Few Real-Time Thoughts / New Contact Info

Posted by urbandigs

Wed Jul 15th, 2009 11:31 AM

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A: For those trying to contact me, please email me at noah + '@' + urbandigs.com. I am no longer associated with Halstead Property. Posts will be light for a few weeks as I take care of some business on my end here for UrbanDigs Analytics & Consulting.

For what its worth I will give you a few thoughts on Manhattan's current market before I focus my time on UD 2.0. Please know that you can not day trade Manhattan real estate - so buy for the right reasons, for the longer term, and with your happiness in mind. If you are an investor looking to rent out your unit for an immediate profit, don't get too excited. Even though Manhattan real estate just went through a sharp wave down in prices and hit the first comfort zone, rents have fallen as well. Unless you plan to put a significant amount of money down, I would not expect investors to be cash flow positive immediately after the purchase. For most of the credit boom, and for as long as I have been following this market (owned and rented out unit for 2003-2004), condos have demanded a premium over coops making it difficult to buy and rent for a profit right away. But deals are ALWAYS to be had so if you did buy and rent for a profit since Day 1, you did great!

When I first rented out my unit I had a shortage spread adjustment in my monthly payment that was quite a shock - as a result the rental income for the first year covered about 85% of my now higher overall costs. I did raise the rental price when I got new tenants the following year. After that I knew I wanted to sell so I moved back into the unit to satisfy the 2/5 year primary residence tax qualification for capital gains exemption on resale. My last tenant paid a monthly rental price that was about 7% below my total cost of carrying the property. I figured if I continued to rent for another year, I would be at breakeven.

For speculators looking to buy and rent, just understand the changes in the rental markets that occurred with this slowdown - I am no expert on Manhattan's rental markets. I believe rents to be down about 15-20% from peak levels across the board. But who knows what landlords are agreeing to real time these days - if you know, speak up!

For those curious about Manhattan real time conditions, as in what is going on today and not a few weeks ago, from my own business and from talks with many colleagues I would say the following with a good degree of confidence:

FOR THE MOST PART, IT SEEMS TO ME THAT PENT UP DEMAND HAS EITHER MADE THEIR PURCHASE OR RETURNED TO THE SIDELINE. THE COMFORT ZONE, WHERE BUYERS RE-EMERGED WHEN PRICES ADJUSTED ENOUGH, WAS REACHED AROUND LATE-MARCH TO EARLY-APRIL. ACTION WAS ESPECIALLY HOT DURING MAY & JUNE AS EVIDENCE BY 'CONTRACTS SIGNED' & 'INVENTORY' TRENDS FOR THAT PERIOD. YOU CANNOT DENY THAT THIS TOOK PLACE. I FEEL LIKE THIS MOST RECENT WAVE OF ACTION HAS NOW PEAKED, MANY DEALS WERE DONE & ARMAGEDDON PRICED OUT. NOW WE WAIT FOR THE LAGGING REPORTS TO SHOW IF THIS WAS INDEED THE CASE - MAY HAVE TO WAIT FOR Q4.

FOR THE PAST FEW WEEKS, THE MARKET IS STARTING TO FEEL MORE LIKE THE TRANSITION PERIOD THAT ACCOMPANIES THE SEASONALLY SLOWER SUMMER MONTHS. TAKE THE ACTIVITY GAUGE DOWN A NOTCH OR TWO FROM MAY & JUNE. PRICING REMAINS THE #1 WEAPON TO MOVE PROPERTY THAT IS HAVING TROUBLE PROCURING TRAFFIC & BIDS. IF YOUR PROPERTY WASN'T VALUED BY THE MARKETPLACE OVER THE PAST 8-12 WEEKS, YOU SHOULD RE-EVALUATE YOUR PRICING STRATEGY AND QUESTION WHETHER YOU ARE BEING REALISTIC GOING FORWARD. SELLING AN APARTMENT THAT GETS UNDER 5 PEOPLE AT OPEN HOUSES AND ONLY 1 OR 2 PRIVATE SHOWING REQUESTS PER WEEK, GETS INCREASINGLY DIFFICULT. I'M A MATH GUY AND THIS MARKET IS A NUMBERS GAME - GET 20+ PEOPLE TO AN OPEN HOUSE, AND A SENSE OF URGENCY IS CREATED THAT MIGHT JUST GET YOU A GOOD BID. GET 3 PEOPLE TO AN OPEN HOUSE AND THAT SENSE OF URGENCY IS NEVER CREATED AND YOU HAVE TO RELY ON WHETHER THAT BUYER IS THE PERFECT BUYER FOR THE PROPERTY. BESIDES, IF YOU GET 20+ PEOPLE TO YOUR OH, ITS PROBABLY BECAUSE YOUR PRODUCT IS PRICED PROPERLY FOR THE CURRENT MARKET.

I'LL GET INTO THIS MORE IN A FEW DAYS.

BEST ALL - NOAH