Where the Deals Are Happening 2 Q 2010
April 2010 - What's going on?! After an unbelievably busy Nov-March, nothing seems to be happening! Apartment for sale or for rent in landlease building finds a renter first. Offer of $1.4M all cash for an UES property asking $1.6M, couldn't make a deal happen, reduced price to $1.55M in late May to try to get something closer to what sellers are hoping for. Apt still on market, more interest at reduced price. Apartment needs major renovating - tough to find buyers for fixxer uppers right now.
May 2010 - Offers of approx $2.5M made for two SoHo lofts. Just when we thought deal was struck, other buyers came in and out bid my customers, BOTH buyers were all cash (mine are financing 50%).
May 2010 - New development in Brooklyn comes back on line at significantly reduced prices (as in apartments that were $525K are now ~$400K). 40 buyers got prequalified by the building's lender within 2 days of first open house. Buyer makes offer 2 days after first open house for small one bedroom with large outdoor space but his first choice is gone already. Makes offer for similar apartment next door slightly below ask (this was the only other apartment in the building he wanted), sponsor paying transfer taxes (TTs) and Sponsor Attorney's Fees (SAFs.) Contracts out.
May 2010 - Made $600K offer on UES apt asking $665K. (Apt originally purchased in 2006 for $675K). Buyer came up to $615K, seller came down to $640K. Other broker and I could not get seller and buyer closer together. Apt still on market.
May 2010 - Received offer on Village one bedroom loft for ~7% below new asking price of $650K (was $675K). Seller gives good counter, but buyers will not come up enough to meet sellers "bottom line." Apt has only been at this price for 10 days including a holiday weekend and there are a few second showings scheduled... Received another offer. Trying to decide between higher offer but possibly less qualified buyer and lower offer from slightly more qualified buyer. To Be Continued...
Toes says: Studio and one bedroom market still strong. Two bedroom renovated lofts in SoHo/prime Tribeca (priced well) in the $2.5M range seem to be flying off of the shelves.
Toes says: Apartments that sell the fastest have something special about them - renovations, views, outdoor space, lofts, etc. Anything not renovated takes much longer to sell. The below 23rd Street and above Canal Street market is alive and well. Williamsburg is also really active now that prices have come down.
Toes says: In my own business, April / May were slightly slower than the first 3 months of 2010 as far as deal actually being done. I'm wondering if it is just my business or if other agents experienced the same thing. I did have two buyers who were rushing to take advantage of the home buyers tax credit, which made them more motivated to purchase.
Looking forward to seeing what the summer brings! My team also does rentals and we're booked solid since summer is the busiest season for rentals. Landlord concessions are way down, most have stopped paying broker's fees and/or free rent. Renters are going to have a hard time adjusting to new rental market.
Posted by anon
Tue Jun 8th, 2010 03:07 PM
Where have u been, Christine "the sky is not falling, people" Toes??? LMAO
Posted by jeff
Tue Jun 8th, 2010 08:17 PM
Christine,
I was on a panel at a Bar Association class last night and Jonathan Miller gave a very downbeat outlook for the New York City real estate maret, based on the expiration of the new home buyer tax credit. I actually disagreed with him.....but he had already left by the time my panel came on. I agree that we may have stolen some future demand with the tax credit. But I made the analogy with cash for clunkers where "normal auto sales" had been about 16MM per year before Lehman Bros died, it fell to 9MM annual rate soon thereafter, bounced to 14MM annual rate on cash for clunkers and then dove for two months back to a 9MM annual rate or so, but is now on course for a 12MM annual rate. So my guess is that in the case of New York City which is a tighter market in general(as demonstrated by continued very low rental vacancies....and we all know NYC is primarily a rental market) we might see a similar slowdown, but would then resume a better sales pace than the post Lehman level. Naturally, my questions to you are 1) How much of your business is new home buyers? 2) How important was the new home buyer tax credit to your customers decisions to buy? 3) How do you see the expiration impacting the market short and intermediate-term?
Posted by Peter
Tue Jun 8th, 2010 08:39 PM
Does anyone else find it interesting that Jonathan Miller gave a very downbeat outlook, when he is also, with partners, trying to buy unsold recently built NYC condo inventory? On Wall Street that is known as "talking your book". I too would like to buy a brand new tax abated Manhattan condo at $700 psf to rent out. He better hope he chose the right partners, because the only people cleaning up in this economic environment are the well connected.
Posted by Prague-Noah
Wed Jun 9th, 2010 02:07 AM
ill definitaly agree that jan-march, for me, seemed to be a crazy market...of course, my opinion was the improvement was progressive and hitting the mini frenzy from an adjusted lower lever during that time, when confidence and markets kept rising.
i wrote about it here: http://www.urbandigs.com/2010/05/fear_rises_markets_jittery_asi.html
for me, did like 8m in deals during that time and the 2-3 br market was very tight...since, for me, business slowed to more normal for this time of year. I would expect broader markets to slow from that very active market of jan-march, as that is usually not sustainable for too long
Posted by jeff
Wed Jun 9th, 2010 07:53 AM
Peter,
I can't comment on other factors coloring Johnathan's opinion. But I was struck by the fact that the entire panel including an active real estate lawyer and commercial appraiser believed that banks are avoiding recognizing bad loans and the regulators have not pressured them to do so, and when they did we would see a big liquidation of "shadow inventory". This is in fact not really the case. Banks are only being allowed by the FDIC to stay in business if they aggressively write down and provision for bad land and development loans (less so commercial income producing loans which are apt to have less severe losses) and raise money to cover the eventual losses. Their reward for dealing with their problems is they get to absorb other banks who have not done this, and for cents on the dollar (after 80/20 loss sharing with the FDIC). The regulators however, are not urging the banks to blow out the written down properties at liquidation prices (The FDIC has to eat 80% of these losses)and the banks are in no hurry to because there is currently little place to re-deploy the capital (not much demand for new loans). Busted development properties will be slowly parsed out into the market and will be given "normal market exposure" and sold under normal profit maximizing/loss minimizing motivation - important concepts we dealt with in the class. Even CMBS bond holders are trying to adopt a similar posture, as they understand that everyone liquidating at once only maximizes losses. The government and bankers/lenders did learn something from the RTC days, which was that giving away a liquidation discount is a bad idea (too bad they didn't learn about not making bad loans to begin with).
Posted by anon
Wed Jun 9th, 2010 08:55 AM
It seems to me that the expiration of the tax credits will have very little effect on NYC, except maybe in the outer boroughs or the studio market in Manhattan, because almost nobody buying apartments in the $750k+ range qualifies for it due to income limits. Have you guys actually sold an apartment to many people who are claiming this credit?
Posted by Keith Burkhardt
Wed Jun 9th, 2010 09:57 AM
My business continues to be strong, but I am offering an alternative buyers model employing rebates along with a very team oriented approach(buyer/broker.) I do have buyers who are willing to buy fixer upper's, problem is most sellers are not offering the proper discount. We continue to scrutinize prices and are happy to move on when bidding goes beyond what we deem a reasonable price. All of my buyers are long term holders and are weighing price along with lifestyle, not too concerned with what may happen in 1-2 years. I feel like we have a little "micro-bubble" happening as buyers are getting a bit ahead of themselves with bids; we are carefully avoiding this.
I mostly only handle rentals in the West Village and demand is strong,inventory sparse(Not unusual for this time of year.) The brokers showing my listings all complain there is little out there in prime Village nabes. For me 2007-2009 were years I stopped selling altogether and did rentals with 2009 being one of my biggest rental years ever with LL's giving incentives that had disappeared for years. The rental market, like the sales market is choppy. The best is selling/renting when price meets location meets condition. I know I am looking to purchase, only problem is it is very difficult to get financing when you are self employed these days. Just like my own customers I am taking my time...
Posted by Christine Toes
Thu Jun 10th, 2010 11:46 AM
Hi Jeff and anon, I only had 2-3 first time homebuyers trying to meet the tax credit deadline and they were all for $365K - $550K apartments in cases where family was giving some kind of cash for the down payment. Two buyers were in Brooklyn, one in Manhattan. The Manhattan buyer will only qualify for part of the credit since he makes more than the minimum income limit but less than the maximum. So I am not sure it really "took" from future purchasers, but it did serve to get these purchasers off of the fence and gave them a deadline. They were going to buy anyway, but this was a nice added bonus for them and helped defray closing/moving costs.
Posted by Christine Toes
Thu Jun 10th, 2010 11:55 AM
As far as future inventory, so few developers are building new inventory in Manhattan that there is very little in the pipeline. There has been literally one new condo auction in prime Manhattan that I can think of offhand (m127, the auction is coming up). "BidontheCity" doesn't seem to be doing all that much business despite all of the advertising they do. Many of the auctions outside of Manhattan (Solaria in Riverdale for example) don't meet "reserve" prices and are basically a starting off point for future negotiations. Essentially you bid on an apartment at auction and you don't get the apartment at your bid price - the developer then starts negotiating with you for a higher price. It seems to be more of a marketing / PR ploy than a place where a buyer can get a "deal." Everyone in Manhattan wants a "deal" but it is still a very efficient market. If a "deal" comes to market there is either something wrong with it (requires an all cash buyer, etc) or there are multiple bidders, it goes over the asking price and isn't such a deal any more.
Posted by SteveF
Thu Jun 10th, 2010 03:43 PM
Peter says: Does anyone else find it interesting that Jonathan Miller gave a very downbeat outlook, when he is also, with partners, trying to buy unsold recently built NYC condo inventory? On Wall Street that is known as "talking your book.
I certainly do. Just so you are aware, I've been an avid reader of miller samuel for many years and a follower of J Miller. Not too long ago I noticed that Miller's "view" of the market changed rather abruptly. I was a little taken aback but took it under advisement until I read of his distressed property joint venture and it all made sense at that moment. Since he is the most quoted "market expert" his -conflict- needs to be at the very least disclosed to his audience.
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