Market Report: Well Priced = Action
A: Sounds so easy right! Well after a busy Presidents Day weekend full of appointments and open houses, I will tell you this: properties that are priced right compared to recent in-building trades are very active! Specifically, the two bedroom market where there seems to be two different types of sellers; 'realistic ones' & 'testing the market' ones. Meanwhile, I feel like the two bedroom market is starting to show some options for buyers. Overall, its refreshing to see bonus season behave like bonus season.
The good news is that even with all the macro concerns & credit crunch, buyers are still out there in full force looking at properties to sink their $$$ into. Readers of this site know my feelings about buyers and the important role they play in any local housing market. In my opinion, buyers are everything and their confidence is the only gauge we have to see where the herd may be heading! Right now, plenty of buyers are out there actively viewing properties with some degree of drop in confidence; confidence varies depending on unique situation & views on the markets.
What a fabulous thing for Manhattan sellers that other markets would love to have! Outside Manhattan, many markets are experiencing surging inventories, fierce seller competition, and a total lack of buyer demand. Here in Manhattan, I see inventory slowly rising the past few months, a lack of fierce seller competition, and plenty of buyers aware of the economic concerns that are going on.
What does it all mean? It means these buyers are willing to put their dollars to work IF the property is priced correctly! It also means that they are hesitant to pay a significant appreciation premium compared to similar deals closed in 2007! Knowing this important piece of market information about the buyers allows me to conclude this tip for sellers: price your property right, and you will get action!
I was mostly out looking at the two bedroom market in midtown east & the upper east side. What I saw validates what I discussed above. Two bedrooms, ranging from 1150 sft - 1300 sft, priced in the 1.15 - 1.3M range had strong open houses. Meanwhile, similar two bedrooms with nothing extra to offer buyers priced above this range, were slow. As I normally do after seeing a bunch of units over the course of a weekend, I called Toes to see how her showings went and to get a sense of her opinions on the market in general. When she confirmed exactly what I saw, I knew it was accurate enough of an update to post here:
According to Toes:
Open houses this weekend in the $375K - $800K range were packed, despite the holiday weekend. The first time buyer is out there in full effect. Instead of seeing 10 - 15 properties as they may have in the past two or three years, they are looking at 30+ apartments and really taking their time to find the best deal. There is no sense of urgency, but still, the best properties are selling right away and there are still multiple offers generating bidding wars. I think the best strategy in this market is to price at or below market value and sell the apartment within the first 2 - 3 open houses. If something is on the market longer than that, buyers will low-ball.The key takeaway from this update for serious sellers should be to avoid greed and use common sense when interviewing agents to possibly work with! Price your property accurately based on in-building trades, your unique apartment features, light/views and to a lesser extent, active comparables.
I've heard from two other agents that their 2 bed 2 bath listings are really slow, they only had three or four people at their listings (in the $1.4M - $1.6M range). In the first three open houses, one of my colleagues has had only 10 buyers. In the past there was a shortage of 2 bedroom, 2 baths, but it seems as if the pendulum may have swung the other way, and now there is an oversupply of inventory. Pricing is key. Look at the competition on the market and make sure you are one of the best priced properties out there or the apartment is going to sit on the market. The longer it sits, the more likely you are going to have to accept a low offer.
Its a well known trick in this business to promise a very high sales price to win the listing from fellow competition (the market dictates what your home is worth, NOT the agent!), try to get buyer clients in the meantime, and work on a price reduction 1-2 months later. Don't fall prey to one of the oldest tricks in the book!
Posted by Anonymous Banker
Tue Feb 19th, 2008 05:36 PM
Couldn't agree more Noah.
I looked around from mid-November to mid-January. Whilst I had the money to spend on a 1,500 sq. ft property valued at 1,300 psf, when push came to shove in this market, the rational side of my brain tempered my usual enthusiasm for finding the "perfect" place and instead I compromised and put value for money over and above the pure emotion. Consequently I ended up in a place offering over 1,500 sq ft, outside space and a section 421 abatement all for little over 1,000 psf.
Had the market been moving aggressively upwards and if I had confidence that the economy wasn't going to slip into recession I would have probably been ruled more by emotion on the basis that slightly "overpaying" now would be more than offset by a near gauranteed capital appreciation. In these more challenged times, I ultimately found a place priced to sell (and reduced $210k) before feeling comfortable that I was making a sound investment as well as finding somewhere I would feel very happy living in.
Finally, I specifically chose to not spend upwards of $2mm and be stretched but to pay $500k less and be very comfortable. Does this fall into Toes reports of demand for 2 beds being less than smaller places? Apart from the super-rich, is everyone being more pragmatic and opting for what they need to move into and putting the aspirational second or third bed to one side for financial expedience sake?
Posted by julie
Tue Feb 19th, 2008 05:50 PM
An anecdotal observation, in my building decent sized Jr 4's (980 sq. ft, "second bedroom 10X10 with a window) have seen a nice increase in asking prices recently. I don't have sales $ for them yet as they are "in contract". I suspect that for people who are uncertain about the direction of the market these apartments give them the sense that they can stay for longer than they could in a one bedroom without the financial concerns they would have with a true 2 bd/2 ba. Thus they are increasing more than either the smaller or larger apartments.
Posted by Noah
Tue Feb 19th, 2008 05:55 PM
thanks for sharing anon banker!
Julie I agree that JR4's and other scalable apartments at a lower price point are always in demand in tight housing markets! The apt I sold was a JR4, and I discussed how I transformed it to a marketable 2BR here on urbandigs.
However, you cant price as high as true 2BR's with dining room and extra 100-200 sft...
If JR4 has extra half bath, that could convince a growing family to buy for a 5 year transaction. Good point!
Posted by toes
Wed Feb 20th, 2008 09:47 PM
Hi Anonymous Banker,
1500 sq ft + outdoor space for approx $1000/sq ft? I think you probably did just fine:) There are always people who will pay a premium for outdoor space. The 2 bed 2 baths I am seeing sitting there are standard, post war, 8'4 ceilings, 1200 sq ft, not particularly renovated, nothing special about it... If you think someone is going to pay top dollar for that right now... Good luck!
Julie, I am also going to agree with you on the Junior 4s. Frequently, by the time someone is ready to buy a one bedroom, they are thinking that in 3-5 years they may have a baby. If they can afford that extra dining area for a nursery, home office, or guest room, they are much more likely to take the plunge. They know they wont outgrow the apartment for a while and can hold it if the market conditions aren't right to sell. Additionally, I don't see that many Junior 4s being built. Most of the new developments seem to make one bedrooms, one bedrooms with home offices (read: no window in the 2nd room), and two & three bedrooms. Many buyers prefer the true "Junior 4" layout over a one bedroom with a home office. A true Junior 4 has a window in the dining area so when you create the 2nd room, at least you have light and air. A "one bedroom with a home office" typically does not have a window.
Posted by toes
Wed Feb 20th, 2008 10:48 PM
I just received a comment via email from one of my buyers that completely sums up what I see going on in the market right now:
"I'm interested in tracking the market, so I can spot a deal once it becomes available and quickly capitalize. I'm not in a rush and might
sit on the sidelines for a few months before diving in."