The return of the trade-up buyer

It's been about 3 months since my last piece, http://www.streeteasy.com/nyc/talk/discussion/10062-where-were-going-from-here-the-bullish-argument, and in this fast moving market, it's time for an update. We've clearly seen the bulk of activity in the lower-end of the market (in Manhattan, we're talking <1mm), which means that for the most part its the 1st timers who are stepping up - this seems... [more]

It's been about 3 months since my last piece, http://www.streeteasy.com/nyc/talk/discussion/10062-where-were-going-from-here-the-bullish-argument, and in this fast moving market, it's time for an update. We've clearly seen the bulk of activity in the lower-end of the market (in Manhattan, we're talking <1mm), which means that for the most part its the 1st timers who are stepping up - this seems true for NYC as well as for the country as a whole. For sustained health, we'll need the trade-up buyers to step in. For that, we need 2 things - increased incomes/confidence of current owners, and an easing of Jumbo mtge rates. While I called for Wall Street earnings/bonuses to rebound, and was soundly jeered on the board, even I underestimated the speed of the return. And its not just anecdotal - the facts are clear - Wall Street has had a remarkable 1st half of the year. One can pretty safely assume that those who will benefit are those who, outside of the structured areas, had already done pretty well over the past few years ('08 excepted). And those are already likely to be owners. So if owners are flush financially, and those larger trade-up apts are down severely in price (30%+), we can expect them to start buying. The caveat, of course, is whether or not the financing will be there. But from what I'm hearing, a healthy down-payment is all that's needed to get some pretty good rates (and let's remember that although up from March-April lows, mtge rates are still amazingly attractive from an historical perspective). So if things remain stable, I expect a substantial pick-up in activity in the middle ($1-5mm) and higher end ($5mm+). [less]