft one bedroom, 1.5 bath apartment at The Link, an El-Ad Properties development (El-Ad is also the developer for the Plaza).


    A week before the closing, we went in for the walk-through to find that the sinks were misaligned, the painting wasn't finished, two outlets weren't working, and there was a plethora of other small problems. When we walked into the bathroom, we noticed that there was no shower door or shower rod. We were told, "This line doesn't have them."

    The sales office bathroom had a shower door! The website shows a shower with a shower door! The offering plan doesn't say anything about the "A" line NOT having a shower door. There ensued a week-long battle between both sides' attorneys about who was responsible for paying for the shower door. In the end, my client had to pay to have a shower door installed because the developer refused to pay for it.

    As I visit more and more new developments, my eye has become trained to look for the tiniest details. Many new development bathrooms no longer include towel bars, toilet paper holders, or shower doors! More and more frequently, I am finding that developers are cutting these out of their apartments, most likely to cut construction costs and keep their price per square foot lower.

    How ridiculous is it for someone to pay $1,150/sq ft (15 months ago!) for a "new luxury condo" and not have a shower door or even a shower rod!? Here are some tidbits I have noticed with clients buying new developments.

  • At 184 Thompson, a condo that is being converted from a rental building, if a closet door wasn't in good shape, they simply removed the door and left the closet sans door for the buyer to deal with. But the apartments are only about $1,050 a sq ft for a condo in the Village, so you get what you pay for.

  • At 88 Greenwich, toilet paper holders and towel bars are not included, but the developer did include wonderful amenities like an iPod docking station, step stool integrated into the kitchen, and trash bin.

  • Meanwhile, a client of mine moved into the Orion and his dishwasher didn't work and it took the building TWO months to repair it.

  • A colleague of mine has a client who just closed at the Atelier, a Moinian Group property. When they went to the walk through, the apartment was dusty, the paint wasn't completed, and there were a number of other problems with the apartment.

  • I sold an apartment at 120 Greenwich and the apartment was done to PERFECTION when my client moved in. However, it was a model apartment, so of course it was perfect.

  • On the positive side, I was thrilled to go to Maison East and Rutherford Place today and see that they do actually have toilet paper holders and towel bars. Maison East actually includes the washer/dryers - not just a washer/dryer hook up.

    So what is a buyer to do?


    1. When buying in a new development, your attorney will read the offering plan, but to be on the safe side - you should read it also!

    2. If the sales office says the building will be ready in the early spring, assume they mean the late summer. I have yet to see a building be ready earlier than what buyers/brokers are told.

    3. If you get to your walk-through and find that the apartment still has work that needs to be done, schedule a second walk-through to make sure everything on the "punch list" has been completed. Postpone your closing date until everything on the punch list is complete if you have the luxury of doing so. Hopefully by delaying the closing you will expedite the process of getting things done.

    4. Consider buying one of the apartments that was used as a model.

    5. Assume that the hallways, lobby, fitness center, roof deck, and any other amenities will be completed at least 6 months later than when the building says they will be completed.

    6. When buying off of a floor plan for a building that is not even in the ground yet, assume that the common charges being quoted to you are lower than what they will end up being when you move in. It is in the developer's interest to low ball the projected budget for the building to make the common charges look attractive to potential buyers.

    In general, I love new developments and after the "dust settles," so do my clients. Young Wall Streeters in particular don't want to deal with the hassles of a co-op and they don't want to gut renovate an existing apartment. They want a gorgeous, never-lived in product. When you move into an apartment that has been lived in, there will always be something that needs to be renovated or fixed. Since the elevators, lobby, and other amenities are brand spanking new in a new development, you wont have to worry about assessments or common charge increases for any major capital improvements any time soon; unless of course there was shoddy work done that demands a redo.

    By going into a new development purchase with reasonable expectations and a checklist of things to keep an eye on, you will have a much better experience! Best of luck in your search!

    Stocks Fall; Housing Holds; Blogs Dead On

    Posted by urbandigs

    Tue Mar 13th, 2007 02:42 PM

    A: I can already see the chain of events occurring. The purpose of UrbanDigs is to discuss, in forward thinking terms, what is going on right now that might later affect real estate; especially in Manhattan. As I choose the topics to discuss I can only hope that I write in a manner that is educational and that you are a bit more knowledgeable at the end of the article. It is this knowledge that should make you a savvier investor. With this subprime thing getting headlines for weeks now, it is starting to effect consumer psychology and the stock market. What I see is a stock market that is beginning to price in future risks to the strength of the economy as investors account for uncertainties down the road. The question remains, is this pullback in the stock market a leading indicator of future economic weakness that might slow job growth and housing's search for a bottom? I think so.

    Lets start from the top and go down from there.


    I'm sure the cowbell will have something to say on this one. The stock market right now is pricing in risks seen to the future sustainability of strong economic growth. Specifically, it seems the subprime sector woes are a lot deeper than most thought and are threatening to infect prime lenders, housing, and the consumer. Not good. This change in the overall environment brings new risks and adds to the uncertainty of the near term strength of the economy; hence the pullback in stocks. Get it? I discussed the chain of events of a falling stock market that leads me to believe it is a leading indicator of near term economic strength. in my posts 'Why Lower Rates Might Not Be Good'.


    According to Yahoo Finance:

    Stocks plunged Tuesday as troubles for subprime lenders kept piling up and U.S. retail sales came in weaker than anticipated, leading investors to brace for a wilting economy. The Dow Jones industrials fell more than 150 points.
    As stocks fall, wealth is lost, consumers get more concerned, businesses cut back in spending/hiring, and the economy weakens. Chicken or the egg? I'll go with stocks. If this equity downtrend continues it will inevitably lead to a slowdown in the economy that proves itself in future reports.

    Oh, and retail sales released this morning missed analysts expectations.


    Short and sweet. Buyers are a dime a dozen, open houses are still very active, no-finance contingency requests are becoming common proving the shift to a sellers market, and inventory remains tight.

    I still expect this surge in buyer demand to last only 1-2 more months, max. Come mid May, I think buyers will notice activity half of what it is today. The question I have is how much inventory will be there to choose from and how negotiable the seller becomes to adapt to the slowing activity.


    Bubble Meter Predictions Revisited (Bubble Meter)

    Housing in 2007 (Calculated Risk)

    Of Things To Come (Property Grunt)

    2007 - Predictions & Discussions (UrbanDigs)


    Well, if you read my blog often you know that I strongly believed the biggest threats to the housing market to be tightening of lending standards and future job losses. Here are my posts on the former which I believed to be the first to hit:

    Credit Crunch: Tighter Lending Standards

    Credit Update: HSBC Warns of Bad Debts

    Lenders Starting To Tighten!

    UrbanDigs Says: Okay, so for months I've been discussing what might happen as the housing market cools and so far its pretty dead on. As subprime woes continue to unfold, and they will, its only a matter of time until prime lenders go into 'prevent' mode and tighten their standards of lending. This contraction in credit is not good for consumer spending in general and means risks to the future strength of the economy. The stock market has been pricing this in for weeks now. The ripple effect begins, corporations slow down spending/hiring, consumers lose confidence and cutback their spending, the economy slows, jobs are lost, fewer can afford homes, more homeowners tap into any equity thats left in their homes, weak homeowners are forced to sell. The question that comes to my mind now is at what point the contrarian investors (myself included) start seeking for a bottom!

    Mortgage Report: Week of March 12th - 17th

    Posted by steve

    Tue Mar 13th, 2007 12:44 PM

    A meltdown of the sub-prime market captured headlines all last week. Several companies refused to accept any new loans and some closed shop. For the most part, I do not deal with the sub-prime market(The sub-prime market is for borrowers that have credit scores below 600), so their recent contraction and blow up will not affect Manhattan Mortgage. The majority of my clients are A-paper and have good to great credit scores. U.S. stocks were firmly lower today after weaker-than-expected February retail sales fueled concerns about growth. As I've stated many times before, when there is weak or negative economic news, treasury bonds tend to rally, which sends yields lower, and hopefully will improve rates by .125%.

    Please email or call me if you have any mortgage related questions.


    Time with Family

    Posted by urbandigs

    Tue Mar 13th, 2007 09:20 AM

    I will be spending time with my family after discovering that my father is beginning an upward battle against cancer. For the next week or so I will have little time to put into fresh content on UrbanDigs. I will however re-publish old content during this time from last year that still can be applied to todays marketplace!

    Thank you for understanding.

    Be Prepared When You Submit An Offer

    Posted by urbandigs

    Tue Mar 13th, 2007 09:10 AM

    A: I get asked this question ALL the time by my clients who are actively looking to buy an apartment, but don't even know what they are supposed to submit when they are ready to bid. Here is a breakdown for what is needed to submit a good-faith bid and make yourself look 'ready to go' so that the seller can take your offer seriously and counter appropriately. Originally Published July 28th, 2006



  • Crunch the #'s and figure out what you can actually afford

  • Get a pre-approval letter from a lending broker

  • Pay down your credit debt and try to increase your score for when you will ultimately lock in a rate


  • A full financial analysis to show your assets & liabilities, salary, and bonus if any

  • Enough liquid assets to cover the down payment + closing costs and STILL have leftover to show the board. Co-ops will require around 1 years worth of liquid assets in maintenance + mortgage costs AFTER CLOSING COSTS, at the very least

  • Written offer letter stating your initial bid, your salary, your job position and time with firm, your attorney info and your mortgage broker info

  • The pre-approval letter you got earlier


    1. Offering plan, 2 YRS building financials, board minutes, and contract of sale will be sent to your attorney listed in the offer letter.

    2. Attorney does diligence and is expected to have contract ready to sign within 5 business days.

    3. Buyer signs contract and sends in 10% deposit.

    4. Seller countersigns contract and broker gets to work on board package.

    5. Bank sends appraiser in and processes financing, if any. These docs (loan commitment + aztec forms) usually take the longest to get and are needed to finalize the board package before it is sent in.

    6. Board package review.

    7. Walk-through and Closing!


    1. If you are using a buyer broker, they will instruct you to have all of this ready as you get closer to submitting your bid.

    2. If your buyer broker asks for a financial history, he/she is NOT being nosy! Rather, they are being professional and are looking out for your best interests as they try to show you apartments that you can actually afford and comfortably pass the board!

    3. If buying a co-op, be prepared to hand in pay stubs, tax returns, employer letter, personal & business referrals, and hard copies to back up EVERY asset you listed! Being prepared makes for a smoother transaction so start saving these docs before you submit the bid!

    4. Please educate yourself on what you can actually afford before you bid for a property! Try to keep the total living expenses (mortgage + maintenance + real estate taxes) UNDER 30% of your total take home monthly income. If you are over this #, think twice about what you are getting involved in!

    My Apartment Won't Sell...Help!

    Posted by urbandigs

    Mon Mar 12th, 2007 08:41 AM


    A: If your property has been on the market for months (either with a broker or not) and has still not sold, there really is only one thing you can do to spur activity: LOWER YOUR ASKING PRICE! The sooner you come to this realization the faster your property will move. Originally published August, 21 2006


    Advice #1: LOWER YOUR ASKING PRICE TO BELOW MARKET VALUE! Its not rocket science. Its just a matter of waking up and realizing that what you thought your property was worth or what your broker promised to get for you is not realistic. Your goal should be to offer a good value to buyers and bring in as much traffic activity to your property as possible. In the end, the MARKET dictates the MARKET VALUE of your apartment, not the BROKERS!

    Advice #2: This will sound anti-productive by its nature (since you might want to sell as soon as possible) but take 1-2 weeks off of advertising in major media outlets such as NY Times, NY Post, or online websites. Don't hold an open house for 1-2 weeks and only cater to individual appointments. Give your listing a break and try to 'freshen' it up for future display to a newer audience after some time off. Combine this with a price reduction and you should get renewed interest in your property.

    Advice #3: Make sure your property is clean and NOT cluttered with furniture during open houses and showings! If possible, put some furniture in storage temporarily to show off the true size of the property. Also, do your best to only show the apartment when you get the most natural sunlight. If you get the best sun from 2:00-5:00PM, then don't run an open house from 12:00-2:00! Sunlight sells if you have it, so use it!


    Notice a trend?

    Im gonna say it because no one else will, especially to your hired broker who promised you those astronimcal asking prices just to gain an exclusive listing:



    Do the right thing. Bring your asking price closer to that of the last comparable sale in your building. If that last sale was more than 12 months ago, than add some time value into it. But don't make the mistake of 'testing' the market as it will only set you back further. And another thing, if there are similar units being offered for sale in your building at the same time as yours, than make sure your priced accordingly.

    It amazes me to see some brokers promise such an out-of-market price for their client's property. Now it is true that some agents are exceptional at the art of marketing and selling, and that they creatively built up their business to a level that offers more services for their clients than the average broker. An example of this excellence can be seen in Douglas Elliman's Jacky Teplitzky & the team and Citi-Habitats agent Danny Davis. Now both of these agents have proven to build an amazing business around their talent and marketing skills, but there is a limit to what premium they can get for you. What you need to look out for is the agents that have NOT exemplified top notch marketing skills and rather is simply promising you a substantially higher sales price to increase the likelihood that you sign that exclusive listing contract with them! The end result here is an overpriced property that receives normal marketing and has to be reduced in the near future if expected to move.

    I'll probably get some heat over this post from the brokerage industry, but hey, I'm an independent contractor and as such I feel that I can independently post my opinions.

    I SAY TO THE SELLERS: Look at pricing of the real estate market as you would look at pricing of corporate stock. If INTEL, NASDAQ: INTC, is trading a $19/Share and you own it, it would be foolish of me (your broker) to promise you I can sell it for $25/Share. How can I do that? Someone else is selling it for $19/Share, and the short term direction it goes is unknown! Well, if someone has a similar apartment to yours (a block away or in building) and is offering it for substantially less than you are, you know what you need to do!

    UrbanDigs Says: Offering your property at a price below market value will generate traffic and hopefully get you multiple offers! If time is on your side, than try a series of smaller price reductions until you see a spur in activity. If you MUST sell now than do one aggressive price reduction.

    Developing Story: No Loans For You!

    Posted by urbandigs

    Fri Mar 9th, 2007 08:44 AM

    A: New Century Financial Corp. has STOPPED accepting loan applications altogether because some of the subprime mortgage financial backers are refusing to provide access to financing. Wow. Just more evidence that subprime woes are only in its infancy and that federal regulation of some kind is inevitable! Calculated Risk goes into more detail and provides a link to New Century's 8-K filing with the SEC.


    Are you blind in your understanding of what is really going on in the housing market outside of New York City? If you are, then you don't care about this subprime stuff because it accounts for under 10% of all loans out there. However, if you are not blind and have been reading any financial news publication lately, than you know that subprime woes are just beginning to get major media coverage! Fact is, outside of NYC the housing market is fairly weak and loans are getting harder and harder to lock in. Its only the beginning and what happens next is still unwritten.

    According to CNN Money:

    New Century Financial Corp. said late Thursday that it has stopped accepting loan applications because some of the subprime - mortgage specialist's financial backers are refusing to provide access to financing.

    "As a result of the current constrained funding capacity, the company has elected to cease accepting loan applications from prospective borrowers effective immediately, while the company seeks to obtain additional funding capacity," New Century said in a statement.

    "The company expects to resume accepting applications as soon as practicable; however, there can be no assurance that the company will be able to resume accepting applications," it added.

    Lenders specializing in such loans, like New Century, rely in part on big banks known as warehouse lenders to finance their operations. These backers require that subprime lenders meet certain minimum financial targets; otherwise, they have the right to end the business relationship.

    On Friday, New Century said it had breached one of those requirements, or covenants, and also disclosed that it's the subject of a federal criminal investigation.
    It's the domino effect that is going on right now and its only a matter of time until this starts to affect prime lenders as well. In fact, only a few days ago Countrywide Financial reported a surge in delinquency in their prime borrowers!

    In yesterday's Businessweek article titled, "The Mortgage Mess Spreads":
    After years of easy profits, the $1.3 trillion subprime mortgage industry has taken a violent turn: At least 25 subprime lenders, which issue mortgages to borrowers with poor credit histories, have exited the business, declared bankruptcy, announced significant losses, or put themselves up for sale. And that's just in the past few months.

    Now there's evidence that the pain is spreading to a broad swath of hedge funds, commercial banks, and investment banks that buy, sell, repackage, and invest in risky subprime loans.

    According to Jim Grant of Grant's Interest Rate Observer, the market is starting to wake up to the magnitude of the problem, entering what he calls the "recognition stage." Says Terry Wakefield, head of the Wakefield Co., a mortgage industry consulting firm: "This is going to be a meltdown of unparalleled proportions. Billions will be lost."

    Affect on NYC - Nothing yet but things will change. As lending standards tighten, this city filled with co-op's already requiring a strict board review process will get stricter. Listing brokers will be forced to tighten their pre-qualification review of the prospective buyer and those with high salary's and plenty of liquid assets will all of a sudden be more valuable to the seller. This might give more negotiating power to the high end buyer as they provide a comfort to the seller during the buying process; especially for a co-op. All cash buyers will gain much greater control during negotiations! Pre-approvals from lenders in the bid submission phase will be useless as getting a loan commitment now becomes the major obstacle. Expect the buyer pool to restrict a bit and borrowers to redefine the range of purchase prices that they can afford. Talking to a lender before a bid is submitted will become a priority, rather than a secondary tactic as it is now. It will no longer be, 'how much can we get a lender to give us', and will become more of a 'I hope this lender can come through for us' type of environment. The lending world is changing and NYC will not be immune forever.

    UrbanDigs Says: I've said it before and I will say it again! The biggest threats I see to the housing market are tighter lending standards and a weakening labor market! Right now we are neck deep in an environment where tighter lending standards are being put in place for subprime borrowers. It is only a matter of time until prime lenders follow suit; especially if the fed gets involved and puts regulations in place to protect the consumer. This 'credit crunch' will restrict purchasing power and limit the buyer pool's size and stretchability when it comes to how much they can afford! Question is, what do you believe?

    Related Posts:

    Credit Crunch: Tighter Lending Standards

    Credit Update: HSBC Warns of Bad Debts

    Lenders Starting To Tighten!

    New Dev Sizing: Double Counting

    Posted by urbandigs

    Thu Mar 8th, 2007 08:26 AM

    A: Here's something most people do not know. When it comes to the quoted size of a new development condominium property, some developers include the portions of all common areas such as hallways, elevators, lobby's, roofdecks, etc. that are allocated to an individual unit; also known as 'common elements'. So, for anyone who went to new development sales office recently and was shown a floorplan that quoted a unit's size higher than it appeared to be on the layout, now you know why.Originally Published January, 19th 2007


    First, a little investigating into what common elements are defined as. Its called Real Property Law 339-i and goes into detail how the condo unit-owner's common elements are calculated.

    According to Habitat Magazine article titled, "Condominiums: A Primer To Ownership Interests":

    An owner in a condominium has no lease. He/she actually owns a unit. That unit (usually an apartment), like a private house, is measurable. In Manhattan, such a unit is generally contained in a high-rise multiple dwelling. To get to that unit, one must walk through the lobby, ride the elevator, and walk down a hallway. These areas are used in common by other unit-owners to enter and leave their unit (apartment).

    Additionally, embedded in the walls and floors of each unit (apartment) are girders, pipes and conduits, which service not only that unit, but also other units within the building. Accordingly, the legislature had to establish various forms of ownership so as to fully account for the ownership of the entire building in which an apartment exists. To solve this problem, they established "units" and "common elements." The units being the apartment in chief and the common elements being those portions of the building generally used by all other unit-owners to enter and leave each apartment, support the building, and bring all necessary services and utilities to a unit.
    So, the legislature mandated the determination of one's percentage of common interest in 4 ways...

    (a) proportion of floor area of the unit in relation to the floor area of all units

    (b) fair market value of the unit in relation to the fair market value of all units

    (c) equal allocation for each unit, or for each unit in a particular class

    (d) floor space of the unit plus unique factors affecting relative values, such as availability of common elements for exclusive or shared use.

    That last one seems relevant here. Let us review once more:
    floor space of the unit PLUS unique factors affecting relative values, such as availability of common elements for exclusive or shared use
    Jonathan Miller, of the amazing Matrix blog, corrected me as I first thought this practice is common to ALL condominium units listed for sale on the open market.

    Noah asks Jonathan: Stuck here trying to write a post about how the total size of a condo unit is quoted by most brokers and new dev sales teams. Wanted to point out that this total size INCLUDES the unit's allocated percentage of the common elements, which is why the apt size itself may seem smaller than the quoted size. Can you please CONFIRM or DISPROVE what I just stated? Is my thinking here correct? I investigated Real Property Law 339-i for this post to back me up.

    Jonathan responds: No thats not true. The % of common elements is based on the total square feet of the unit / total square feet of all units in the building. This percentage is then used to allocate expenses. Lately we have been reading about developers who have been taking liberties with including common area in the square feet calculation, (double counting), so it makes the square feet look larger, driving down the ppsf.

    Thanks Jonathan for a detailed clarification of this new trend.

    UrbanDigs Says: The total square feet quoted on some new development condominium property listings includes the total common elements allocated to the unit-owner. Be sure to ask the sales team if the new development you are thinking of buying into has included the allocated common elements into the unit you are considering. Your attorney could explain this in more detail especially when the offering plan is reviewed before you sign any contract of sale! Its all about being educated!

    Time Off

    Posted by urbandigs

    Wed Mar 7th, 2007 07:03 PM

    I'm going to need some time off to tend to some family issues. I hope to be back early next week. In the meantime, I'll be re-publishing some old stuff I wrote that I feel has merit in today's marketplace for buyers and sellers.

    Thanks for understanding.

    Determining How Much To Put Down

    Posted by urbandigs

    Wed Mar 7th, 2007 10:27 AM

    A: It's a question that comes down to a few factors most important of which is your comfort zone and opportunity cost. How much money do you need in liquid assets AFTER closing to be comfortable given your current financial situation and lifestyle. Only you know how much money is coming in and being spent. But one thing I can tell you is that putting more money down at closing, if possible, is a good thing if your money is in cash earning very low interest!


    While there is nothing wrong with putting down the bare minimum of 10% for a condo and 20% or so for a co-op, many buyers come to me with their full financial picture asking how much money they should put down past the minimum requirements.

    First off, you need to crunch your own financial numbers and ask yourself a few questions regarding the property you are thinking of purchasing. Start with these questions:

    1. How Much Will This Property Cost Monthly - A must! Do you even know what the property you are considering buying is going to cost you per month before tax benefits? Call your mortgage lender and get a rate quote based on your credit score and other factors and then go visit's mortgage calculator and plug in the numbers! Then add in the monthly maintenance and real estate tax payments (only maint. for co-ops as your taxes are included in this payment) to get your TOTAL COST OF OWNERSHIP!

    2. How Much Are You Bringing In - Your debt/income ratio is a number that many co-ops look into to make sure that your total costs of home ownership do not exceed a certain portion of your take home income. Generally, you want to keep your total costs of living under 30% of your take home monthly income.

    For example, if you take home $6,000/Month and the property you want to buy will cost you $2,000/Month, than your debt to income ratio is 33% (2000/6000 = 0.333333). This means that 1/3 of your gross monthly income is being put towards your living costs. You will also need to add in your minimum debt payments to this calculation; especially if you have high credit card debt or student loans (which is good debt and not looked upon as negatively as credit card debt in the eyes of board members).

    What you are taking home in salary on a monthly basis largely determines how much of your assets you could put into your home. If you are making 10x your total cost of living payments, than obviously you could put down a lot more money at closing towards equity in the property as you would require less security in liquid assets afterwards due to your higher salary!

    3. How Much Liquid Assets Do You Have - The biggie! You don't want to stretch yourself too thin but this post is for those in the opposite position and with suitable assets. To buy a new home you will have to pay transaction fees in addition to your down payment; nothing comes for free! If you are buying a condo than your closing costs will be significantly higher than if you are buying a co-op; so you must plan accordingly ahead of time.

    First, determine what the TOTAL amount of liquid assets you have. This includes all asset classes that are easily convertible to cash. For sake of this discussion, lets call your assets 'A'.


    Quick Tip: 401K other pension accounts do not count unless you have full access to this money w/out penalty. Real estate equity is also considered illiquid until you cash out, however you can pull out equity via a HELOC to cash into your checking account for another property purchase. If you are doing this be sure to take care of it before you buy the new home and already deposited the monies into your liquid accounts.

    Now that you know your total assets, you must determine how much the minimum down payment + closing costs will eat up at closing; you do this so you know what you have leftover and how much of that you should put towards equity. The best thing to do is to contact your real estate attorney for a breakdown of closing costs for your specific property in question. Lets call your total closing costs estimate 'X'.


    4. What's Left - Do some math! Take your total liquid assets and subtract the down payment and closing costs to see what is leftover!

    A - X = ?

    For Co-ops: You will need to show 1-2 years of liquid assets AFTER closing to the board for review and approval. This is generally a bare minimum. Some co-ops request higher amounts. You can find out exactly what you need to pass a board by asking the listing broker of the property; specifically you should ask..."how much salary and liquid assets after closing does this board look for in prospective buyers?"

    For Condos: You will need to show a few months at least of total monthly payments in liquid assets after closing for the listing broker to pre-approve you. Yes, its a condo and there is a right of first refusal process, but that does not mean you can put all your liquid assets into the down payment + closing costs! You still need to show something afterwards, although not as much as a co-op would demand.


    Still reading? Good!

    Now that you know how much money you will have leftover after closing there are two main items you need to look into. First is your comfort level. Based on what your take home pay is, your expected total cost of living & other debts, and closing costs how much money do you need in your accounts after all is set and done to feel safe?

    If your salary is just making it to cover your living costs, I would certainly want to have at least 8-10 months of living costs in liquid assets. If you have more than that, I would strongly consider putting more money down at closing so that your monthly living costs are lower, bringing your debt/income ratio down as well! This will make your daily life more comfortable knowing that your salary is more comfortably covering your living costs.

    If your salary is easily covering your living costs and your debt/income ratio is below 30%, than you need to see how much your liquid assets is returning back to you via investments? If your money is in stocks or short term CD's, than you are probably used to a 5-8% return on your investment with stocks being the higher end. However, if your money is sitting in a checking account earning 1%, than you would be much better off putting MORE money down at closing and taking out a smaller loan!

    The key here is understanding that you are paying interest on the loan amount you take out. So, if your investments are earning that interest or more for you, than it would be better to leave them as investments and utilize the tax benefits on the interest payments of the loan. However, if your money is earning little or no interest, than you would be better off putting more money into your down payment and taking out a smaller loan!

    UrbanDigs Says:


    Mortgage Report: Week of March 5th - 10th

    Posted by steve

    Tue Mar 6th, 2007 01:39 PM

    The bond market rallied last week and sent interest rates south. When there is a meltdown in the stock market, mortgage backed securites are usually purchased at least temporarily. With the dow down over 500 points last week, rates certainly improved to new levels not seen since last year. The 10 year yield fell from 4.68 down to 4.52 and that really affected the market positively. Market experts predicted that the recent seven month climb seen in stocks was unusual and bound to be volitile months ahead. The current 1000 day streak without a 10% decline was the second longest in history. Experts knew that stocks needed to regroup before heading north again. It's a good time to lock in your rate before the stock market begins to rebound.


    Market Update: Still Active & Low Rates

    Posted by urbandigs

    Tue Mar 6th, 2007 09:09 AM

    A: With the stock market selloff recently bringing lower yields on the 10YR Treasury, resulting in mortgage rates ticking lower, the activity at Open House's and in general in the Manhattan real estate world remains active. I would expect March to be like the old saying, 'March comes in like a lion and out like a lamb' in terms of activity.


    I went to 5 open houses this past Sunday with buyer clients ranging from $400,000 - $1.3M, a nice representative range. I noticed that activity is still very active with almost ALL the open houses having at least 4-6 people there during the short time we were browsing. So, if a 2 hour open house gets 6-7 buyers (including mine) in a 10 minute time frame, it is probably safe to say that the listing broker got close to 25-30 people throughout the entire open house. Thats fairly active.

    I would expect this trend to continue, at least during the next few Sunday's, with plenty of weekday appointments as well for brokers with exclusive listings. As I focus on my 10 buyer clients, I'll continue to provide market reports as best I can based on what I see out there. What this means for buyers out there is less negotiating power and more competition.

    One thing I do know is that if history repeats itself, and it usually does, that as we get closer to April this trend of incredible buyer activity will start to die down! It always does during this time of year. As a real estate agent, I have noticed this trend from 2005-2007 with 2005 & 2007 being the most active of the three years; 2006's months of JAN-MARCH was active too, just not as active as the year before or after.

    Some of the reasons for the surge in buyer activity and health of the NYC real estate market continue to be:

  • Low Interest Rates

  • Strong Jobs & Incomes

  • Higher Rental Costs Making Buying More Attractive

  • Tight Inventory & Strong Demand Bode Well For Sellers

  • As the stock market undergoes a healthy correction, and I stress 'healthy' and also notice a nice bounce coming today that hopefully holds (if it doesn't we may be in for a longer term correction as hedge funds and institutional traders re-adjust for more risk and uncertainty), expect a stabilization of lending rates. For the housing market to remain robust we need the economy to continue to be strong and stocks to rebound showing faith by those in the know that all is fundamentally OK with the US economy. Should stocks continue to falter and extend their losses, expect future economic data to come in weaker than expected which will ultimately hurt housing's search for a bottom.

    In terms of lending policy changes, I am a bit concerned that what is going on in the sub prime world might spillover to changes in prime lenders standards for loans. I already had one of my buyers have trouble getting a loan commitment as he had to submit much more paperwork than normal to make up for his weak credit history. I can only imagine what other buyers are going through who have weak credit scores. Put simply, if your credit is less than stellar you might have a slightly larger headache when securing your loan! Its the beginning of the changes that could very well lead to prime lenders down the road. Keep your eyes open.

    I talk about this stuff because it is forward thinking and can possibly lead to changes in policy that affect real estate investing on a fundamental level. If lending standards are tightened, purchasing power restricts and buyers find it harder to get loans for more than they can afford. I don't need to explain how that might affect housing; read my posts on Credit Crunch & Lenders Starting To Tighten for my take on this changing dynamic.

    Here are some links to posts that you should find useful about the sub prime and prime lending world:

    A Tantamentary on "Messier Mortgages" (Calculated Risk)

    Why Money Left Stocks & Got Picky About Bonds
    (The Mortgage Reports)

    Homeowners Stuck As Lenders Cinch Standards (via The Mortgage Reports; USA Today)

    SubPrime Lender Puts Workers on Leave
    (NY Times)

    Dirty Behavior: A Broker Lies

    Posted by urbandigs

    Mon Mar 5th, 2007 12:24 PM

    A: The real estate industry has such a bad reputation because of the behavior of dirty agents who lie, mislead, and conduct business to the benefit of themselves without any regard or respect to who else is involved in the transaction. While it may come down to dollars and cents, what this broker (I will not name names or firms) just did to me and more importantly, my clients, represents everything that is wrong with this industry! My hope is to expose this behavior as an example of the business practices of some and as proof that the tarnished reputation of real estate agents is warranted. My other hope is that the hard working, honest, and ethical brokers out there get rewarded for their services provided and stick to their principles.


    IMPORTANT NOTE: What this broker did is 100% legal and can be argued as acting in the best interest of her client while in violation of the code of ethics laid down by REBNY. I am not complaining about the legal aspect of this situation. Rather, I am complaining about the lies and misleading statements that the broker handed out to my clients and attorney while a signed contract + 10% deposit sat in the sellers attorney office for 8 days as she checked into whether another offer was genuine. The broker admitted to this and I even have a saved voicemail proving it. Ultimately, she went with the other offer that was higher without ever giving us a chance to know what was going on or counter to. Rather, we were kept at bay and lied to that the signed contract was en route to the sellers to get countersigned, while all this went on.


    Standards of Conduct

  • follow the highest moral and ethical standards of courtesy, integrity, proficiency, professionalism and honesty;

  • recognize that, in all transactions in which a Member participates, the Board's established reputation and high standing in the community will be maintained only if each Member's conduct reflects courtesy and proper regard for all other persons participating in such transactions;

  • when representing a buyer, seller, landlord, tenant or other client as an agent, protect and promote the interest of their client. This obligation of fidelity to the client's interest is primary, but it does not relieve Members of their obligation to treat all parties honestly.


    MON JAN 29th - My clients submit ALL CASH offer of $275,000

    The News: OFFER ACCEPTED OF $275,000

    WED JAN 31st - Deal Sheet Created.

    LATE THU FEB 8th - Docs received for buyer attorney to do diligence.

    TUE FEB 13th - Buyer attorney finishes diligence within 4 business days. Overnights contracts to buyer although this was when we had the ice-storm on entire Northeast.

    THU FEB 15th - Buyer gets contracts in afternoon. Ice storm delayed delivery.

    MON FEB 19th - Buyer signs contract and FedEx's in 10% deposit to their attorney.

    TUE FEB 20th - Buyer attorney receives signed contract + deposit and messengers to seller's attorney office!

    WED FEB 20th & TUE FEB 21st
    - Multiple calls into Broker verifying contract receipt and inquiring about seller countersigning so I can proceed with board package. No response.

    Later on FRI FEB 23rd - THE LIES BEGIN..! Broker explains that contracts were sent out to BOTH party's required; one of whom is in MASS and one of whom is in CALIFORNIA. We are told that they are en route and waiting to be countersigned.

    MON FEB 26th - Broker calls my cell to tell me "contracts were received by seller attorney and being sent out to get countersigned"? I question that this information is old news and that seller attorney had signed contract since last TUESDAY! I also question that we were told on FRIDAY by both her and seller attorney that signed contract was en route to sellers to get countersigned.

    WED FEB 28th at 7:21PM - THE DAMAGE IS DONE. Broker calls me to apologize and tell me that seller got another offer last week and that she decided to take it. She also admits to lying to me and that she decided NOT to tell me what was going on because she had to verify that the offer was genuine. All of this while my clients signed contract + 10% deposit is sitting at seller's attorney office, never sent anywhere.


    NYC is a very fast marketplace and is a different animal than most other parts of the country. After almost 3 years of conducting business as an honest and ethical real estate agent in Manhattan, I can tell you firsthand that 100's of times I have been in a situation where I wanted to show an apt to my client where a offer was accepted and a contract out. The listing broker's response EVERY TIME to me was either:

    1. "We have an offer accepted and a contract out. We are showing for BACKUP ONLY"

    2. "We have an offer accepted and a contract out. We are no longer showing and have a backup."

    Even in bidding war situations where multiple bidders are fighting for the same place there is a level of honesty and ethics that governs how the process works. In bidding wars, a best & final deadline is set and all bidders get a chance to submit their highest offer. As the deadline passes, the seller selects the highest and best offer and sends a contract out. During this time the buyer is given a chance to generate a signed contract of sale!

    In this case, the behavior of the broker was nothing short of scummy, dirty, shady, sneaky, and unethical and goes against the very CODE OF ETHICS that REBNY attempts to enforce to keep this industry somewhat honest. The real victims here are my clients who did everything by the book, in a timely manner, and were simply lied to and misled that the deal was proceeding while the listing broker had other intentions. We never had a chance.

    UrbanDigs Says: The broker did nothing illegal and I understand that. However, this is a matter of principle and morality of which this broker obviously has none of. If the broker came out right away AFTER our signed contract + deposit was received by the seller attorney and stated, "..we received a higher bidder, but will at least give you a chance to re-negotiate the contract price before we proceed, otherwise we will go with this higher bidder", I will have no problems and there would be no follow up! But that is not what happened. It is the lies and misleading statements that this broker used which was in clear violation of the only oversight this industry has to protect against unethical behavior. It's a shame and I feel awful for my clients who lost attorney fees, two other apartments of interest that are now gone as this situation unfolded, and their future home. When will it stop?

    UrbanDigs in NY Magazine

    Posted by urbandigs

    Fri Mar 2nd, 2007 04:20 PM

    A: Great to be in such a popular publication! Check out the article titled, "When Brokers Blog", that discusses what happens when brokers blog, and points out that the real purpose of blogging is to expand ones business and generate leads! Hmmmmm, now why didn't I think of that!

    UrbanDigs in NYMag

    My Contribution:

    When Citi-Habitats agent Noah Rosenblatt started blogging about the real-estate market twenty months ago, his colleagues couldn’t fathom why he spent hours every day on his site, “They couldn’t believe it,” he remembers. They do now: At a real-estate seminar at the Marriott Marquis in January, a standing-room-only crowd of agents skipped seminars on mortgages and foreclosures to swarm a seminar on blogging, inundating Rosenblatt with questions. Sensing opportunity, they seemed eager to get online, and fast.

    Go Digs!

    Why Lower Rates Might Not Be Good

    Posted by urbandigs

    Thu Mar 1st, 2007 12:11 PM

    A: There is a false perception out there that if the fed starts to cut interest rates that housing will be set up for another boom. I strongly disagree with this train of thought and here is why I think lower interest rates might not be good for housing, at least right away!

    First off, with the economy still relatively strong (only starting to show some signs of peaking) and with oil/commodity prices still at very high levels, there is no way the fed will get involved in a long standing rate easing campaign. With that said, lets analyze what the fed might do.

    If the fed cuts interest rates one or two times towards the end of the year, which is by no means a certainty, it is because they are starting to see signs that the economy is weakening and want to add some stimulation to prevent a recession.

    So lets break that down. If the economy is starting to weaken, then stock prices will reflect that early on with a selloff. Since the stock market is a leading indicator of the economy, it will be the first to show signs that trouble might be ahead. Assuming this happens, paper profits and consumer portfolio values will restrict making people feel less confident and less wealthy. As this occurs, there will start to be talk of a fed rate cut as Ben Bernanke and company attempt to put a floor on how bad things might get.

    In fact, the fed might even wait until there are real data points signaling a weakening economy before actually cutting; which is why many argue that the fed is lagging in its policy. In short, they want to know that something is actually happening and not any type of anomaly before changing monetary policy.

    As the fed cuts rates, it is because the economy is getting worse. The more they cut, the worse off things really are and the more in need of stimulation to prevent things from getting real bad. While interest rates and lending rates might dip a bit, it will come at the expense of restricting wealth effect due to falling stock prices and job losses.

    The first thing that happens in the beginning of a weakening economy is that corporations start cutting capital expenditures and other costs. The ripple effect begins. As corporations prepare for the worst, their spending cuts fuel the upcoming weakness that results in lower profits and profit margins reported. As this happens, job cuts are considered as another option.


    Here is a chart of the unemployment rate dating back to 1997, charted monthly, derived from the Bureau of Labor Statistics website:


    Now here is a chart of the fed funds rate and monetary policy changes during this same time:


    Now, lets combine the two charts and see if any relationship exists between when the fed starts cutting rates and unemployment reports soonafter:


    Hmmm..Very interesting! At least we know that when the fed is cutting interest rates, it is because the economy is weakening, and in a weaker economy unemployment usually rises.

    We have seen a very strong economy for some time now which has been reflected in higher stock prices since 2003 or so. Now one can argue that todays economy is a global economy with tons of liquidity and historically low real interest rates, and I'm fine with that, but what worries me is the warning signs. I see commodity prices still at very high levels, a stock run up that is due for a correction, possible policy changes in Washington, a weak dollar, and signs of peaking profits and profit margins.

    But put all that aside and trying to keep focused on real estate, I just don't see how one can argue that as the fed cuts rates the housing market will boom again! There is a reason the fed is cutting rates to stimulate the weakening economy, and it is those reasons that might not bode so well for housing in the near term.

    As I mentioned before, the biggest threats I see to housing in the near term is a change in policy of lending standards (which is already happening as lenders get tougher in the loans they hand out restricting purchasing power) and job losses. If the fed starts cutting rates, then its because corporations might be in for some tough times that could very well lead to job losses. How could that be good for housing? Even if rates on the 30YR fall from 6.2% to 5.75%, if you don't have a job or take a pay cut, then you can afford much less of a home if at all.

    UrbanDigs Says - I'm not a pessimist and hope you don't look at me as such a negative broker. Its just the way I see things and like to play devils advocate and talk about the stuff that few like to publicly talk about; especially in this business. If the fed cuts rates it is because they sense weakness which will ultimately be priced into equities and which will force corporations to take action. That is my fear. Don't get caught up in the idea that 1-2 fed cuts will make the housing market boom because deep down those rate cuts are in reaction to more serious underlying issues that will overpower lower lending rates! Rather, it is the nearing of the end of a rate easing cycle and when the fed starts raising rates again (because the economy is strengthening) that I feel is a more optimal environment for the next round of housing price appreciation.