Stuck In Stage One

David Goldsmith

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The Kübler-Ross model for dealing with loss and greif is fairly well known.

I think there is evidence that the Real Estate market in NYC is stuck in phase 1 - denial. It's not simply that transaction volume is down tremendously ( April 2020 Manhattan Residential Contract volume was down 80% from 2019) and continues to slide even though this should be prime Spring selling season (Manhattan Residential Contract volume is down >30% vs the same period last month). More importantly there is a denial that the market is distressed in the lack of price reductions. Last year month to date price reductions for residential in Manhattan were 379. This year that number is 100.

Everyone is jumping up and down screaming about how transactions are still being done. But I have seen 2 agents/brokers who have done multiple deals and in both cases they had gotten their sellers back to 2012 or so prices. At the same time I am seeing listings come back on the market at, near or sometimes above what they couldn't be sold for before they got pulled, as well as new listings come on above peak prices of a couple/few years ago.

I don't think this is serving the best interests of either buyers or sellers. It is going to result mostly in both buyers and sellers calling each other unrealistic and frustrating the market. I think agents are unrealistically telling sellers that this time on the market is "free" because they were able to get the "days on market" field on many websites changed to "counting suspended."

But buyers aren't stupid and can simply count from the listing history. Also this change isn't permanent and when it changes back all those days will get tacked on. There is no free lunch. If a seller doesn't need to sell them they shouldn't be on the market right now, and if they do need to sell them they need to mark to market.

No agent it doing their sellers any favors by encouraging a co-dependency with them on aspirational pricing.
 

Noah Rosenblatt

Talking Manhattan on UrbanDigs.com
Interesting. so Im hearing things all over the place. About to do podcast with Stacey Froelich and she said her 8 or so deals are under 10% down from pre market, so Im curious to see how that goes. Markets def dislocated, and dead. Residual and legacy new deals are starting to fade. weekly deal vol in the low 40s, thats low. Buyers are doing their thing right now. They see whats up. Sellers, I mean, the ones that have to sell, tough right now as bids likely pricing in current conditions.

Im looking at sales, and so far most are from Jan/Feb contracts signed. So we are still 1-2 months away from true covid deals filing in at the earliest. Until then, price discovery is tough with so few deals being signed.

If sellers are pricing above pre covid, they really better have a good property to pull it off. Someting real unique.

I think we may see a rebound in activity, but, it wont go back to normal levels. Reverse check mark kind of thing..commercial, hmm, that sector has to be getting hit hard
 

MCR

Member
Yes. Just anecdotal, but friends who recently relocated to the city from California for new job start date of May 15 (offer and start date finalized last fall before anyone had heard of COVID-19) just signed rental agreement after looking to buy for 6 months and being shocked that sellers rejected what they were willing to pay.
 

MCR

Member
And I know three separate owners who have been wanting to sell for over a year now. Two of those have pulled their listings entirely because they are not willing to accept a loss (they believe market will be back better than ever in a few years and they have deep pockets). The third "has" to sell and accepted an offer right before COVID-19 lock down that was not close to what they had been hoping for, but they "had" to accept it because they are scheduled to close on another apartment in July. Their buyers backed out and they are in a world of hurt right now.
 

Noah Rosenblatt

Talking Manhattan on UrbanDigs.com
right so this is in line with the weekly videos and narratrive Ive been putting out. Most sellers do NOT have to sell, otherwise we would see 1000+ deals signed now. But those that do, are finding bids unencouragable. But they got to do what they got to do. I am hearing a few stories about rental market being active and deals happening, but they are few and far between and I dont think representative of the mass market..good stuff , thx for sharing
 
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David Goldsmith

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As per my usual bellwether of the rental market - Stuyvesant Town / Peter Cooper Village - last year shortly after The Housing Stability and Tenant Protection Act of 2019 passed, the number of available listings on their website sunk to around 100. Back in March that had doubled. Today it's at 375.
 
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David Goldsmith

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The reason I use that so much is there are over 11,000 units there so Law of Large Numbers kicks in. And you don't have to normalize much for location, condition, services, amenities, views, concessions, size and all the other things you need to adjust for when comparing across whole markets.
 
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David Goldsmith

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While Luxury Buyers Chase ‘COVID Discount,' Developers Insist Prices Can't Go Any Lower

Developers in New York City with pricey luxury apartments to sell were facing an uphill battle in 2020, faced with a supply glut and waning demand. The hill has only gotten steeper the last two months.

JDS Development Rendering of interiors at 111 West 57th St. The luxury residential market entered 2020 saddled with challenges. A well-documented oversupply has been a persistent problem for years, but increased rent regulations, amped up state and new taxes on luxury purchases — plus the uncertainty of a presidential election year — made buyers reluctant.

With the city frozen by the coronavirus pandemic, transactions have ground to a halt. Buying activity has dropped by around 70% since mid-March, Corcoran Group President and CEO Pam Liebman told Bisnow. Last week there was just one contract signed on a Manhattan apartment asking at least $4M, according to data from Olshan Realty.

Just 14 contracts for apartments costing more than $4M were signed in the last six weeks, compared to about 135 during the same period last year.

Sponsors who were already cutting deals and dangling incentives to buyers will be under even more pressure, particularly those with hefty loans coming due. But real estate's relentless optimism hasn't dimmed much, sources said, with many developers holding out for better days.

“New York City is the dream, but right now it is in nightmare conditions. We just have to wait for it to pass,” said Olshan Realty President Donna Olshan, adding that there were a few more contracts signed on luxury properties this week. “You have to be realistic. The buyer pool has shrunk, and the buyers out there are looking for good value.”

Courtesy of Extell Development One Manhattan Square Some developers have already responded to the pandemic, with Extell Development last week offering discounts as high as 20% for still unsold units at its 815-unit project One Manhattan Square.

The developer, which is building two of the most high-profile condo projects in the city in Central Park Tower and Brooklyn Point, said in a release that the discount was in response to “global conditions caused by COVID-19." HFZ Capital Group has reportedly weighed selling discounted units in bulk at its Bjarke Ingels-designed condominium the XI, The Real Deal reported.

Compass broker Vickey Barron predicts a jump in “rent-to-own” style offers at many luxury developments as economic conditions become more strained.

“[Developers] are going to have pressure from their lenders,” she said, adding that some will fare better than others. “None of them are worried because they always tell themselves it is all going to be fine. That’s how they get out of bed each day … [but] money has to come in somewhere.”

While sales volume increased in the first quarter of 2020, it was largely because sellers had begun to reduce their prices, according to appraisal firm Miller Samuel. The number of closed sales in the borough was up 14% year-over-year in Q1, but the pandemic only set in in the last few weeks of March and has not yet shown up in the sales volume figures.

The median sale price was just over $1M, the third straight quarter of decline. Miller Samuel CEO Jonathan Miller told Bisnow listing inventory for luxury homes — the top 10% of the market — dropped by nearly 25% in the first quarter, a time when it almost always rises. Miller estimates it will take more than six-and-a-half years years to sell all of the new development inventory that is available in the city, even without taking the pandemic into account.

At least 2,000 new condominium units will become available by the end of this year, most of which will be priced at the higher end of the market, according to Miller Samuel data.

“What you will start seeing when the luxury market returns is pent-up demand,” he said. “But the pent-up demand will be modified by job loss.” He noted that the low number of transactions make it impossible to really figure out price implications. “We are in the period of price discovery,” he said. “Logic says there is an impact on pricing, but there is literally no empirical evidence yet.”

Corcoran CEO Pam Liebman said there are buyers who are expecting a “COVID discount” and making lowball offers. “Buyers are being very aggressive, they are coming in and bidding anywhere from 10 to 30% below the ask, claiming this is what they are calling a ‘COVID discount,'” she said on Bisnow’s podcast this week. "Sellers are saying, pricing was already down, and it’s certainly not down another 20 or 30%." Liebman, whose company is marketing Hudson Yards’ luxury residential offerings, where a penthouse at 35 Hudson Yards is asking $59M, said not all developers are under pressure. “Unless they have debt breathing down their neck, which eventually may happen to some of them, they don’t just turn around and say, ‘fine, give it away,'" she said. “Developers are eternal optimists and many of them just [think] things will get better. I’ve had many people just say, ‘I’ll just wait.’ But nobody knows if waiting is going to work out well.” Brokers and developers have pointed to an uptick in people browsing properties online and making inquiries, though they admit it is rare that those translate to a multimillion-dollar deal. “I’m less somber than I was eight weeks ago,” said David Juracich, a principal at JDS Development. “I am surprised how many inquiries we get, and we’ve already had a lot of offers. In some cases, it’s just people trying to get a cheap deal, but if you have 10 people giving a low bid, six of them will move a little more, then one will step up." His company is one of the developers of the supertall Billionaire's Row tower 111 West 57th St., where a penthouse is asking $57M. “The country is suffering, but there are always pockets of people doing well," Juracich said. "Many people who have been in their apartments for two months are looking for an upgrade."
 

Noah Rosenblatt

Talking Manhattan on UrbanDigs.com
The reason I use that so much is there are over 11,000 units there so Law of Large Numbers kicks in. And you don't have to normalize much for location, condition, services, amenities, views, concessions, size and all the other things you need to adjust for when comparing across whole markets.
right makes sense
 

David Goldsmith

All Powerful Moderator
Staff member
Corner 2 BR/2 bath gets pulled because it doesn't sell at $1,550,000

Jr4 gets listed at $1,599,000
 

David Goldsmith

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Just a single data point, but I'm hearing of many similar stories:

A reader writes of a tenant in an UWS rental building built circa 2000 who attempted on lease renewal back in April to renegotiate $3,500/month rent. Landlord refused and tenant moved practically next door. Instead landlord had to paint/prep unit, lost 1 month rent, paid 1 month broker fee, and re-rented unit asking over $600/month less.

By my calculations the landlord could have negotiated $1,000 off the rent and still been ahead for the year.
 

David Goldsmith

All Powerful Moderator
Staff member
Update on Peter Cooper Village/Stuyvesant Town:
Offering prices on units down >5% on most units and now offering 2 months free rent, but refusing to negotiate lease renewals to current market rates (even with no free rent) and continuing to lose hundreds of tenants.
 

Noah Rosenblatt

Talking Manhattan on UrbanDigs.com
hm, i dont get why they wont just bite the bullet and do the deal at mkt level rates and reset? seems like a better alternative given current conditions than dealing with renting them out, unless they know smtg we dont about demand at those concession levels?
 
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