Urbandigs: Market continues to improve

Keith, You drove away the bears with resale market pulse at 38 percent!! Does it go much higher? Not sure as there will be new listings 4-6 weeks from now.

It's been a really difficult year, to put it mildly. New York City, the country and the world still face significant challenges going into 2021.

I'll take any bits of good news wherever I can find it.... and appreciate it. I'm optimistic for 2021 and always looking forward and embracing whatever life throws at me.

The simple act of purchasing a home can take on a very complex nature when you read some of these threads. My advice for 2021 if you're purchasing real estate; buy quality and purchase in a location that has consistently had a great deal of liquidity throughout the ups and downs of the market. If you're making a purchase simply because you think owning is better than renting, and looking at "B" rated properties, I might reconsider. And of course always buy well within your means.

There are currently no fire sales, so if you're looking for 20 or 30% off a currently appropriately priced home, I think you're going to need to wait a little longer and hope your theory about the market pans out.

There's certainly nothing wrong with renting, most New Yorkers do it. I personally prefer owning my primary residence and this has served me well.

Co-ops and new developments have their hands tied regarding how low they can go. That said new developments do have the ability to offer other incentives to make their pricing more competitive, sometimes you've got to ask, they may not always offer it. We've gotten significant credits for carrying charges, property taxes and even recently the mansion tax rolled into the deal. One of these was on a condo which I personally considered significantly overvalued. However the clients view of it was purely consumption, it's where she wanted to live valuation be damned! It certainly was a beautiful home though...

Wishing everyone one a joyful and prosperous new year!

Keith Burkhardt
The Burkhardt Group

I'm happy to let other people pay extra for the "A" rated properties. Likewise with the suburban version of that aphorism ("buy the worst house in the best neighborhood").

For myself, I've always preferred to pick out the best unit in a just-barely-good-enough building or neighborhood.

There are indeed very good discounts for neighborhoods. For example, Turtle bay vs lower part of Upper East Side (60s east of Lex). However, these discounts do not go away and it takes longer to sell. Best deals for these neighborhoods are in down-markets.

@richard if you're going to play on the B team, you've got to understand value and dig deep for it. You did.

Js.

Keith

Yes. It seems Richard got a very deal during the dark days. Congratulations!!

Guess we'll have to see the last quarters trends will continue;

Mansion Global: Manhattan Luxury Housing Closes Worst Chapter in a Decade.
https://www.mansionglobal.com/articles/manhattan-luxury-housing-closes-worst-chapter-in-a-decade-222285

RichardBerg, where/what did you buy?

The most recent open house report from Fritz:

"Good afternoon New York City Open House Index followers and contributors!

Here is my recap of last weekend's action at the open houses in New York City.

Second weekend in any year usually indicates a strong uptick in the open house traffic. This year is not an exception. The average attendance at open houses in NYC jumped to 1.98 per open house! This is 65% increase from 1.20 average recorded the weekend earlier. Will it continue? This is the value of this index tracking – we can collectively notice if there is a sudden change in the direction of the buyers’ behavior. According to my estimate, there were approximately 2386 buyers attending open houses this past weekend. This is 220% more than on the weekend of January 3rd, when we recorded 746 buyers total. Last year, on 1.12.2020 weekend, the average in NYC was 5.35!! There was no virus then!

49 open houses reported zero traffic. This is 28% of all open houses – significantly lower than what we observed in the last quarter, when this was constantly between 40-55%. Another strong uptick indicator. Last year, on 1.12.2020 weekend, only 15 open houses out of 254 reported zero traffic, or just 5.9%. Different times, right?"

Market Pulse holding up pretty well. See if it can hold up in next few week with new listings to come. On vaccine front, it seems that the speed of vaccination has picked up to a more reasonable level.

One thing we're starting to see, more resistance from sellers to what might be perceived as low or low ball offers. Where as over the summer, it seemed any offer was enthusiastically received and entertained. We have a few offers at right now, quite frankly I'm surprised the sellers haven't accepted, all things considered.

And I feel like I need to add these disclaimers; this is not a market prediction or quantifiable analysis. Simply what one small broker is currently observing in the market.

Keith Burkhardt
TBG

I'm helping my sister-in-law move to West Village (from London). She put in a (rental) offer on this place Monday, only to be told the owners were pulling it from the market because the same open house had yielded THREE purchase offers:

https://streeteasy.com/rental/3361148
https://streeteasy.com/building/abingdon-court/2npq

So if any of you Gold Coast Gurus has suggestions, I'm all ears. Top factor is minimizing walking distance from St Josephs (111 Washington Place).

I love how they've condoized Novare but I'm a sucker for weird properties, and far from an expert in this $10K+ tier... https://streeteasy.com/building/novare-condominium/rental/3104335

Macro wise -- I've mainly been telling her to negotiate low & hard, especially at the high end of her price bracket. Did not expect her to stumble into a bidding war!

Prime village is a different beast. There aren’t that many special deals besides ultra-luxury or high $/sq ft. There just hasn’t been that much building in this area.

@richardberg, does she need three bedrooms?

Though he sadly passed away recently, an agent formerly in my office owned in 75 Bank St for several years. That unit is directly above the deli. If it doesn't have a vermin issue due to the new renovation, it will at some point.

Little Steven (E Street Band, Sopranos) owns a penthouse in the other building mentioned in that post.

30, sorry you lost a friend.

@Ali, a sufficiently spacious 2/2 would work, I think. Just her & a school-age daughter.

She's just...accustomed to the finer things, shall we say. All the furniture seen here is steaming across the Atlantic as we speak: https://www.rightmove.co.uk/properties/75152880#/ Unfortunately I may have given her an overly rosy picture of GV negotiability off ask...

Apart from size & location, I haven't gotten her to narrow down the type of property much. She's looked at glass-n-steel rentals, boutique lowrise condos, narrow triplexes (25 Vandam particularly reminded her of the vibe her townhouse in the "other" Greenwich had), etc without really ruling any out.

@lrschober a large loft in a FiDi co-op. Suffice to say I am not paying mansion tax.

I'm confused. Your friend is moving from SE10, which is border Zone 2 and Zone 3 and has the sole virtue of being next to the soulless Canary Wharf, albeit separated by a river. Your friend is looking in GV, which is as prime as Belgravia or the Grosvenor Estate, rather than looking in the NYC equivalent of SE10: Sunset Park?

Believe me, I've conveyed as much. In fairness, her prior home was in Kensington and she worked at the Wharf.

I assume you mean the nice part of Kensington, in which case she should be totally at home on the UES. The main trains serving the area are green and yellow on the map - just like South Ken.

Daughter's already enrolled in the above school. I'm not the one with the chronic illness so I'm not gonna second guess the desire to make it walkable.

(my advice was to join us in FiDi and stick to PS 397, but what's done is done)

Hi Richard,

I have some thoughts about the GV rental. If you have the time/inclination to chat, email me at upstairsrealty [at] gmail . please put "streeteasy" in the subject line so I can find it.

ali r.
{upstairs realty}

Here's last week's open house report from Fritz. it would be great if more agents reported their open house traffic to him so we could have a better sample size.

Wondering if those who made extremely bearish calls 10 months ago feel the market has held up better than you expected?

"Here is my recap of last weekend's action at the open houses in New York City.

What a weekend! (yes, the week was great too, with inauguration and all – check for my favorite meme on the bottom), but I am talking here about the third weekend in 2021. The average open house attendance shot up 42%! From 1.98 per open house on the January 10 weekend, to 2.82 this past weekend. And this was primarily thanks to Brooklyn traffic. We recorded 12 open houses that had 10 or more visitors, but Brooklyn took 5 out of the top 6 spots! See more under Brooklyn below. Is this a signal that the buyers are back in town? At the first 3 weekends in 2021, the average attendance at open houses was: 1.20, 1.98 and 2.82!!! Good upward slope, baby! Not to get too excited, last year on January 19, 2020 weekend, the average was 4.17 for NYC, but only 5.44 for Brooklyn. Maybe the buyers are getting more confident with the news on vaccination and the new administration in Washington?

47 open houses reported zero traffic, this is 29% of all in the sample. I received 163 replies this week.

The most visited open house mentioned goes to Kris Sylvester of BHS. Kris reported 24 visitors to his open house at 365 St John’s Place in Prospect Park, Brooklyn. It is a $650K 2BR unit. Here, in his own words: “The listing is well priced at what I believe is below market price of $620K. The apartment was staged after waiting for a tenant to move out. Many visitors did point out how lovely the apartment looked. I had someone downstairs at the door checking the names off the list of appointments and handing gloves to each visitor. A bit surprised we don’t have any offers but we’re going to be showing again this weekend. We made a video that turned out pretty well and many folks said that they enjoyed it. It’s definitely worth making a video as it gets into peoples‘ minds. 24 groups in one day was indeed quite a lot. I forgot to mention that the apartment came with a private storage unit, bike room, shared garden, reasonable maintenance, washer/dryer combo in the apt and it’s close to the heart of cultural Brooklyn... The Brooklyn Museum, Prospect Park, Brooklyn botanical gardens, and the Brooklyn central library.”

There were 4673 open houses held in NYC last weekend, the most this year, and there were approximately 3491 buyers hopping from one to another, according to my very rough estimate. This is 46% more buyers in the market last weekend, as compared to the weekend prior."

>> We made a video that turned out pretty well and many folks said that they enjoyed it. It’s definitely worth making a video as it gets into peoples‘ minds.

Yeah but did the voiceover break into song?

Some interesting rental charts, which seem to support nada's thesis (I think?)

You've got to love these Friday reports from Noah and John.

https://youtu.be/SUreUuoA7ic

Anecdotally, my data points seem to indicate the rental market has bottomed this winter price-wise. After filtering down to 7 in-person viewings as of 3 months ago (criteria: favorable price), only 2 remain on the market. One of the 2 increased its ask by 50%. The other remains, but could be an oddball because it is effectively furnished.

In terms of price, if we were at a seasonally-adjusted ~150 last year, the bottom seems to have been ~100. I would guess we’ll become ~125 by next year, with most of the gains coming in the late spring & summer.

Seems about right for ultra luxury. I was looking at 3 or more bedrooms and the rental listings have reduced dramatically.

$10-15k range.

I’ll also add that I have not seen across any new listings or price drops in my email updates that were exciting (price-wise). Mostly, inventory priced higher than ~100 (by my prior scale) sits. When one comes down to meet market, it transacts shortly thereafter. While the transacting prices seem not to be that different than a couple of months ago, the breadth of inventory at that price seems to have shrunk.

Between that, the data discussed on Keith’s UD post, and vaccine outlook, I’m feeling a lot more confident on my call about the rental bottom happening this winter than I did when I first made it in the summer.

But, we shall see...

It is possible that the market slides sideways for a while. Rents don't need to rise by some force of gravity. Personally I'm still seeing rental inventory that was available last summer and now at somewhat more reasonable prices. Maybe it will transact, but that's just bc sellers came down to meet the market. Doesn't mean rents will rise.

Manhattan 3 or more bedroom 5233 in Nov 2020 vs 2113 in 2019. 2646 in the search on Streeteasy 01/24/21.

https://streeteasy.com/blog/data-dashboard/?agg=Total&metric=Inventory&type=Rentals&bedrooms=Three%20or%20More%20Bedrooms&property=Any%20Property%20Type&minDate=2010-01-01&maxDate=2020-12-01&area=Flatiron,Brooklyn%20Heights

So George, you now think the bottom (price-wise) has occurred and it’s a question of when it’ll move up? What is your best guess, and why? Please prognosticate as you best see it.

300, what’s your prognostication?

Nada, As we were discussing offline before you locked in your stellar deal, Nov/Dec will indeed turn out to be bottom. And I wouldn’t be surprised if the average Manhattan luxury rental instead of being down 20 percent from the peak is down 5 percent from 2019 level by the time it is summer for new leases (beta of 0.5 ish to ultra luxury).

Apartments on SE over $10,000 rented + taken off market since 12/1/2020 = 610

Apartments on SE over $10,000 rented 12/1/2020 = 270

55% of the units over $10,000 have been "taken off the market" WRT SE rather than rented. Since SE keeps raising rates to place rental listings and commission income is down many firms have limited the amount of time agents can have their listings on SE. In November Gary Malin COO Corcoran estimated up to 75% of available rentals were not officially listed. The actual market is much worse than you can derive from casually observing what's listed as available on SE.

My anecdotal limited view is that apartments over $5000 will slightly recover, meaning the 5 month stuff will go away, but it will still be a tenant's market when I renew in July. Simple supply and demand. Nobody is getting a pied a terre rental in NYC except maybe people leaving bigger units to live in Nowhere. Nobody is moving in. And more units keep coming on the market.

All those investors who bought in the last 5 years expecting prices always to rise and a 0% yield on rents at the time are looking mighty stupid.

30, What you say is correct about SE not having all the listings but I am only using Street Easy data for MOM comparisons. The reduction in listings is real and uses SE data.

George, I think you are set up better than most of the summer renewers given the July date. If you decide to stay in NY rather than go to Nowhere permanently, then I suggest you decide sooner rather than later and mentally prepare to move alongside your renewal cycle. Lots of people in your shoes whose foot is going to drop in NY as summer runs along.

300, I think your forecast of a 75% recovery of lost ground by summer is too optimistic. Simply too many Georges out there. Some won’t come back, some will leave due to the lure of taxes and belief in WFH careers, some will have blown their RE dollars elsewhere, and some will simply be uncertain thereby delaying upgrades they’d otherwise have made. Demand will be stronger than it is now, but just too many George-y headwinds blowing to get within spitting distance of 2019 IMO.

Yes. Perhaps 50/60 percent retrace.

I went looking at some units I like. The ones that are most attractive and best priced had a lot of activity in the past two weeks. The ones that are either a little less attractive or a wee bit richly priced did not. Has bottom been reached? Probably. But good properties at good prices trade in any market.

^^ Speaking of famiky-sized rentals only.

I checked 1 Union Square South (always found it very expensive), 3 month free. 300 Mercer (building), 2 months free. So plenty of deals still out there.

In the meantime, digs resales market pulse went to 46. It will be interesting to watch next couple of months with new listings coming on and Covid vaccinations picking up speed.

The historical median closed sales trends charts are really interesting.

More improvement as we inch closer to the spring... Good signed contract action.

https://youtu.be/9M-N19_S3TQ

Regarding open house attendance data: I appreciate the use of data to back up various claims made on the SE forums, but I don't agree that the number of open house attendees is a good metric to measure the momentum of the market. Just because people are going to open houses, it doesn't mean the market is improving. There's nothing else to do right now! Open houses are one of the only forms of free entertainment for me and my broke, unemployed friends :)

Agree that open houses right now are not good indicator, but not because of entertain seekers who are always there in any market. The real issue is the many of the showings are by appointment one party at a time. So showings are not concentrated during open house. So a better metric, which we do not have, will be total weekly showings. But I will take whatever metric someone painstakingly puts together. Of course, market pulse is a much better metric than open house attendance.

Buildings are allowing open houses right now?

I feel like I work a lot of "good" buildings in Manhattan, so maybe I'm biased, but you're correct stache -- no, they are not allowing open houses.

ali r.
upstairs realty

According to John and Noah their Market pulse indicator has moved into neutral territory. For the moment I'll take that as things are continuing to improve, we'll see if it's sustainable through the spring...

I'm sure others here have an opinion on that.

Keith Burkhardt
TBG

{*looks out window at the 5+ inches of snow, which continues to fall*) LOL "spring"

fp are you going stir crazy?

The market pulse is a nonsensical number. It is pending sales to active inventory. Pending sales have been high not just because of volume but because it takes so long to get a coop approval and loan to close a transaction in this environment. Inventory is lower not because there are no houses for sales but because we are in January and those inventories will take a bounce as we enter spring.

I think if an economist were making an index they would use a days on market measure, which remains elevated but not extreme around 90 days.

@stache Yes, yes! although I am showing my new listing (*insert shameless plug here*) today:

https://streeteasy.com/building/505-greenwich-street-new_york/11e

ali

Woodside, We had the same closing delays 3 months back and market pulse was in the 20s. How do you explain that?

My first reaction to Ali's place was "ouch, those taxes". But that's not fair: while 1.3%/yr is 2X what I've seen elsewhere in the Village, it's less than half of what I'm now paying!

(quick example:
https://streeteasy.com/building/302-west-12-street-new_york/14b - also a midrise condo building, assessed @ 0.6%/yr)

Carved-up townhomes nearby can land under 0.5%/yr by sneaking under the Class 1 limit. Somehow, floor-through lofts a few blocks away in SoHo/Tribeca also tend to have super low taxes, despite being firmly Class 2.

City-wide the optics are even worse. Black & brown homeowners in the Bronx can pay more than Ali's client, while Ken Griffin pays 0.22%.

Why is % of home value the only fair metric?

Per square foot of space Ken Griffin is paying a lot of taxes.

If a place is intricately designed with marble interiors, etc. it would sell for more, but does that mean the buyer should pay more taxes in perpetuity? Especially if the buyer already paid mansion tax and other taxes on transaction.

I have already seen some listings where taxes plus maintenance exceed possible rental price. How does this make any sense?

On the market conditions: yes, looks like a lot of properties I have been following are going into contract, however, there have been a lot of price cuts, and new listings seem to be more reasonably priced. And quite a few properties got delisted, rather than sold. Also, I heard that listings are lower than they otherwise would be because listing brokers are holding back inventory on purpose.

Exactly.

"Why is % of home value the only fair metric?"
"Especially if the buyer already paid mansion tax and other taxes on transaction."

@richardberg are you breaking the taxes out of the maintenance? Ali's place is a condo so the total nut is taxes plus carrying charges.

Congrats on the listing, FP.

For anyone looking for family-sized rental, now might be a good time to approach unsuccessful sellers in one of the old line coops in your preferred neighborhood. Our building is having a serious discussion about rental term limits. While I would rather live in a building occupied by owners, I am coming around to really loosening up rentals because I'd rather have a building that has humans living in it than a ghost ship, which is what our coop seem to be becoming. A few big apartments with deep pockets under them who would rather rent them than let them sit vacant, but they cannot attract highest quality renters without being open to longer term leases.

MCR,
Some of the original Coops (I'm talking 1920s) were about 50% long term rentals where half the building was made up of shareholders who "cooperatively" owned the building and the other half were tenants who's rents paid the run the building.

@30yrs - Ha! re “cooperatively.” I would full-on embrace rentals with a minimum rental term of 3 years rather than a max of 2 years. It will be interesting to see where our building lands. Stay tuned.

>> For anyone looking for family-sized rental, now might be a good time to approach unsuccessful sellers in one of the old line coops in your preferred neighborhood.

That doesn’t make sense to me, MCR. You can lead a horse to water, and all that. I wouldn’t want to rent from an owner who hasn’t actively decided they’d rather rent the place.

>> A few big apartments with deep pockets under them who would rather rent them than let them sit vacant, but they cannot attract highest quality renters without being open to longer term leases.

Definitely true. The owners of my new place had originally preferred the flexibility of a 1-year lease, but (before I got into the picture) their broker explained to them “Imagine you were going to rent this place and only had a lease term of 1 year. It’d take you 3-4 months just to get the place set up.” That made total sense to them.

They actually all do want to rent their apartments. It is painful to watch them not talk to each other (they are aloof and busy and don't know each other to the same extent that I know each of them) because with a little organization, they could mobilize a rule change. They have each approached me to mobilize the rule change at different times, and I am in the process of mulling over whether I want to do it. They just want unfettered rental policy; I am not down with that, but I could be persuaded to cast my vote towards more liberal rental policies with longer term renters. I have no problem with renters; I am just not keen on a community with people passing through yearly. We are a small building, and I do believe there is a difference in how one treats their neighbors and the staff if they are staying for awhile vs. just passing through.

I cannot imagine our building is unique in this respect. I suspect the conversation is going on in old-line coops throughout the city in the traditionally family friendly neighborhoods (Carnegie Hill, Yorkville).

Regarding sublets in co-ops, as long as you hold the potential renters to the same high standards you hold owners during the vetting/board process, what's the difference? I mean I know what people think the difference is, but personally I don't think there is one.

Will the renters suddenly take on a new persona simply because they're renting the home? I think NADA is a perfect example of that, and he's been renting in condominiums where there essentially is no barrier to entry.

Keith
TBG

@MCR, I think multi-year leases make sense for co-ops, but I also think that the board has to somehow hoard a yearly right of approval/re-approval*, which will necessarily make the agreement less attractive to the tenant.

* There are just too many lifestyle issues where "renters," if we can demonize them as a class (sorry, nada! you're exempt of course) will feel they're being "reasonable" while, from the POV of co-op owners, they're not. The easiest, but not only example here, is noise... renters generally kick and howl about having to conform to 80% carpet rules, keeping their kids and dogs quiet, etc.

I'm not blameless here -- I'm a co-op owner who makes noise and I'm constantly bribing my downstairs neighbors to keep them happy -- but I have seen situations where the divergence has gotten so acute that the co-op would not allow an annual renewal of what the shareholder/lessor had thought a year previously would be a multi-year lease.

@nada thanks for the congrats on the condo listing -- and @richard and everybody else (except @30 who has thought of this already), a fun little side point:

January is the absolute WORST time to list a condo. Why? Because what do you write on the "taxes" line?

January 15 the City Department of Finance, NYC's taxation entity, drops the annual NOPV, so the listing broker becomes in possession of the tax bill that is forecast for the unit. "Most" brokers, however, don't list those taxes ... they instead list taxes based on previous tax bills, and then update the tax number (which, surprise, is nearly always an increase) as they approach a contract signing.

I once worked with a buyer who found this common industry practice to be incredibly deceptive, and he was so put out by it that I swore I would always use the NOPV numbers once they were available.

However, that might also put me in a zone of a few weeks where my tax numbers look higher than the competition's because some of that competition is ... let's be charitable... waiting to update their tax info.

On that point, though, the #14B brokers can polish their halos, because the tax number they're using looks marginally HIGHER to me than either the unit's previous tax bill OR the unit's forecast tax bill. It must have come from the managing agent, which indicates a level of thoroughness that's commendable.

ali r.

@300,

The market pulse has recovered because a lot of inventory is pulled from the market in December and January (the inventory in the denominator). However, there is still some sale activity and a large backlog of unclosed deals (the pending sales in the numerator). Market pulse is not seasonally adjusted and will predictably go down as inventory seasonally comes on in the spring.

Inventory went from 9,600 to 7,350 because of seasonality. Pending sales is much higher than it was last spring, but not because of increased weekly sales.

Re nada's rentals: "he's been renting in condominiums where there essentially is no barrier to entry."
I would argue that the price points of Nada's various rentals over the past 10+ years are real barriers to entry. The Average Joe is not living at any of those addresses. :-)

>> Why is % of home value the only fair metric?

That's what a property tax is, by definition. Mind you, I'd welcome a shift to a more Georgist tax regime based on principles like ATCOR* and/or Pigouvian consumption, but that's never been proven out at scale.

For better or worse, the vast majority of the developed world taxes stuff that's permanently affixed to their land, because that stuff is (a) not subject to capital flight (b) easier to assess than a LVT (c) a decent proxy for both wealth and community impact. Or at least it is in sanely-governed states where the function from market value -> assessed value hasn't been convoluted by centuries of special interest.

*https://slrg.scot/what-the-hell-is-atcor/

>> @richardberg are you breaking the taxes out of the maintenance?

Of course. (FY21 gross taxes - commercial rent escalation) * (my shares / total shares) / purchase price = 2.5%. I knew it was egregious going in, but did not sign away my right to gripe about it!

It's crazy how lumpy the system is. My taxes on my Midtown studio -- which is currently rented out -- are roughly 1.5% of home value. And that's AFTER a massive certoriari action.

Woodside, For seasonality, just compare YOY numbers. It is certainly true that there will be more listings in Feb/March and Resale Market pulse will likely to go down a few points. You can look at previous years for guidance.

@richard I should have known better, stupid question. : )

@Richardberg I get it. But in most places property values and rents are at less of a disconnect than in NYC.

Also phrasing it as "Ken Griffin pays less taxes than people in the Bronx" is misleading. He is paying a lot of taxes in absolute amount.

I always wonder if you separate NYC into multiple cities (say based on boroughs) with each city paying for its own police, schools etc, what would happen to Manhattan real estate taxes?

The Nadas of the world are a strange breed. At my last building, the board prez was discussing some change to the rental policy (annual reapproval, I think) with me at the gym. He said, “No offense, you know I like you, but not everyone’s like you. After all, no one has ever washed a rental car.”

I then proceeded to tell him the story of how I had rented a fancy car in Italy for a week once, and then washed it three times. One time, personally. It’s part of the experience, goddammit! Besides, what’s the point of driving around in a dirty fancy car?!?!?

Nada, Good story. I had to rip condo President of a fancy building a new one as he was acting like a coop President when it came to approving my sale. I told him to live in a coop. I am not sure if his behavior will change but I got the approval in 3 hours after that.

Lol, I did the same thing in Costa Rica. Attendant looking at me with raised eyebrow, " Is this a rental?"

Anyway, I think we are going too far off the thread’s topic.

Good to hear, Keith! Proves I’m not crazy. Or that were both crazy, but at least I’m in good company.

Okay 300 let's steer this this thread back on course:

“There’s newfound affordability,” said Jonathan Miller, president of Miller Samuel.

About to jump on a zoom call so sort of rushed through this. Are those sales numbers for condos and co-ops for January? Might be reading it wrong??

Similar to anonymouse' predicament with rentals, we're working with a handful of buyers that are feeling very frustrated they're not getting the kind of discount they expect. From our perspective, the relatively larger discounts were happening last spring when the faithful were jumping into purchase during what was probably the highest levels of anxiety and negativity.

https://www.bloomberg.com/news/articles/2021-02-04/manhattan-apartment-buyers-come-back-after-almost-a-year-away

Any hopes of a meaningful discount should have gone out the window on November 9, 2020 when Pfizer announced they had >90% vaccine efficacy.

The bear theses from here (property taxes will go up, services will go down, escape mutations, etc.) are storms in a teacup compared to what NYC went through in March and April last year.

Also, I too have washed a rental car, and it was also in Costa Rica. It was covered in mud and I didn't want any raised eyebrows at return.

Are there data on which areas of Manhattan are improving more quickly than others?

Flarf: I think you have it exactly reversed. COVID-19 was always going to be contained one way or another in a few years at most. IMO, structural problems with NYC, like poor governance and fiscal health, are far more dangerous to RE valuations.

Containment attempts in the first year of covid-19 were utter failures. What would have changed in year two, three, or four? Just wait herd immunity and cross our fingers that duration of protection is infinite?

With highly effective vaccines, one can now look past the covid valley. All of the structural issues that were risks before covid are clearly still risks today, and perhaps even more so. But a buyer couldn't expect a discount for poor governance and fiscal health in February 2020, so why would that be the case a year later?

If you think the market isn't properly accounting for those risks, then you probably shouldn't be a buyer, or you should be prepared for a lot of rejected bids. My comment was in response to Keith's mention of his handful of disappointed buyers -- not sure what else you could say to people in that position.

You have mouse on the other thread who wanted a better rental deal than pretty good deals offered already in Dec. Now he is having trouble paying up a little. Guessing it is happening right now in prices with people wanting the discounts they could have gotten last summer.

Keith, What percentage increase roughly are you seeing in Manhattan $2-3mm vs a deal you could have gotten in say July / August / September when the showings were open but the market was very slow.

New post-COVID headwinds for real estate that buyers should consider (my opinion):
1) Possibility of future global pandemics and their potential devastating effect on NYC with population moving out to nowhere for 12-16 months
2) City budget deficit that will need to be at least partially covered via real estate tax increases
3) Current and potential future holds on residential evictions, an added risk factor for any landlord / financial investor
4) For certain parts of town, likely significant delays in municipal infrastructure developments, such as new subway stops, parks etc, due to budget deficit
5) Accelerated shift to work from home, causing relocation of white collar jobs and employees to other, lower cost geographies
6) Perception of greater crime and homelessness in the city, causing some long time New Yorkers reconsider their choice of living in the city
7) Potential influx of inventory due to new construction + conversions from commercial to residential (there appears to be excess office space in the city)

This is on top of existing pre-COVID factors: rising RE tax rates, recent pro-tenant law changes, increased transaction costs (mansion tax), new construction supply, and general bubble with high prices / ridiculously low cap rates

There are of course some mitigating factors (like what? besides being the greatest city in the world?)

Flarf: I'm sure you've heard of the Spanish Flu. No vaccine ended that pandemic. You might not have heard of the 2 flu pandemics after that. A combination of normal recovery and vaccines ended both of those, so yes, you'll achieve herd immunity one way or another. The outcome is clear, the only question is how you get there.

"But a buyer couldn't expect a discount for poor governance and fiscal health in February 2020, so why would that be the case a year later?"

I have no opinion on what discount buyers were expecting, and my point was a completely different one. Just because fiscal and governance risks aren't being fully taken into account doesn't mean that they aren't very real and tangible risks. History is littered with examples where no one cared about these issues until they had to. If buyers don't feel like they are getting the prices that they want, then they should walk away, especially when rents have crashed far harder than prices.

Lastly, the Bloomberg article Keith linked to actually is counter to the example from his clients.
The article says sales are rising because "buyers who had waited on the sidelines are sensing opportunity in Manhattan now as mortgage rates hover near record lows and sellers become more negotiable on pricing." Sellers becoming more negotiable on pricing seems like they are willing to offer more discounts, rather than less.

Certainly every buyer is different and has his or her own agenda. most of our buyers are people who simply have an owner's mentality and don't want to rent the home they live in. They haven't simply decided to buy because the interest rates are low or necessarily just because prices have fallen. Sometimes it's just dumb luck that you wind up in a position that you're need for a new home happens at a time that might be conducive to making a good deal. These are people most focused on finding the right home for their family, and when they do they make reasonable bids.

However, we have a handful of buyers who feel this market owes them an extremely significant discount, and they make very low bids relative to current ask and in some cases ask for very large financial concessions. We recently had someone bid 20% below ask, want all closing costs including mansion tax and mortgage recording tax along with two years worth of real estate taxes / carrying charges as a closing credit. This didn't happen. I'll say this much though, in this particular building I was in agreement that if I was going to purchase there, I would certainly need a very compelling discount. But this ask was beyond the beyond.

Sellers have certainly readjusted their expectations when pricing apartments today, at least reasonable ones have. And perhaps that's one of the reasons along with a strengthening market we're not seeing significant discounts on desirable apartments. Based on my experiences the serious discounts happened last spring and early summer. It is not happening currently.

I would also note that most buyers are being selective in this market. If you find some mediocre apartment, overpriced, on the market for 200 plus days in some mediocre location and you get a 20% discount.... That's not necessarily a win. I would much rather rent than buy a C+ apartment, and what constitutes a c+ apartment/location is something I discuss with my clients on the phone.

For years I've heard very smart arguments from very smart people of why real estate is overvalued. I've also heard the same arguments regarding Tesla stock. one of my friends crummudgingly father, when told 'have a great day', will always answer, 'I've already made other plans'. Sometimes Mr Market makes other plans...

Keith
TBG

Keith: I'm always puzzled when people feel like they are entitled to a lower / higher price. I too would love to fly first class on economy, but then there's reality. Whether you are the buyer or seller, if you don't like the price, the option is not to transact. Of course, then you have to own the consequences of whatever decision you make either way. I've seen plenty of units whose owners seem to be chasing the market down, when being a little flexible a couple years ago would have given them a healthy profit. Conversely, buyers who want to hold out until prices match their expectations may be waiting a long time, including forever.

"There are of course some mitigating factors (like what? besides being the greatest city in the world?)"

I would argue that this is the determinative factor and nothing else matters. :-)

@MCR Definitely.

And also low interest rates and high inflation expectations.

"This Market continues to show strength" UD

New contracts at 260 for the week, supply remains stubbornly low.

https://youtu.be/umWTimaeyoA

Keith Burkhardt
TBG

Keith>> We recently had someone bid 20% below ask, want all closing costs including mansion tax and mortgage recording tax along with two years worth of real estate taxes / carrying charges as a closing credit.

What’s the thinking behind such a bid?

It reads like “I’m gonna pin you from until you cry mercy, then I’m gonna let you squirm and pin you from another angle, then I’m going to do it a third time just for show. Finally, I’ll let you up, but only if you say Mr. Nada is the greatest there ever was, with a cherry on top.”

In particular, I don’t see how this motivates the other side to get to a “yes”. Why not just bid (say) 25% off ask and say “screw your ask” once rather than 3 times over. It’s the same financially and seems like an easier route to a “yes”.

Some people are just nasty.