True Gotham

Yes I'm still alive!  Just in case you were wondering.  It has been almost 2 weeks since my last post on TrueGotham and the longest streak without a post since this blog's inception.  The lack of time to post blog entries is a function of the new market dynamics that make up today's very challenging real estate environment.  A greater amount of time is being spent on creative marketing strategies, more frequent communication is being demanded by anxious sellers, and more effort is going into creatively structuring deals that would not have been acceptable even six months ago. 

Case in point...contingencies have returned to the negotiation process and I'm not only referring to financing.  Of course, the desire for a financing contingency abounds in this ultra tight credit market and some are even inquiring about the availability of owner financing.  In addition to these obvious changes due to the credit crisis, we are now seeing requests for contingencies on the sales of existing homes once again.  Some sellers are actually granting these contingencies as they have no other option but to hope and pray that their prospective purchaser is a successful seller themselves.  Then of course there are the all cash buyers who are over-confident and frequently bidding as much as 30% below already adjusted asking prices in an effort to find and take advantage of a desperate seller.  So far, I've seen no evidence of sellers willing to accept these low-ball bids.  That said, these sellers are often amenable to a counter offer which is different from the market of the last decade.

But with all of the anxiety that abounds in today's market, the greatest challenge for a real estate agent remains pricing.   In fact, it has become increasingly more important to not only do an extensive market analysis but to also consider where you believe the market is going short term when suggesting an asking price.  Some agents are even developing pricing strategies that price 10% below the 5 or 6 most similar properties on the market.  Others are pricing higher in an effort to make buyers feel like they are stealing a place if they get it for 20% or less than the asking price. 

Whatever the strategy, navigating today's real estate market place is not for the faint at heart.  Anxiety is high!  There are definitely opportunities for qualified buyers and many "real" sellers will still be selling at significant profits.  Some won't.

So I see you are selling all the apartments that you personally own in Manhattan. Does that suggest you believe Manhattan is at the beginning of a property price crash?

LOL!!! I only own one 3BR apartment in Manhattan (combo of 2 apartments) and I live in it with my wife and 2 kids. I don't want to sell or move...BUT...and this is a big BUT (not butt), my absentee neighbor has put his place on the market. I would LOVE to buy it and combine with mine but the credit crisis won't allow that to happen. So I'm thinking that someone may still be willing to pay a premium for 2700sf in a full service condo with pool, health club, garage, etc in prime Upper West Side building and location. If that "someone" comes along, I will sell. If not, we will stay. I have a showing tonight and another person coming back for 2nd look Thursday.

As far as where I think the market is headed, I think it will get worse in the short term before it gets better but I still believe that owning Manhattan real estate is a great long play. If I'm fortunate (or unfortunate if you ask my wife and kids) to sell this place, I will likely rent for the short term while I passively seek another opportunity for ownership.

Hope that helps.

I received 7-8 calls from sellers over the past 4-6 months alone, asking my advice on pricing. I received calls from buyers asking if they should walk away from deposits.

This is truly unprecedented times. With stocks down 40% and falling, the negative wealth effect alone is causing many to consider selling their homes, some are being forced to after taking on way too much leverage, spending way too much, way too much debt, and cashing out too much equity in their apartments thinking Manhattan only goes up.

People dont learn. I think we are a stones throw away from complete absence of buyers, other than a signifcant discount on price. I just dont see where any surge of buyers will come from. All mine are waiting until 2009.

I fear that once the media gets a hold of price reports that show the first decline, whether it be 4Q, 1Q, or 2Q, they will overexaggerate it making it worse for buy side confidence.

This really is a perfect storm. I hope I am wrong with the long end of the curve, and much higher rates as a result of policies taken to stem this crisis.

Thanks for weighing in Noah as I always appreciate your perspective.

I don't disagree that buyers are anxious but I do have some who are proceeding despite their beliefs that the market will decline and despite my opinion of the same. Short term losses in equity don't seem to scare those who view real estate as primarily a home/shelter.

For example, I have a doctor buying in Chelsea becuase he loves the apartment and plans on being there long term. I have a retired widower bidding on a Park Ave 6 becuase it is her "perfect home" and she plans on staying there for the remainder of her years. We also have a retired and cash rich CT couple buying a substantial pied a terre in Gramercy. These people aren't at all concerened when i pose the question, "How will you feel if your $3M home is worth $2M next year? (BTW, I don't think we will see that great of depreciation but I'm not naive enough to say it's not possible) All of these buyers respond similarly by saying that they have no intention of selling next year or for many years for that matter. They continue to need and desire the tax benefits of ownership and again see their home as a place to live more than an aggressive growth stock.

I'm also seeing sellers being much more receptive to countering offers that they would have scoffed at in the past decade. So transactions have slowed considerably but they continue to occur. I see a major exodus of agents from the industry coming over the next year or so but that bodes well for those of us who can navigate this complicated market for our clients...you included my friend.

the fruits of being a 16yr veteran! Im in my 4th year here, had my best year mind you with like 13 deals (all without a team! makes me wonder if I had one how many I could have done), but last 2 months is standstill with only 2 deals in contract. Not much on horizon unless I get some highly motivated buyers/sellers come in.

Its great you have this business, but I wonder if it is widespread across the board, the way it was say in 2006 & 2007? I doubt it.

Take what you can get boss, get your deals done. I know there are buyers out there, Im not saying there are none, but Im saying if we had evidence to compare the # of active/serious buyers today, compared to past few years, I bet all my money that percentage is way way down.

Unfortunately we dont have data like this, as its impossible.

Of course many are struggling including me relative to even last year. I'm not at all suggesting business is anything like it's been for the past 10 years and completely agree that sales volume is down considerably. There will be an exodus from the real estate industry and those who are best at navigating this difficult market will rise even further to the top. You have integrity Noah...need I say more.