Lower End Market Shift: Call It Broker Babble If You'd Like
Toes Here! Just want to pass on what I am both seeing & hearing out there. I know you're all going to pounce on me if you aren't actively in the market right now, but so be it! This post mainly has to do with sub $1M properties that are PRICED WELL, i.e. below the most comparable active competition.
I have sensed a market shift in the last four-six weeks. One of my sales listings had a bidding war in the first 9 days on the market where there were three bidders very close to the asking price, one all cash. A fourth buyer came in 15% lower than ask and was flabbergasted that his offer was so much lower than others.
A buyer of mine offered full asking price on a $299K apartment only to be beaten out by someone putting more than 30% down (building only requires 20% down). The lower end market has been very active as of late.
Another buyer of mine offered full asking price (just reduced to $515K from $538K a month ago) on an apartment, but was two days late - a contract was going out and his offer wasn't high enough to disrupt the current deal.
I wanted to make sure this wasn't just something I was seeing in my own business, so I took a survey. Here was my question to my fellow brokers:
"Hi y'all,Here are the responses I received:
I have 2 separate buyers who lost bidding wars this week ($299K and $515K downtown).
One listing where we had a bidding war (UES, $525K) between three great buyers.
And I have noticed a few brokers/sales offices RAISING prices on a few apartments. (Don't they know that everyone is on streeteasy & knows that they raised the price!?)
Is this happening everywhere? Do I need to tell my buyers that literally in the last few weeks this market has just shifted? I'm worried that they will think I am giving them "broker babble" or they'll think I am being "pushy broker girl." So I would like to get some more anecdotal evidence before I start making assumptions about the market based on my own business.
Thanks so much for your feedback! Christine"
1. Sales offices will do that especially if they've had listings on since 2007- they just assume that the apt has appreciated, but in reality, they will cut a good deal, especially if they wish to sell the last few remaining units- not the case for all sponsors, but for some.
2. For buyers, I would use inventory facts. Inventory is decreasing so there's less choice. Since there are a lot more serious buyers out there, the "freefall" in prices is over and realistic offers will need to be made, sometimes very close or at or even above ask price.
3. We discussed this in our meeting this week as well and I have been involved w/ one bidding war this past month. It is still a shaky market in my opinion and only the best priced apt is priced a bit lower are getting the bidding wars. That said you can only present the situation to the buyer and have them decide on best and final offers - that would save u criticism in future about your advice should the market take a tumble.
4. Christine, I assist 2 VPs, and I’ve been seeing it happen on deals for both of them. We’re seeing it on deals from the 600k range all the way up to $5mil on Park Avenue. I know what you mean about being accused of broker-spin, but it really is happening (on well-priced and otherwise awesome apartments). Even just had a bidding war on a $5,000 rental
5. Working with a studio buyer under 500k currently and it is shocking what is going on. Every good property has at least one offer on it. Just lost out on a bidding war for a property that was on the market since July and now all of a sudden got 3 offers on it. She lost out on another a couple of weeks ago. It's hard for first time buyers to deal with it.
6. Christine - I also get a sense that the lower end of the market is shifting since mid August and prices are tightening up in the $450,000 and below range. I too have seen a few price increases.
7. Hey pushy broker girl. I had 4 offers over ask on a townhouse in Bklyn last month. So it is happening when props are priced right.
8. I had 3 bidding wars in May/June. Each apartment went for below the asking price, but they were priced right for what they were in this market. I think its nuts to raise prices in this market.
There you have it! The buyers are out there and when something is priced right, apartments are selling and there are even bidding wars.
Toes says: Don't be surprised if you have to pay asking price or very close to asking price for an apartment. Whether its a real shift or just a temporary bubble, I don't know, but studios and one bedroom apartment in particular are selling if they're priced right.
Toes says: If you've been active in the market and are ready to pounce on something, be prepared with your financial statement filled out and ready to go, your Manhattan real estate attorney in your back pocket & a recent mortgage pre-qual letter. The most prepared birds get the worm:)
Posted by Noah
Mon Oct 5th, 2009 12:48 PM
Christine - don't feel bad writing about what you see. Maybe because you didnt write much when things were real slow, some may think its broker babble. Let people say what they want
In my humble opinion, this market shifted over the course of the past 3-5 months. There is a reflation mentality taking hold that is occurring right after extreme fear and uncertainty (early 2009). Its quite amazing to see it in the field, via the improvement in bids, depth of buyer pool and willingness of buyers to get back in at the new, lower level. This market never ceases to amaze me.
Im not really in the lower end anymore, most of my clients are around 1.5M - 4M or so, but I see it a bit there too. Doubtful as much as the lower end. Due to the nature of this recession, lower end experienced the smallest of price declines out of all market segments, and seems to be the most active right now. Financing, or lack thereof in higher end, likely has something to do with this.
Anyway, I have been writing about the activity for months and the expected surge in closings and contracts signs that Q3 just showed. You cant deny it. Fundamentals aside, this market is emotionally driven and no doubt lower prices equated to higher sales.
My only fear now is that sell side optimism is outpacing buy side confidence. I think bids improved to a level and that buyers are not too quick to chase further from this point on. But sellers expect them to. I wonder if this will lead to another minor disconnect and slower volumes for the remainder of the year
I enjoy front line info, whether its good or bad. Wish we could hear this stuff from you all the time, especially in bad times.
Thanks
Posted by Jay
Mon Oct 5th, 2009 01:44 PM
"priced right" is and always is the key. The problem is many sellers have no idea where that is. I've seen 1Br's that weer priced in the high 500's in the Spring (with no takers) come back on recently at higher prices. If it didn't sell for $x in May, it sure won't sell for $x+ now.
As for me (and this is the market I am watching) I still expect it to slowly creep lower over the next couple of years. And in the cookie-cutter 1BR market, there are no "deals", so either pay market or sit tight. I just don't see the value at current prices. If others do, more power to them.
Posted by Noah
Mon Oct 5th, 2009 02:33 PM
a main reason why sellers dont know where the markets are is because of conflicting market reports and the nature of this business.
most brokers build successful businesses around getting listings. The you get a constant flow of buyers through the listings you sell.
To get the listing, the seller must sign an agreement with you. Many brokers pitch their own marketing skills and business operations (which is fine) in an attempt to 'sell' the homeowner that they can move their property at an inflated price. The brokers agenda is to get the listing, worry about price cuts 1-2 months later. So, sellers are often quoted misleading estimates or ranges where their property should trade. Then seller usually goes with the broker that promises the highest price. I would like to think this trend is a dying one, but Im sure it still happens
Posted by OT
Mon Oct 5th, 2009 03:16 PM
We have had 2 units in our building go into contract this year and both fetched good prices. The first was 5% below the peak 2007 price, and the other was at equivalent price to mid-2006 comp (only comp available, smallish building). From what I have seen, sub $1MM in prime hoods are staying within single digit drops.
Posted by OT
Mon Oct 5th, 2009 03:17 PM
Yeesh, sorry for the triple-post. Stupid IE...
Posted by Noah
Mon Oct 5th, 2009 04:22 PM
Thats ok...OT. yea, reflation mentality is a strong force. I just question the sustainability of it over medium term. This confidence compliment could last easily another few quarters.
Posted by MikeG
Mon Oct 5th, 2009 06:41 PM
If its priced to sell it will sell. I think what you are witnessing is a "market shift" in seller mentality by way of lower listing prices (generally).
Toes, I think your also missing the "BIG PICTURE", prices are still going down not up. Calling a market shift based on a few data points would make Barry Ritholtz frown.
Posted by Noah
Mon Oct 5th, 2009 06:57 PM
MikeG - its a good point. people get very tied up in this qtr-to-qtr or even nearer term than that.
Its funny, they ignore the wave down completely, and instead focus on how bids may have improved on a month to month basis. Definitely misses the bigger picture that prices are in a down trend and likely will stay that way for a bit. Its never a straight line and there will be deals at every price.
Posted by Toes
Tue Oct 6th, 2009 02:26 PM
I had another customer in the under $1M market get into a bidding war yesterday (large Village doorman one bedroom). The apartment was priced to sell and was only on the market for 3 days before two offers came in over the asking price! Thus far, we won the bidding war, but until the ink is dry on the contracts...
Sure, what I am seeing could be a market blip, pent up demand, etc. But the under $1M market is extremely active right now and I suspect in 3 months when the next market report comes out, you will see that I am not making this up!
Posted by Edward
Thu Oct 8th, 2009 02:24 PM
Isn't Christine the one who wrote the long opus on how prices would be heading up, right before they crashed 25%?
Was that also based on the same market insight?
Posted by Former Seller
Thu Oct 8th, 2009 03:49 PM
Edward- before jumping all over Christine, let's remember that the overwhelming majority of UD followers earlier this year had a consensus for total armageddon, average Manhattan PSF going to $500 before end of year, no reflation trade, no 'wave' down, just sustained asset decimation throughout the year. Most of them disappeared from discussions here late spring. Point is, the short sellers can overshoot trends as well.
Christine is just reporting what she's seeing on the street right now.
Posted by Janney
Fri Oct 9th, 2009 01:00 AM
Thanks for the recap and the interpretation. With all these happening, we could conclude that nothing is truly predictable right now and we could only hope for the better in the days to come. Good luck on everything. By the way, I know a real estate coach who could also help many in the real estate industry make money despite the current crisis.
Posted by MikeG
Fri Oct 9th, 2009 11:36 AM
Any observed uptick may be a result of seasonal demand (seasonality), and not a reversal in trend or better yet a trend in asset appreciation.
The "buy now before prices go up" definitely sounds like broker-babble to me.
Remember whoever has the gold makes the rules.
Posted by MikeG
Fri Oct 9th, 2009 11:37 AM
Any observed uptick may be a result of seasonal demand (seasonality), and not a reversal in trend or better yet a trend in asset appreciation.
The "buy now before prices go up" definitely sounds like broker-babble to me.
Remember whoever has the gold makes the rules.