WEEKEND PRESS: Front Page NY Times Real Estate
A: Got some great press and with great company in this weekend's edition of Sunday NY Times Real Estate section. The article seems to focus on how the downturn is affecting the bloggers, either by job layoffs, traffic decreases, lack of content, or lower ad revenue. Lets discuss, and also take a look at how this site's traffic has fared over the course of this crisis. In short, traffic has been rising consistently as the severity of this credit crisis was revealed.
From NY Times, "And The Blog Goes On":
For readers, it was fun to pillory the design flaws of new offerings and to read about how one broker had trashed another in an overheard conversation in an elevator.Yes, it is true that there is no entertainment value in writing about a pressured sales market, where those that MUST sell are having a very hard time moving their property. But, readers of this blog were warned well in advance as the focus of this site has been to dissect the macro economic trends as they turned from bad-to-worse, way back in mid 2007, before the problem evolved into a full fledged credit crisis. In July 2007 I wrote, "MuBiS, Credit Fears, & Housing Woes" and I said:
But with the recession in full swing and the housing market waning, what will these blogs write about now? It’s not entertaining to skewer a market where property values are falling and scores of people are losing their homes to foreclosure. Nevertheless, the blogs’ founders worry about declines in page views and advertising, and like the owners of other forms of media, they are trying to find strategies to deal with the recession.
In my opinion, Inventory, Wall Street & Jobs are the most direct fundamentals to the sustained growth of the Manhattan real estate marketplace in this past housing boom! Right now, this is what is supporting us and at the same time these fundamentals are the biggest threats to keep your eyes on! Should wall street flounder, resulting in a loss of jobs and high end salaries then it is very possible that more and more inventory will hit the marketplace at the same time that buyer demand loses a big umph.A few weeks later I wrote, "Its A Risky New World: Credit Spreads":
It’s a changing world. Either you realize it and adapt with it, or you lose; plain and simple.Those discussions, written over 17 months ago, started a shift of content here on UrbanDigs.com from writings focused on Manhattan real estate TO writings focused on the severity of the credit crisis, our banking system, and the overall economy. At the time, I started getting emails from people asking me to write more about Manhattan real estate and to stop talking so much about the macro economy. Hopefully now they realize why I didn't do that.
Today, we find our local marketplace neck deep in the slowdown that has wreaked so much havoc on the nations housing markets, banks, individuals, equity prices, etc..Turns out we are not immune as so many brokers have promised we would be. It also turns out that people out there are in fact interested in learning WHY this slowdown is as severe and unique as it is, compared to previous recessions. That is why traffic on this site has steadily increased since 2005, seeing monthly page views hit just shy of 600,000 and monthly # of visits hit over 105,000 last month alone; according to urbandigs.com server awstats! Here are some graphs showing you traffic growth over the past 3 years:
I have plenty to write about now that the eternal optimists and the most upbeat economists have realized this credit crisis is as bad as originally feared. I also will continue to write about the state of the Manhattan real estate market as we deal with this crisis, in real time as I see trends play out.
Jeff & I will continue to analyze, break down, and discuss the changing trends of the macro economy, the credit crisis, and ultimately endgame (some thoughts on the latter stages of debt-deflation), and how this all may affect our local housing markets! Let's keep it real and discuss openly the problems we are facing without bias, spin, and other types of misleading emotional bullshit. It is what it is, and either you adapt and survive, or you hope & get hit on the head with a 2 x 4. Heck, even Larry Kudlow has ceased being an eternal optimist lately!
Posted by chris
Sat Jan 24th, 2009 11:52 AM
Congratulations with the increase in page views of your site, Noah. Always fun and interesting to read your comments.
If you have the time, read John Kenneth Galbraith's 'A short history of financial euphoria'. A truly excellent macro analysis of what drives asset bubbles, herd behavior and the fallacy of the argument that 'this time it will be different'.
Speaking of herd mentality, have you done research on what drives the remarkably insane levels of asking prices on new listings that even 'reputable' RE brokerage firms are still putting out there, in this market? Could it be that there is massive collusion among the 'top' brokerage firms here in Manhattan to keep up the ask prices no matter what? In essence, similar to the collusion between Christie's and Sotheby's in the art market, a few years back?
Posted by Noah
Sat Jan 24th, 2009 12:01 PM
Chris - THANKS! Yes I will read that, thanks for suggestion.
You know, I was going to do a piece on that. Honestly, here is what I think is playing a BIG ROLE in high asking prices outside of denial on part of the sellers, thinking their place is worth near peak or peak, and pricing close to that level:
SELLERS USUALLY INTERVIEW 3-5 BROKERS BEFORE CHOOSING TO SIGN A 6-MONTH AGREEMENT WITH A FULL SERVICE FIRM. BROKERS HAVE MASTERED THE ART OF SUGGESTING A HIGH PRICE OR HIGH VALUATION FOR A PROPERTY TO ENTICE THE SELLER TO WORK WITH THEM. COMMON SALES TACTICS INCLUDE, "I AM THE BEST AND MY TEAMS MARKETING EFFORTS ARE SO AMAZING THAT WE CAN DELIVER TO YOU A HIGHER PRICE", OR "I AM A SPECIALIST IN THIS BUILDING AND I HAVE 5-6 BUYERS ALREADY TO PAY TOP PRICES IF YOU WORK WITH ME", ETC...
The 1-2 punch is GET THE LISTING and then WORK ON REDUCTIONS. Part of getting the listing is suggesting a favorable price for the property. After all, if a seller hears a higher price, they prob will choose to work with that broker! Right?
This POISONS the mind of the seller, makes it hard for brokers with more realistic pricing strategies to get the listing. I go through this so much I cant begin to tell you. I think it plays a role in pricing.
Posted by chris
Sat Jan 24th, 2009 12:14 PM
Yes, but with the effect that properties sit on the market for a long time, which is a huge disservice to the sellers, especially in a declining market. Case in point: the seller's of Brooke Astor's apartment on Park Ave FIRED Leighton Candler, Corcoran when her 6 month contract was up; and promptly replaced Corcoran with Stribling. And this is supposed to be the high end of the market where the RE brokers have 'superior' knowledge ... :)
Seriously, I wouldn't be suprised if the top firms are massively colluding. And that's not even legal, right?
Posted by Noah
Sat Jan 24th, 2009 12:24 PM
"which is a huge disservice to the sellers"
Exactly! But its human nature to try. In such situations, I tell my sellers that I will try a higher price (TO A POINT) for a short period, and if no acceptable bids come in, we reduce to my suggested price.
What did Stribling list it at compared to the last listing price at corcoran? link?
Posted by anonymous
Sat Jan 24th, 2009 12:53 PM
congrats noah.
why were on the nyt topic, if not talked about before, why did they change their layout for searching for apt's for sale. The added map is nice, but the search features make it much more difficult to navigate. not happy at all.
Posted by chris
Sat Jan 24th, 2009 01:04 PM
http://www.observer.com/2009/real-estate/whither-astor-duplex-listing-down
Here it is - Brooke Astor's pad at 778 Park Ave. Initially listed at $46 million by Leighton Candler at Corcoran, dropped to $35 or $34 million (cash only, of course). It failed to sell, and Corcoran got fired. Not yet up on the Stribling site, I think.
Posted by faustus
Sat Jan 24th, 2009 06:29 PM
Noah, congrats on the press! It's great how much you're getting out there.
Btw, I think now may be a good entry point for TBT.
Posted by Noah
Sat Jan 24th, 2009 07:19 PM
thx faustus! I was orig in TBT at 56 or so, bought more at 59 on the way to 65. Never sold until it fell to 54 or so, took loss.
Starting nibbling around 43 on the downside, and now I have like 500s from dca of about 39. They just launched options on it, few months ago. Was thinking of buying some calls, but figured to wait fro another selloff to do so. Nothing goes in straight line.
Posted by Donald
Sat Jan 24th, 2009 07:56 PM
ok, great to knwo that UD won't be going the way of Circuit City. But, personally, I think seeing a decrease in housing blogs is a WELCOME sign because, quite frankly, there are too many of them. And some blogs have quite hateful speech against anyone who owns a house and real estate agents. I like reading thoughtful commentary, not angry rants, so that is why I left sites like patrick.net and Housing Panic and came to UD.
Posted by paul.b
Sat Jan 24th, 2009 08:56 PM
congratulations Noah & company, you deserve it! I've been reading this blog for about a year and a half, and it amazes me that the content gets better with time. Keep up the good work
Posted by Jonathan J. Miller
Sat Jan 24th, 2009 09:47 PM
Noah, I've always admired your efforts on UD, especially when digesting it over a big juicy steak ;-) Here's to another good year of transparency, brainstorming and new ideas!
Posted by Peter Comitini
Sat Jan 24th, 2009 10:41 PM
Hi Noah, congratulations on the ink today. Well deserved! Impressive traffic numbers, that chart doesn't look too flat to me :-)
Chris, I don't think there is any collusion by the brokerages. They would gain more by selling properties briskly, at realistic, even if down prices; rather than by spending time and advertising dollars for months without results. It is more likely a reflection that many sellers are not ready yet to accept that their expectations are overreaching. There are buyers for the properly priced stuff.
Posted by Noah
Sun Jan 25th, 2009 08:49 AM
Thanks Donald!! Much appreciated, I'll do my best to keep it up.
JM - yes, its best to discuss anythng over a juicy steak. Lets do it again sometime!
PC - Thanks!
Chris - I dont think its collusion either, rather just the way the sell side of this business is. Im not the one to talk to about the ultra high end! So, look to Peters response more than mine. I agree that many sellers are still in he DENIAL stage.
Posted by chris
Sun Jan 25th, 2009 09:59 AM
Peter/Noah, interesting points. Let me ask you the following: WHO ultimately sets the asking price? Is it the individual broker with the seller, or does anybody at the brokerage firm supervise/approve the published asking price? I would imagine that there is a reputational risk to the firm if it's left only to the broker and the seller ... the published asking price could be ridiculously high or low. So my question is, is there oversight and pressure from the RE brokerage firm in how the asking prices are determined?
Posted by Noah
Sun Jan 25th, 2009 10:08 AM
GREAT QUESTION! I'll try to answer it this way. The SELLER sets the ultimate asking price and must give approval for any price cuts thereafter.
The seller generally uses the broker as a guide to set the asking price, hence the comment I wrote above about seller brokers' poisoning their minds with ridiculously high asking prices as the process to secure the listing begins.
I have told sellers in the past that I am not interested in working an exclusive where the sellers starting price is WAY off base, and unrealistic. Most brokers will take on a listing, if anything, because it makes them appear busy and you never knw what potential buy side leads you may get from the listing, even if the listing never sells. Especially true at high end. Even if a property should be priced at 5M, if it is listed at 7M, the seller broker will get leads in this high end range they may ultimately end up working with on another deal.
The brokerage firms usually stay away unless the price is insanely unrealistic. Otherwise, they may get involved if there are no price reductions after a certain period of time. Or cutback paid advertising after a certain period of time if the listing is unrealistic.
Just my two cents. In short, the seller sets the asking price, they are the boss, its their pad, and they are the ones in charge of accepting an offer. The broker is a guide, albeit sometimes a bad one since many brokers promise very high prices to secure the listing. Other brokers wont waste their time or quote a price that is way more realistic that ends up doing them harm because they dont get the listing. Happened to me many times.
Posted by anonymous
Sun Jan 25th, 2009 01:03 PM
It is hard to trust a broker's recommended asking price. After all, the broker is incented to set a price as low as possible because GETTING A SALE, REGARDLESS OF PRICE, is the best way to make money. For example, let's say I own a 1 bedroom condo with a current market price (if such a thing exists) of $700k. If a broker were to sell it there and make 3% commission, he would make $21k. If, however, he convinces me to put it on the market for $600k (which in my example is below market), he is more likely to sell it, and would make $18k. If I were a broker, I would prefer an easy/guaranteed $18k vs a hard/chance at $21k all day.
Posted by Office - Noah
Sun Jan 25th, 2009 01:41 PM
Anon - "It is hard to trust a broker's recommended asking price - After all, the broker is incented to set a price as low as possible because GETTING A SALE, REGARDLESS OF PRICE, is the best way to make money."
exactly! They dont. And seller brokers know this! Hence why I think the 'poisoning' of sellers minds in this current marketplace is playing a role in the severe illiquidity for past 4-5 monts. The world changed, but sellers for most part, have not acknowledged it. This is the way most down cycles start, and simply shows the mechanics at play here.
Posted by Office - Noah
Sun Jan 25th, 2009 01:48 PM
"If I were a broker, I would prefer an easy/guaranteed $18k vs a hard/chance at $21k all day."
Sorry, forgot to respond to this part. This is very true, BUT, the process of earning any money at all begins with securing an exclusive listing agreement. Herein lies the crossroads. Does the broker:
1) suggest a realistic, yet lower price to seller, to get a quick sale that is most beneficial to him/her; which puts the chances of GETTING the listing significantly lower, OR
2) suggest a high price, to raise chances of GETTING the listing?
For most part, the answer is #2, suggest a high price, and secure the listing first. THEN, and some brokers set this up wonderfully in the sales pitch, agree to a reduction after X weeks? So, 1-2 punch. Get listing first, then GET THAT PRICE DOWN. Sneaky? You bet? Does it work? You bet! Make no mistake about it, some brokers excel at the 'art of the sales pitch' knowing that this is where the money is made in this business.
But this market changed. And most brokers 'art' that worked when the market was bullish and very active, likely wont work when bids are hard to come by and pricing strategy throughout the sales process becomes critical.
Posted by Trooper
Sun Jan 25th, 2009 10:33 PM
I think the best startegy is tol tell the seller that broker will agree to sell at price X but must consider a reduction if there are no offers after the first 30 showings or so.
Posted by Peter Comitini
Mon Jan 26th, 2009 12:07 AM
"Could it be that there is massive collusion among the 'top' brokerage firms here in Manhattan to keep up the ask prices no matter what?"
"It is hard to trust a broker's recommended asking price. After all, the broker is incented to set a price as low as possible because GETTING A SALE, REGARDLESS OF PRICE, is the best way to make money."
Fascinating comment string Noah/Chris/Anon. Segueing from brokers who are setting prices too high and colluding to prop up the market; to brokers who are setting prices too low to make a quick sale at the expense of their clients.
But the anonymous poster is correct to point out that it is all a matter of trust. At the end of the day it it's always in a client's control, if you can't trust your broker, then you should probably find another one.
-peace
Posted by Aquarian
Mon Jan 26th, 2009 10:14 AM
The RE business like any business should ideally be about providing a competent service at a fair price, all based on integrity and trust. It's a cliche but true: a person of good character does the right thing for no other reason than it's the right thing to do.
In my view, the root problem among many agents is a lack of integrity and in-depth knowledge of all relevant factors. Noah, thanks for a decent measure of both on your blog.
Posted by Austin Smith - Goomzee.com
Mon Jan 26th, 2009 11:07 AM
Congrats on the coverage Noah! In case you didnt know, Dustin Luther features the NY Times article on his 'hotlist', which is where i stumbled on it. Keep up the good work!
Posted by Kevin
Mon Jan 26th, 2009 11:22 AM
Congrats. Keep up the good work, and know that due to this site when I decide the market has settled enough for me to jump in and I start looking, I know who I am going to call first.
-K
Posted by Office - Noah
Mon Jan 26th, 2009 12:05 PM
Austin - THANKS!
Kevin - You got it! I'll be here, thanks!