April 27, 2012
This is a fascinating keynote by architect and urban planner Vishaan Chakrabarti, Director of Columbia University's Center for Urban Real Estate or CURE. There are some big ideas presented here about the future of New York City's development built around sustainability, economic return to the city, and unlocking the potential of underutilized land, by creating well-designed urban density and mass transit to service it.
One statistic that jumps out is that there are about 4 billion square feet of unused FAR (development rights) in our city today. This is actually land unused because of regulation which, if intelligently developed, could provide valuable economic growth and infrastructure for future generations of New Yorkers. The proposed creation of LoLo, a new lower Manhattan land mass connecting Governor's island with the Financial district is presented too, giving us a glimpse of what thinking out of the box really looks like, when not being used as a marketing punchline.
From the CURE web site: CURE identifies, shares, and advocates solutions for a rapidly urbanizing world. CURE redefines sustainability as dense, mixed-income, mixed-use, transit-based urban development. From climate change and energy dependence to the socioeconomic and political upheaval they engender, CURE addresses emerging and current global issues through the lens of urbanization.
January 5, 2011
Here's a post from our friends at the Wharton School of Business that takes a look at the economy globally, with some cautious optimism. I believe that in our local New York City housing market we've clearly seen some stability and even modest appreciation off the lows. Yet nationally, housing and unemployment are still putting a drag on the economy. Read on to see the perspective of some Wharton faculty on how that may look in the year to come.
The Global Economy in 2011, A Rocky Ride or Smoother Sailing Ahead?
In the United States, most experts are betting that the economy will grow stronger this year, but they warn that high unemployment, a depressed housing industry and other problems could dampen growth. Meanwhile, the fate of the euro is still in question, and the specter of inflation looms large in China, Latin America and India despite their resilience to the recent global downturn. In the Middle East, observers expect renewed growth, but they note that resource constraints will become an increasing problem for the region. Knowledge@Wharton spoke with Wharton faculty and other experts to get their views on what's ahead for the world economy in 2011.
The United States: Housing and Unemployment Risks
In the U.S., "the threat of a double dip [recession] has passed," says Wharton finance professor Richard Marston. The congressional compromise to extend the Bush-era tax cuts for two years should help the country's recovery, he predicts. "With the added stimulus of the tax bill, we will have continued growth in 2011."
Still, "there are some very severe downside risks," says Wharton finance professor Franklin Allen. One main concern is housing: Allen, Marston and other experts agree that the uncertain housing market will continue to be a drag on the economy.
"In the housing market, the data is going in different directions," Wharton real estate professor Susan M. Wachter notes. Some reports show sales picking up, while others show prices continuing to stagnate. "The bottom line is that we're bouncing along the bottom.... We're likely to be in a holding pattern." Fortunately, Wachter says, the weak housing market probably will not do too much additional damage to the economy, as most of the harm has already been done. New-home construction is not likely to go lower, for example.
According to Wachter, the housing market has enjoyed some stability because many lenders have been reluctant to foreclose and sell homes at fire-sale prices. A lender is typically willing to sell when a foreclosed property can fetch as much as the appraisers say it is worth, she says, but appraisers rely on backward-looking data that is quickly out of date in a volatile market, making it hard for the lender to know what a property is really worth.
Another problem, Wachter notes, is the recent rise in mortgage rates, which increases payments, makes homes less affordable and undermines sales. In addition, high unemployment reduces the number of potential buyers, she adds.
"The unemployment situation is still not good, and that's going to take a long time to change," Allen agrees. "There's been some upturn in consumer spending, but until things start looking better on the housing and unemployment fronts, I think [consumer spending] won't drive things forward."
While many U.S. retailers reported a good holiday season, it is not certain that consumers, who are the most important force in the economy, will continue to reverse the tight-fisted habits developed in the past few years, Allen says. Whether they have really loosened their purse strings or did so only for the holidays is unclear.
U.S. economic growth also could be hampered by ripple effects from the continuing debt problems in a number of European countries, Allen notes. In addition, economies are starting to overheat in some developing countries, especially China, he says. China has started to raise interest rates to curb inflation, but that could draw more foreign money into China, possibly depriving other countries of capital they need to speed growth while worsening China's inflation problems.
December 16, 2009
» download snapshot (544kb) I'm presenting some data published here by Corcoran based on November contracts signed, which leads the sold and closed metrics by 60 to 90 days. This is telling if you are thinking about bringing a home onto the market, or buying one in the first half of 2010. I've met several new customers who will be spending bonus money in the first quarter, but others have been sitting on the sidelines waiting to see what was going to happen before plunking down hard earned, and recently recovered savings. I can feel the momentum to a busy first quarter of the year starting already. It was not unusual to see multiple bids on properly priced homes this December.
In truth, we've seen good activity in the final quarter of 2009. A year ago, amid the uncertainty of the financial crisis, sales activity had slowed to a trickle. This chart shows the number of Manhattan contracts signed market-wide since November of 2007 for some context. Today they are up 193% since January, largely because of improved opportunities for buyers, and consumer sentiment generally feeling better.
The sales activity has a roughly inverse relationship to the chart below, which shows the supply side. A year ago we began to see peaking inventories of apartments. It has today decreased by 25% since November 2008. While there is some "shadow inventory" of new developments (unlisted/unsold) unaccounted for in these metrics; the pipeline of newly developed units, has virtually been turned off. Developers accepted the new market reality and began improving prices as the year continued.
november 2009 manhattan condo and coop prices
Condos gained in pricing in November compared to a month earlier, amidst strengthening demand for larger homes. The number of contracts signed was roughly consistent with October and about double a year earlier. Coops sales activity was also up a significant 173% over November 2008. Median sale prices increased 18% over the month prior and 12% year over year. They are selling quicker too. The increased activity is due to pent up demand from people needing to trade up to larger units and improved pricing that brings them in line with demand.
If we continue to see the inventory of available apartments going down, and buyer activity remain as strong, I believe that we will be hitting real price equilibrium soon. On a micro scale I know that I've seen pricing in some larger coop buildings actually increasing already off their lows of the year.
March 9, 2009
The NY Times ran an article on the market downturn in Manhattan real estate. Looking for Bottom in N.Y. Real Estate reminded me of conversations I've had recently with buyers, and it gets to the crux of the slowdown. Sellers and buyers simply are entrenched in their mindsets. Buyers are being cautious of paying too much, and sellers are in denial that their values have dropped. The result is that fewer deals are being done. They call this a buyer's market, yet the irony is that fewer people seem to be actually buying.
“What we’re seeing is a big disconnect — sellers need to get more realistic, but buyers don’t even think it’s enough. Buyers are not hesitating to walk in and bid 40 percent off the price, but sellers aren’t taking it.”
It's not like the phones aren't ringing, and properties aren't being shown. Traffic at open houses has been both decent and steady, but when one gets down to bargaining, it is harder to close the gap. The number of transactions taking place are off by 55% since last year by some reports. Values have dropped, and there is a lot of wild speculation at this point about how far. The correction is real, but in the downtown neighborhoods like Tribeca, the Village and Soho where I work, the anecdotal evidence would indicate that the deals are happening well above 40% off asking. It pains me as I read anonymous comments on blogs from people gleefully looking forward to an economic meltdown in which they can profit. No one likes a bottom feeder, and they rarely close a deal since greed gets the better of them. The market is pricing fear into its bidding and it is as hard to justify it, as it is difficult for sellers to accept that they have lost value.
how does a listing broker respond to the new market?
Some agents would have you believe that the market has absolute control over pricing and that their contribution to marketing the transaction is irrelevant. They will approach this market as a an exercise in financial analysis, and drown in a sea of data. Where is the value of what they bring to the table in that? It does require an approach that is different from a year ago when the market was still climbing. To close a deal today it takes better brokerage, advice on pricing that understands the realities of pricing in the marketplace, and uses the best approach to marketing it available. With less money chasing more listings, can a seller really afford to not have their property stand out? I see the broker's job in the context of market forces (macro influence), and using tactical promotion + pricing + negotiation (my influence). Striking the right balance is crucial to closing a deal in which everyone wins.
It is painful to see some sellers making decisions which will hurt them in the short run. Pricing their homes too high, in a declining market, and not closing the deal, means that you are going to be chasing the market down and quite possibly selling even lower in a few months. I wouldn't be the first agent who lost an exclusive to another firm that pitched an unrealistically high selling price to get the business. Agents get to meet buyers by "buying" listings this way. It is a huge disservice to their clients, who will sit and watch their values decline, and reduce their price eventually to a level that they will be pitched on later. The real rub is that level may be lower than it would have sold for if they had listed at a proper go to market price in the first place. I had an unusual year in 2008 in that almost all the properties I listed were taken over from other agents after their exclusives expired, then turned around and closed by me.
A good broker will lay out the hard and soft data that supports asking price, and will actually want to get paid for representing you. The one who walks in with inflated figures, and sells a discounted commission is often someone to be wary of. If you can't sell the property, you'll try to sell the fee, and get the customers. It's the oldest trick in the book. We will have real 1Q/2009 data next month, and while I don't expect it to be pretty, it will be better for the marketplace to know where it stands.
can sellers be successful in this market?
I believe that a professionally represented property will still sell for it's highest price possible, most will trade within a range that will vary and in relationship to it's features, and how well the marketing highlights them. This can still be a surprising market. I had a conversation recently that summed it up. I got a phone call from a colleague who was looking for some advice on pricing an apartment at the Cielo on East 83rd Street, which is a building that I've done some business in. The conversation went something like this:
"Peter, I see you're in contract with your exclusive at the Cielo, I have a friend in a similar unit in the building. Can you tell me what the negotiated price was?"
"Not until after until it closes, but it was not that far away from asking."
"Incredible! The market's is really sputtering, there are 17 apartments listed for sale in the building, but yours is the only one that's gone to contract. Why is that?""Since you're asking, my practice operates a bit like a boutique advertising agency. The quality of the graphic design, photos, and overall presentation are things I spend a lot of effort on I think it makes the difference. We actually had simultaneous, multiple offers, for all cash on it, within just a few days of each other."
Her line of questioning was actually going to "did you have a fire sale?". We did not. It was sold within 5% of asking. Within that conversation are mentioned each of market forces that every real estate deal has in common. Pricing, promotion, and negotiation; subject to the environment of the marketplace. The first three being the levers which a broker can use skillfully to produce results. When your broker gets them right, you will get a closed deal. They work in every market. In this one in particular they are of more value than ever.