Market firming up

I'd agree with this. I'm working with 3-4 BR buyers Downtown and some of the places that we saw in the fall have gone into contract -- I would call this typical bonus seasonality of the type we saw pre-tax bill. Pricing is showing a very large renovation spread -- I think there are still values to be had if you're willing to renovate, especially if you're looking at larger units in good co-ops. My sellers will jump into the market later (right now still in the painting and fluffing stages) but I don't think we'll find it as slow as it was last year.

ali r.
{upstairs realty}

Definitely picking up, very anecdotal due to lag between active, offer accepted and ultimate contract signed and updates at that time in RLS.

Definitely hearing from colleagues that a flip seems to have been switched on buy side.. I think we need 2-4 weeks more for these trends to show in stats.. but it's nice to hear after a few years of a quiet active season. Will report on it once more data is in

Agree Ali, definitely some good deals to be had if you're willing to renovate.

Glad to hear business is picking up. Can anything yet be said about pricing trends in last few months?

"Pricing is showing a very large renovation spread -- I think there are still values to be had if you're willing to renovate, especially if you're looking at larger units in good co-ops."

So spot on Ali! Just had podcast with Spire folks and they discussed this very thing, I'm also hearing this from other colleagues.

Gut Renovation spread should be large at $500 per sq ft or larger for good areas of Manhattan as there is plenty of supply of very nicely newly finished apartments with Calacatta marble countertops etc in 1400-1700 per sq ft range depending on the location.

Gut Renovation spread should be large at $500 per sq ft or larger for good areas of Manhattan as there is plenty of supply of very nicely newly finished apartments with Calacatta marble countertops etc in 1400-1700 per sq ft range depending on the location.

Judging from the Olshan Market Report contract activity in the luxury segment for the first 4 weeks of this year appears to be down nearly 20% from last year. As LL Cool J said "Don't call it a comeback."

Not sure about >4mm market but in the stuff I track - $1.5mm to $3.5mm I see listings moving.

I am more concerned about pricing levels not volume. Any thoughts on sales price trends, discounts to listing prices, etc.?

My estimate is that the current manahattan deals are being done at 5 percent lower than the peak in $2-4mm range. Streeteasy condo index show 3-3.5 percent down. I know of people going into contract for $4mm listing in two weeks with discount in 5-6 percent range.

I don't do enough volume for you to set your watch by me, but I'm seeing listing discounts of 4-6%, but compressing a little bit from a couple of months ago, which was an "opportunity" time to buy because bonuses had not yet dropped.

Keith on this board is probably doing the most volume. Would love to hear what he is seeing since his original post.

Check out our new Market Pulse chart, I used filters to show you the different price points. It's a ratio of pending sales to supply real-time. Shows market forces really, leverage changes. Certainly shows how segmented Manhattan is:

https://www.urbandigs.com/marketwide-charts/market-pulse/all-manhattan/all-proptypes/600k-1m+1m-2m+2m-5m+5m-10m+%3E10m/?agentid=58

Does not let me view when I click on the link. Says contact one of the agents to see it.

Noah,
Am I reading it wrong, or do the numbers say things are "worse" (i.e. leverage is still shifting in the buyer's advantage) pretty much across the board both from a year ago and a month ago?

That's what it says, your reading it correctly. However, it's highly seasonal.. so yoy does filter that out, true, but we are in that part of the season where pending sales starts to rise. First the stuff comes on, then the stuff goes to contact. So I'm trying to wait another 4-6 weeks to see how this active season is faring. But you right, leverage is very much in buyers hands. Try not to look month to month or even quarter to quarter due to that seasonality.. could be noisy

Hmm 300 what browser and computer are you using? That link should let you view without restriction.

But it seems like everyone is saying how much better things are than a year ago, however the numbers don't seem to bear that out?

I think everyone is talking anecdotal about higher traffic and bids coming in last few weeks.. but that takes time to funnel into CS status. That's why I want to wait a few more weeks to see these numbers play out

Digs, It did not work from iPhone but worked from my computer. Thank you for the link.

Hmm ok thanks for this Intel. I'll send it in to my team to fix

@UD, not to be a dope but I don't know what I'm looking at. A higher line = more market activity, is that right?

And is it possible to overlay 30-year interest rates on this chart?

Hey Ali!

For market pulse chart:
Higher = stronger market, leverage shifting to sellers
Lower = weaker market, leverage shifting to buyers

Let's say the value is 0.35, that means 35% of yours inventory is in contract and pending a sale

Urbandigs - is there somewhere people can nominate you for MVP of this message board? Very helpful input.

Opposite view to this thread's consensus:

https://therealdeal.com/2019/01/30/manhattans-luxury-market-hasnt-started-off-the-year-this-slowly-since-2012-heres-why/

:))

Wait!! 10y at 2.68 post fed. So rates are now tailwind for housing.

Lot of contradictory opinions. But what always seems to be true is that brokers blame sellers for not accepting reality and judge the health of the market by level of activity not by prices. Activity means sales which means commissions.

By the way, can someone explain the correlation between the government shutdown and the Manhattan luxury housing market?

I would repeat this: "I think everyone is talking anecdotal about higher traffic and bids coming in last few weeks.. but that takes time to funnel into CS status. That's why I want to wait a few more weeks to see these numbers play out"

I think the firming up talk is brokers discussing the change in action, traffic, buyers showing up, bids relative to last 12 months or so. Still, there is prob a lag of multiple weeks between an offer coming in, negotiations, accepted offer and due diligence, and a signed contract and ultimately an update in the data sharing systems so we can track it on sites like move at UD. We need more time

I think the damage has already largely been done. I saw on the news today mortgage originations are down 16% from last year. There is now no argument (at least for Manhattan) that both prices and buyer sentiment are not well into the negative. I will disagree with Donna Olshan in the article posted by NY_Houser above and say that unlike the stock market, Real Estate markets almost never turn on a dime. I doubt that "mortgage rates have not gone up as much as some people predicted" will be enough to save this market. Real Estate always overcorrects: on the way up it overshoots any reasonable valuations and on the way down it doesn't rebound untill you would have to be an idiot not to buy (rather than rent). Real rental prices (including brokers commissions, vacancy and concessions) are way down and interest rates are up, indicating sales vs rent comparison at significantly below current sales prices. This super tanker isn't turning around on just "no terrible news". Market momentum will keep dragging it down until there is a real reason for prices to rebound. And aside from the anecdotes the numbers still point to a further slide.

ximon,
The reason I personally point to volume is because I think volume and prices go pretty much hand in hand and it's much easier to gauge Delta volume than Delta price.

Well, we know Delta volume -- it's down 14% yoy (sorry Digs, that's not your stat, but hopefully it lines up with what you're seeing). I don't think prices are down that much, except maybe in a couple of niche segments -- feels like a lot of 2/1s are piling up right now, for instance.

300,

If by volume you mean sales volume, I agree there is a pretty strong correlation with price levels although I suspect it lags quite a bit behind.

Yes, real estate always over-corrects, even worse than most financial markets do. And I just don't see low interest rates as necessarily a good sign. Its the outlook for rates that perhaps matters more. What is the average holding period for a mortgage? Way less than the scheduled loan term, correct? So you only get the benefit of the low rate for a few years than you need to deal with the mortgage market again in the future. Interest rates will be higher in 5 years, no?

It will be interesting to see the impact on the sales market due to declining returns in the investment market. I suspect the impact will be great and that it will be a very long time before the investment market returns to its recent heights.

With apologies to many in this forum, beating up on sellers may not be the panacea many brokers hope for although it appears to be the only tool in their toolbox at the moment.

Ali,
Just to be clear my point is that lower volume leads to lower prices but there is a lag and it's a lot easier to track changes in volume a relatively long time before the changes in price show up - but they will.

ximon
I'm not sure what you think brokers are capable of. I don't think it's reasonable to expect that brokers can get buyers to pay over market (especially now that buyers have their own broker's who are supposed to be looking out for their best interests). So what are sellers brokers supposed to do other than guiding them toward taking whatever number market currently is?

Back in 1989 we sold a JR4 at 69 West 9th St for $200k. the owner of the apartment directly below it, and in the same condition, calls me up to get us to sell his apartment. But he wants $212k because he wants the same thing at the guy upstairs got. I try explaining to him that the guy upstairs got $200k, but he tells me "that's what I want to but I have to add your commission." I tried to calmly explain to him that the guy upstairs. $200k INCLUDING our commission, but he wasn't interested in hearing that. I'm pretty sure he eventually sold for $180k. Would he have better or worse off if some broker had brought him $200k and convinced him to take it because that was market?

30, Higher interest rates and fear of fed continuing to raise rates was a big reason for you being bearish. Now that both are not an issue, is your bearish thesis for resale (we know that new developments are oversupplied and in many cases way overpriced) simply based on “once the prices go down a few percent, they will continue to go down”?

I think we should look to Urbandigs for actual data that can help us try and understand the markets path. Though the educated guesses here are certainly interesting to consider.

We are very busy, 'slammed' is probably how my two associates would put it (I just got back from vacation). That said our buyer clients are being tough and I won't hesitate to walk away from a deal they think is too pricey. In a few cases we've done just that recently, and then after some time the listing agent comes back to us trying to make a deal.

Where it's been difficult is on newly listed properties where they come in just too aggressively.

Sorry somehow hit the reply button too soon!

In those cases we have to take the sit and wait approach,psychologically it's just too difficult for a seller to move 5 or 8% off the ask after a week or two on the market. There have also been some exceptions, properties the market considers priced correctly or even a bit soft, we're seeing multiple bids. We are participating in one of those right now on the upper East side; two bedroom two bath let's call it under 1.3 million.

But again we have a very deep referral base, with wonderful clients many buying their second property with us and quite a few that have been with us for years and are welcoming this softening market.

On a purely speculative note, I feel more than anything it's the current political uncertainty that is the biggest headwinds to the market. Clients fear the music is stopping and we may see a big correction to property valuations.

I totally agree with 30, real estate corrects slowly and it's certainly been correcting for some time now. I happen to think it's a good time to be buying. Take your time, be selective and plan to hold it 7 to 10 years. But most importantly love the property and the idea of owning. Whether you're paying rent or mortgage, you've still got to write a check every month. So as long as your financial picture is sound, have a nice nest egg tucked away, I personally think owning your home is a nice way to diversify your portfolio and receive some nice emotional benefits.

I don't think buying a house with 5% down and then leaving yourself with no money in the bank is necessarily a good idea. but that is not the profile of your typical New York City buyer.

Personally I love owning my home, and my anxiety level regarding my real estate holdings(I also own one investment property) is significantly less than my equity portfolio!

Keith Burkhardt
TBG

About the benefit of a low rate not lasting long, if one buys with FHA financing, the loan is assumable to the next buyer. Loan amounts have gone up; a legal 4 family FHA loan limit is at $1,397,400.

That said I have a lender who will do condo loans and no condo questionnaire is required. Rates are the same as Fannie Mae rates. This means that there is no check on occupancy. However this is not for new developments. And the loan amount is max at $726,525. But there's always a HELOC that could be gotten in the case of condos. So if the purchase price is $1.2M, 1st mortgage is $726,525, the Heloc is for the difference. 10% down is okay, 5% in some cases,no reserves required, no PMI. Closing in about a month.

30 - here is a new Market Pulse chart comparing Condos vs Coops - can you please check on your iphone and see if the link lets you view? I want to test a fix we did on these shareable charts.

https://www.urbandigs.com/marketwide-charts/market-pulse/all-manhattan/condo+coop/?agentid=58

While Im at it - Great thread! If you guys want other charts, tell me what you want and Ill create shareable links here.

No. Still can not view.

30, you asked what I think brokers are capable of? Getting buyers to pay over market is the exact opposite of what I am saying. With respect, that mindset is exactly the point I AM making which is that many brokers see a closed transaction as the only goal and whether the buyer or seller get a good deal is secondary. Your example of the obstinate client is a good example of why property owners need unbiased advice. I realize it comes with the territory that brokers typically put their commissions about the fiduciary interests of their clients but that is not IMO what the market needs.

Telling a client to NOT sell is not one of the tools in a broker's toolbox, is it? But a good financial adviser with the best interests of their clients might say exactly that - to hold pat. As I have said before, getting market price is not the only motivation of an owner.

Keith,

You have it exactly right. You understand the psychology of the market, the need to consider long-term goals and the risks of debt which sales brokers never seem to care about. You would make a good financial adviser.

Damn ok thanks

Ximon, FYI I have told a number of clients not to sell as well as not to buy, there are times it does not make sense. However, it mostly depends on timing. I spoke to someone last week with a unit they purchased in 2014, they will not get whole on a current sale, they will lose at least the transaction costs (nice home, great location). They asked if waiting a year or two made sense, for that, I have no idea. If you can rent or stay put for 4+ years, I would feel 'pretty' confident you'll be in better shape.

You also need to know my history, I started The Burkhardt Group in 2007 offering renters a discounted commission, advising at the time it may be a better time to rent rather than buy. I started selling again in 2009, when clients, perhaps a bit braver than me asked for a similar model for sales. After some research and a lot of tweaks over the years, here I am. A big influence has come from these boards, those here early on remember all the animosity towards brokers, I wanted to create a model that would appeal to these clients.

Keith Burkhardt
TBG

@urbandigs - I have no problem viewing the link (I use google chrome).

@ximon - I do not think it is reasonable to expect a broker to be a financial advisor, unless they know your entire NW picture and, even in that case, a real estate broker who does not have a background in the basics of investing in all asset classes would not be very helpful.

The Manhattan/Bk prime market is different than the rest of the country where people buy houses that are 3-5x their income on leverage. I don't think most people would even open up with their RE brokers that much to share their entire balance sheet, without which you really can't give someone good investment advice.

anonymousbk, you raise good practical points but I feel confident that NYS laws would contradict you. Does anyone know how a client can formally release their broker from any fiduciary responsibilities?

Fiduciary duties do not cover all aspect of life such as advice on divorce which can have an impact on real estate purchase decision. There is a separate qualification for financial advisor.

Next thing some one will ask for is for a broker to make the purchaser whole to the extent of commission earned if the price of the property goes down. After all, you are supposed to put the interest of the client first.

"30, Higher interest rates and fear of fed continuing to raise rates was a big reason for you being bearish. Now that both are not an issue, is your bearish thesis for resale (we know that new developments are oversupplied and in many cases way overpriced) simply based on “once the prices go down a few percent, they will continue to go down”?"

My bearish thesis is based on many factors, but the highest are a combination of:
1) prices rose above any reasonable calculation of value, creating downward pressure,
2) interest rates were not just predicted to go up, but actually went up. And on a percentage basis, they went up 35% which is quite a large amount. So interest rates not going up any more doesn't stop the market from falling until the effects of that rise get baked in. Prices didn't immediately fall the full amount as the result of the mortgage rate rise, so they don't immediately stop falling if the rate stops rising. If you want to say that prices are going to stop falling or even go back up as the result of interest rates then they would have to go back to the low point,
3) in Manhattan at least, one of the major factors pushing people to buy has always been staggering rental prices. landlords have been doing anything they can, which lately has been some rather extreme measures, to make it appear that rental prices continue to climb or at least are stable. but the reality is that if you look at the difference in net annual rent per unit add factor everything in that landlords are giving up (vacancy, Brokers fees, and concessions) real rents have come down. This puts real returns on Real Estate into the negative (especially when coupled with higher mortge rates). (As an aside, I'm about to go back into retail brokerage from consulting and the first listing I am about to put on the market is a 12 family out in Woodside at close to a 5 percent cap rate. A few years back these we're trading in the low 3s and last year everyone wanted 4 percent)

"Does anyone know how a client can formally release their broker from any fiduciary responsibilities?"

I am not giving legal advice but some things cannot be disclaimed (like the responsibility for ordinary care as a bailee). My guess is that no matter what a broker got in writing, they could not truly disclaim a fiduciary duty.

30, What has been historical yield spread of Manhattan prime condos over 10y treasury? I will post average mortgage rates post 2008 crisis later.

I don't think anyone was suggesting a real estate broker, without the proper education could be a financial advisor. No aspects of this were covered in my 45 hour broker course (;

Except for Ximon who thinks fiduciary duty of a broker includes advising on financial capability and well being of the buyer.

Well put 300. That's exactly what I am saying. How would you describe a fiduciary?

Fiduciary duty is limited to the type of advice you signed up for and real estate brokers do not sign up to be financial advisors. “Ability to repay” is mortgage broker and bank’s responsibility.

So fiduciary duty for a real estate broker is to get either the buyer or the seller the best price?

That is a separate question but it certainly does not involve offering financial advice.

Financial advice as it relates to real estate investments, YES! There is a minimum amount of information that a real estate agent should know about their clients before helping them execute a sale or purchase. Coop boards know this and a broker should know it too. This really should not be confusing.

No. It is not real estate investment advice. It is only purchase advice. Brokers on this board can comment further.

“Licensed Real Estate Salesperson” says a lot.

"30, What has been historical yield spread of Manhattan prime condos over 10y treasury?"

Are asking about a condo yield based solely on what it throws off as a rental property?

Yes. Thank you.

So regardless of what we think the "fiduciary" duties of brokers and salesperson should be, what they actually ARE is pretty clearly defined: Loyalty, Disclosure, Care, Obedience, etc.

Sometimes these duties conflict and that's where it gets racy -- If you have a duty of Obedience to the client (so you're supposed to carry out the client's directives) and the client is, in your opinion, walking off a cliff, then your duty of Loyalty (that you place the client's interests above your own) demands that you say something, and that's generally when you get fired.

That said, I don't interpret my fiduciary duty as "to maximize my clients' income and net worth" -- which honestly, would be impossible even if I tried it, because who can predict the future? Everyone who bought Boeing stock three years and shorted crypto last year, raise your hands!

My fiduciary duty is instead to give them reliable and detailed information about the markets that they are participating in, or thinking about participating in, and then assist them from there. If a seller client needs both speed and price, my duty is NOT to get her the best price; it's to lay out for her, as well as I can, the relationship between speed and price, and let her pick where she wants to land.

Realize that there's also a risk in many transactions of the transaction not going through, so sometimes sellers decline an ABSOLUTE attempt at best price in favor of an attempt at a FAIRLY HIGH price with a FAIRLY strong degree of certainty.

Under your definition, Ximon, seller's broker is violating his fiduciary duty by backing Offer A, with Price X at 99% certainty, over Offer B, with Price X + Y, at 95% certainty. But many sellers prefer Offer A, and certainly a lot of my job when I'm on the buyer's side is to get Offer A that fair hearing.

ali r.
{upstairs realty}

good thread here..just did a quick check on UrbanDigs of the new sales charts, fresh in from the bakery. Figured you guys may want to check out a short summary of them - https://medium.com/@noahrosenblatt/new-sales-charts-are-in-f563657e9814

Ali, Thank you clarifying and introducing the concept of responsibility of the buyer which while not novel sadly needs to be clarified to the socialists.

Noah,
My read on those numbers is that supply is still far out pacing demand and the thing saving the market is that potential sellers are still taking their offerings off the market in record numbers (and at this point it's hard to argue they are just doing it for the Summer and will put them back on in the Fall ;) ).

30 - if Sellers are taking their properties off the market for longer than Summer/Fall then isn't fair to say that those properties are no longer part of the "market." I think you could argue that those properties might be a factor in prevent price appreciation because they represent likely additional inventory that would come onto the market if prices rose, but I also think it is fair to say that the continued downward pressure is reduced if they are not actually participating in the market.

Team M-
I'm sorry I wasn't more clear:
My point was that if those properties had not been taken off of the market there would be even more existing inventory and thus even more downward pressure on the market as demand would remain the same and supply would increase and Keynesian supply/demand economics tells us this would result in lower prices.
However, even including these properties being removed from the supply pool, supply growth is still far out pacing demand growth (increase in supply 1,059 units, increase in contracts signed 59 year over year) so as far as I am concerned the numbers still point to prices going down and I stick with my prior dire predictions.

Ali, excellent points that I would like to address in a little detail. By the way, I am a licensed real estate salesperson as well as a FINRA-registered financial adviser so I hope you will accept that I have been well-trained in broker-client relationships.

"So regardless of what we think the "fiduciary" duties of brokers and salesperson should be, what they actually ARE is pretty clearly defined: Loyalty, Disclosure, Care, Obedience, etc."

Yes, these terms are fairly well defined in law although far less clear in practice which is part of my point.

"Sometimes these duties conflict and that's where it gets racy -- If you have a duty of Obedience to the client (so you're supposed to carry out the client's directives) and the client is, in your opinion, walking off a cliff, then your duty of Loyalty (that you place the client's interests above your own) demands that you say something, and that's generally when you get fired."

Yes, of course there is often a relationship between these duties although I would not necessarily describe them as "conflicting". The duty of Obedience requires knowing what the client wants so the broker can execute these directives competently.

But it is the duty of loyalty which is at the heart of a fiduciary relationship especially in an industry which condones co-brokerage. If a broker follows the obligation to put their client's interest above all others, then it becomes clear that in order to do that, one needs to know what the interests of the client are. In order to know this, one needs to know something about the client such as their financial wherewithal. A client may not know if they are taking more risk than they should since they are not real estate experts. So who advises them on this? Are there financial advisers who specialize in real estate matters? I don't know any. Except maybe me. For mortgage brokers, there is an obligation, albeit a legal one, to make sure their clients know the risks of certain mortgage products. Mortgage brokers therefore solicit information from the client in order to make a determination whether such products are appropriate for their clients. But not every buyer seeks the services of a mortgage broker. So, shouldn't sales brokers perform similar minimum tasks when appropriate?

"That said, I don't interpret my fiduciary duty as "to maximize my clients' income and net worth" -- which honestly, would be impossible even if I tried it, because who can predict the future? Everyone who bought Boeing stock three years and shorted crypto last year, raise your hands!"

Sorry but I don't know who you are quoting. I know I never said this or really anything like it. What I believe is that if a client tells you they want the highest price within a certain time window, those instructions require the broker to act in every way towards that goal while explaining to the client the risks of that strategy.

"My fiduciary duty is instead to give them reliable and detailed information about the markets that they are participating in, or thinking about participating in, and then assist them from there. If a seller client needs both speed and price, my duty is NOT to get her the best price; it's to lay out for her, as well as I can, the relationship between speed and price, and let her pick where she wants to land."

I know that the majority of brokers try to get their clients the best price. The question is whether a broker has discussed with their client what "best price" means. What does "best price" mean when listing brokers agree to list at unrealistic asking prices? Does this mean that they are serving the best interests of their clients? We are obviously seeing a lot of this practice in the current market. Is this strategy to at some point beat the seller down? Wouldn't a true fiduciary simply tell the seller that the asking price is not achievable and if necessary refuse the listing?

"Realize that there's also a risk in many transactions of the transaction not going through, so sometimes sellers decline an ABSOLUTE attempt at best price in favor of an attempt at a FAIRLY HIGH price with a FAIRLY strong degree of certainty."

Yes, this is the art of real estate brokerage and why a talented broker can be a great ally. But how do you know that e.g. a bid will result in that perfect storm of a closed sale unless you spend time with the client discussing their ability to close? For example, will their financing appear too risky to either the seller or coop board? Or will the bank back out after they do their final underwriting? These questions raise another one - did the broker do everything necessary to understand and help mitigate these risks?

"Under your definition, Ximon, seller's broker is violating his fiduciary duty by backing Offer A, with Price X at 99% certainty, over Offer B, with Price X + Y, at 95% certainty. But many sellers prefer Offer A, and certainly a lot of my job when I'm on the buyer's side is to get Offer A that fair hearing."

Again, I don't remember saying that brokers are required to back the highest price offered. Perhaps someone else here said it and attributed it to me? Whatever. I do believe that "Let the Buyer Beware" is a vitally important concept but is only valid when the professional real estate agent has done their job to fully investigate and disclose all knowable risks, acting in the best interests of their client at all times.

Anyway, I know I am in the lion's den on this issue so don't want to antagonize people any further. I will try to refrain from such discussions unless started by someone else.

300, you have once again resorted to name calling which should be beneath you. I must now ask that you never again respond to one of my posts. In return, I will do the same.

Ximon, If you do not like people questioning or labeling your opining or views as they see fit, internet chat room is not for you.

It is just like Ethan saying "300 do not respond to his "overpriced" posts" which he has been posting for last 9 years.

30, Here is some unverified data on historical spreads.
https://mobile.twitter.com/jesse__stein/status/985926372882354177

Same data different link. I can say much about the source.

https://medium.com/compoundclassroom/will-rising-interest-rates-impact-manhattan-residential-real-estate-prices-823a858ef07e

Same data different link. I can’t say much about the source.

https://medium.com/compoundclassroom/will-rising-interest-rates-impact-manhattan-residential-real-estate-prices-823a858ef07e

And spread over treasury does not adjust for condo rental income being tax advantaged, if you include 1031 exchange benefit vs treasury interest.

A) He says these are for multi-family and you asked for "Manhattan prime condos", and
B) I don't know where he is getting his numbers from because in 1992 properties were not trading at 5% cap rates. I was selling deals at close to double that. Then between 1992 and 1996 he has cap rates going up to 6.5% when cap rates actually fell during that period. So I would love to know where these numbers come from.

I can only guess based on the high median $/SF figures that this chart includes development deals which don't trade based on cap rates or even $/SF of current space but more on $ / developable SF.

That is all I found so far. I believe the link is talking about average condo price per sq ft and using rental building rent per sq ft. This should bias the total yields lower with latest years biAsed more due to ultra high end condos outpacing ultra high end rental buildings. Appreciate if you find any other source.

Thanks for the response Ximon. You're not in the lion's den with me. I love being able to get a cup of coffee and sit down and chat about real estate. I don't work for a large firm, so you all are my watercooler!

I didn't realize that you had your license... are you working the buyer's side, or the seller's side, or both?

ali r.

If they are actually using condo $ for sales and rental buildings for the rent to calculate their cap rates the I think that their numbers are fairly meaningless.

“Compound” also uses median condo sales price charted over the past 10 years as a proxy for the historical returns to investing in a condo. And those historical “returns” as predictions for future returns for their REIT. So use their data with caution.

Believe they are taking a large haircut on the rents for expenses which I am sure is estimated. I would love to see any other data you can find. In my opinion the data is not that far off from reality that Manhattan individual condos have not traded that far off from treasury yields after paying for expenses in the last 25 years.

I think you will find that real return rates on condominium units after expenses are closer to mortgage rates than 10y rates. Remember that multi-family have almost always traded at lower cap rates (on average) than condos because with multi-family you are almost always paying for "upside" on rents when you can shake statutory tenants out*. In fact when you see anyone buying multi-family at 2% cap rates that's the only reason they are (or were) buying at those numbers because you couldn't service your debt at those numbers. In the past few years advocates have labelled loans on such deals "predatory" financing because the only way "speculators" buying such deals could service their debt and hang onto their properties was to harass statutory tenants into leaving.

*The exception being development deals as stated supra.

I actually think fully rented non rent stabilized multi-family in nyc have traded at 50-100 bps premium to individual condos in the last 10-15 years as condo have a price premium built in for personal use. The richer the buyer, higher the price premium they are willing to pay for customization and freedom. Just take any top new developments as an example. Cap rate is likely close to 1.5 percent. Mid end new development are 2 percent and pedestrian coops are2.5 or even 3 percent cap rate. Most more than $3mm net worth individuals with family do not like to rent for long.

"I actually think fully rented non rent stabilized multi-family"
That describes such a small percentage of the market that I don't even know how you get a "usual", but perhaps you could give some examples (that were not development deals - which include brownstones purchased with the intent of turning them into single family).

BTW this statement is self contradictory:
"I actually think fully rented non rent stabilized multi-family in nyc have traded at 50-100 bps premium to individual condos in the last 10-15 years as condo have a price premium built in for personal use. "

I should have said 50-100bps higher cap rate rather than premium.

Ok, just to be clear do you think in 2007 to 2009 people were buying individual condo units at 1.5% to 2% cap rates?

No. I am taking about spread over treasury rate. Treasury rate in 2007 was higher. As per the the link (fwiw) I posted it was minus 100bps spread to treasury. Condo price data may have some units in the data which were too high end. To spread may not have been as negative. Probably - 50 bps.

What does your experience say?

Separately, I am sure better data is out there. I will continue to look for it.

Some data for multifamily (spread over mortgage rates is lower down). I expect cap rate for condos to be lower than multifamily by at least 50-100bps and not as volatile.

30, Any way to get a refresh of that data till 2018 from your contacts?

http://www.worldpropertyjournal.com/us-markets/commercial-real-estate-1/bob-knakal-massey-knakal-real-estate-new-york-housing-market-may-2009-apartment-data-trends-rental-rates-multifamily-housing-cap-rates-grm-791.php

I don't have time to read that article right now but on first glance that chart seems to be the correct numbers to me. Note that it shows the two things I complained about the previous chart you posted re:1990s (that the cap rate was double what they claimed in 1992 and that it went down from 1992 to 1996).
But also note how the chart shows cap rates are actually very significantly higher than 10y, not discounted from it.

This is for multifamily for which the cap rate has indeed been closer to mortgage / financing rates and recently even lower than financing rates. But condos in Manhattan trade at a lower cap rate (call it by 50-100 bps) than multifamily due to “rich like to park money, own and customize premium”. Would love to see alternate sources of data as Massey Knakkal is only multifamily.

I think the problem you will find with any charts showing returns on condos is (from all the one's I have seen at least) they tend to leave out expenses (especially broker's fees and concessions, but also vacancy allowance) and calculate returns on the gross rent at 100% occupancy rate, and therefore overstate the actual return.

Very likely true but on a relative basis for year to year comparison it does not matter except the spread over treasury will be even more negative.

The burkhart group is a team of three, however we do between 45 and 50 + transactions per year, quite a bit.

so we have a pretty good on the ground idea of what's happening in the market. And although I keep hearing arguments from people regarding data points that a crash is coming, we continue to see more and more transactions taking place.

Looking at all the emails my team has sent out to schedule appointments since yesterday, 4 came back has accepted offers only showing for backup. 3 in Brooklyn came back as we already held the best and highest. This is for properties $900-$2m, and a townhouse for just over 5 million in Brooklyn.

There was quite a slowdown from August through the second week of January. I'm guessing we did 15 plus transactions during this time and clients did very well. But that period seems to be over. Brooklyn 2 bedrooms under 1.5 continues to be the Sweet spot.

I would say I'm cautiously optimistic about the market. deals are getting done, it's certainly A tale of two cities or maybe three or four. You can't make any generalizations about the overall market right now in my opinion. You certainly could in the 90s as well as the more recent down cycle in 2008. But things are different right now, new development is one thing, above 5 million is another, non-prime locations yet another. We recently did an all-cash new development deal about 6 million, yes a significant discount from ask.

curious to hear others opinions that are out in the field or following along on streeteasy.

Keith Burkhardt
TBG

All I can say is that my accepted offer got bid away by 10+ percent for something sitting on the market for almost 2 years. Good for the seller.

300,
Since you're not getting it, how about giving us all the info so that we can better understand the actual picture?