Monday, April 28, 2008
Its a real estate market!
Faced with only 24 hours in the day, I've been focusing on my core brokerage business and blogging a bit more lightly recently. I expect that the pace of posts will pick up again moving forward. I'm a real estate broker who blogs, not a blogger interested in real estate. Let's dive right in with today's report on the fickle first quarter of 2008. Peter
download the complete Q1.2008 corcoran report
The Manhattan market has been interesting recently. It is hard to characterize it as either a buyer's market, or a seller's market. Its just a real estate market, and a more balanced one than in the last few years. People are considering their purchases carefully. We are seeing more offers starting below asking prices, yet well priced apartments are selling briskly, even with multiple offers. There is substantial buyer demand out there, but it's being tempered for the moment by uncertainty in the economy.
Customers are acting more cautiously since the Bear Sterns buyout last month. Whether the hesitation is justified depends on if you feel the fundamentals have actually eroded or not. How much damage to the global economy was caused by the sub-prime crisis is a matter of continuing debate. I've heard it described by some industry leaders as if you had a choice of 10 bottles of water to drink, but you knew that one was poisoned you wouldn't drink any. The whole thing needs to unwind. However let me point out that the availability of credit for residential purchases has not been affected as much. Most people willing to put 20% down (less in some cases) and who have good credit ratings are still able to get mortgages at historically low rates. It's just a real estate market.
Additionally, developers now faced with putting more equity into their deals may put some of their plans on hold, restricting supply in the construction pipeline, and setting the stage for lower inventory a couple of years out. The available inventory of apartments in Q1 2008 rose to about 6% higher than in Q1 2007, mostly during the second half of the year as economic uncertainty began to cause some people to "wait and see". The number of apartments available to buyers in Manhattan bounced around 9000 units, but is trending higher, with more new developments coming online, and a buyers taking longer to decide.
The good news is that for buyers, this hesitation may have created the best opportunity to buy Manhattan real estate in the past 10 years, unless you feel that long term, New York City is spiraling downward into an abyss (a point of view that I haven't come across very much). There is a good selection of apartments available, and an environment more receptive to negotiating. No one is giving anything away, but fair deals are being struck every day.
mixed messages: what do the numbers say?
The hesitation has not translated into lower prices. The corcoran report showed that first quarter sales figures from 2008 looked pretty decent overall, but also showed that the number of co-op transactions has dropped 22% compared with a year earlier. Condo closings rose by 36%, and 60% of the condos were in new developments which have a greater lag time to being reported since they go usually go into contract during pre-construction, often many months before closing. They therefore don't actually reflect the current market activity as well as co-op transactions do.
People still seem genuinely interested in real estate. 'New York Luxury Living' was an event hosted recently by the New York Observer at the Puck Building, which featured 40 new developments in a trade show style showcase. My agent friends were overwhelmed by the public response: 2,256 people paid ten bucks a head, to walk into a bazaar of developer's sales teams, hawking their products. That's way more than the expected attendance; "sorry we ran out of brochures", was the catch-phrase of the day. Newly developed condo sales accounted for a disproportionate amount of sales activity in the first quarter. This is sexy new product, with slick presentation. Could it be that older co-ops may need to consider doing that long put off lobby renovation or other upgrades, to help keep up with the market and hold value? Open houses for correctly priced properties under a million are busy, as are any where the perception of value exists. We price properties based on good research as to what has actually sold and closed, which always fare better than those based on competitive properties in this market. The marketing and sales management has to really kick in now, more than ever. It takes more than a few postcards and a web site to deliver results. Differentiating your home by graphic design, staging, a record of obtaining publicity, and an outstanding luxury broker network creates a more compelling proposition to help our clients achieve their goals.
I'll be focusing on sales in the downtown market in an upcoming post.