Every marketplace offers opportunities for someone. People have been taking a wait and see attitude with their investing and spending since September, so it will come as no surprise that with it, New York real estate has experienced a slowdown in the last quarter of 2008 too. It will contribute to a very different marketplace than we've seen in several years.
Whether it is the right time to buy or sell a home is not solely based on the temperature of the market. It is more likely motivated by an individual's circumstances and should be considered in terms of the impact of the move in five years, not five months from now real estate is the textbook example of illiquid, long term value. Manhattan apartments are still trading, at the right price, and with the right marketing. Chances are greater that it it will be at a slightly lower price than it might have been at the beginning of 2008. For most sellers it's a paper loss and they will still realize a very healthy margin of profit from their homes after experiencing the sharpest rise of values in history. It may be counter intuitive to buy in uncertain times, but if 2009 is the year where the market catches its breath, it is also where buyers seeking value are able to get what they seek. Here are five reasons why:
Mortgage interest rates have dropped dramatically
In December, Fed Charman Ben Bernake announced that they would purchase mortgage bonds and possibly Treasury bonds in an effort to stabilize the markets. The effect was that mortgage rates fell to their lowest levels in 40 years. According to Debra Shultz
at Manhattan Mortgage, rates today for a 30 year fixed conforming mortgage (up to $417K) is 5.25%; and the rate for a 30 year "high balance" mortgage (up to $625K) at 5.5%. Jumbo 30 year fixed mortgages (over $625K) are at 5.875%. These rates are just about a full point lower than they were a year ago, making properties more affordable. You can use a mortgage calculator like this one
to help estimate the effect on your purchase.
There is talk of rates dropping further. Chances are that the incoming Obama administration will do what they can to stimulate the economy and the housing market, by helping to keep mortgages low. It will help people to refinance existing loans, making their homes more affordable, and increasing their disposable income. It should stimulate home buying as well. Exactly how they might do that remains to be seen.
There is finally a good selection of apartments to choose from
Manhattan has traditionally had highly restricted housing supply. A few years ago the most common complaint was that very little was available in any particular neighborhood/size/price, and what was available was snatched up quickly; often with multiple bids. That's changed and buyers are in a much better position to find the apartment and features that they want. They feel less pressure and have more control in the deals. One caveat, the good stuff, that's well priced, will still go pretty quickly. So look and make offers, but chances are that if you perceive value, others will too.
Coops and resale properties are where the value is
I'm a resale agent and that is where the value will be in this market. Sellers that have built equity over time are in the best position to strike a deal. If relocating to the suburbs, they will find a market that has likely corrected more than Manhattan has. If staying in town, they will be reinvested in the same marketplace in which they are selling. Compared with sponsor sales, resale properties in condos that were developed just a few years ago will often trade for a bit less. They may be gently used, but offer many of the same features and style as their more recently developed cousins.
New developments may be willing to offer incentives to buyers
Developers have been creating top quality housing in Manhattan for several years, but the credit crisis, which began for them in October of 2007, has effectively all but halted that building boom. The pipeline has dried up, and when the new product has been absorbed, there will be little new stuff following for while. I've heard experts put the total available housing stock in Manhattan, including resales, at about 9.5 months of inventory. That would be as opposed to two or three years worth in more severely correcting areas of the country. Buyers have a short lived opportunity now to negotiate on their choice of new developments. Sponsors have been driving a pretty hard bargain in the recent past. They have been able to not only charge premium pricing for their product, but also have asked customers to pick up sponsor closing costs and their transfer taxes traditionally seller's expenses. Competition for customers has gotten stiffer, as they not only compete with other new developments, but with recently developed units coming onto the resale market too. Competition in this way is good for buyers. Some sponsors are advertising that they will now pick up closing costs. Other incentives may be negotiated too at some developments, whether explicitly stated or not. Everyone wants to make a deal.
Strong buyers those with all-cash or substantial down payments, have an advantage
The quality of buyers is more important than ever to a seller. In a market where mortgage contingencies have become common again, credit underwriting requirements are stricter, and loan to value ratios are being scrutinized more carefully, those with substantial down payments, or who do not require financing, will find they have greater leverage in negotiating.