Quietest October in a Decade
BUY NOW!!! SELL NOW!!! DO ANYTHING!!! JUST DO IT...NOW!!! (I'm kidding...kind of)
I have always told my friends, family and client base that I would welcome a bit of a market correction here in the Manhattan real estate market. The thought being that any "shakeout" would result in some sort of increase in inventory (wishful thinking?) and perhaps an increase in transactions. I've been sharing this "theory" for three years now and nothing of the sort has happened...yet? That said, if the October and first week of November activity are any indication of what's on the horizon for the New York City real estate market, that correction may indeed be just around the corner. I'm not prophesying by any stretch here as that always gets me into trouble but this has been the quietest October I have seen in the past 10 years.
Some anecdotal evidence:
- Many sellers remain reluctant to reduce prices even after their properties have been on the market for quite some time (8-10 weeks).
- One of my buyers has his eye on 3 properties with stubborn sellers and all 3 remain on the market unwilling to accept reasonable offers within 5% of their asking prices.
- That particular buyer is in a "holding" pattern, has rescinded his offer and now expects to obtain one of these 3 properties for a discount of 10% or more off the asking price (only time will tell)
- Another buyer has rented for the time being in order to "shop patiently" for the right "deal."
- Another buyer has given up on Manhattan and purchased a single family home outside of the city.
- I have taken 3 properties recently that were marketed unsuccessfully by my colleagues (hope that I can do better?)
- I keep a dry erase board of transactions on the wall behind my desk and the property section has decreased (only representing 5 active properties) while the buyer segment of the board has increased exponentially to 10 buyers (90% of my business over the past 10 years has been representing sellers...that has changed in the past couple of months)
Again, these are simply anecdotal examples of what I'm seeing on the front lines and many of my colleagues are reporting similar experiences. We all await Wall Street bonus reporting with expectations that numbers will be 20-30% less than bonuses last year. Let's not forget that last year was a record bonus year though and we are all wondering how the hit to Wall Street is going to effect Q1 2008. For now, we, and many of our buyers and sellers wait.
"October is the quietest in 10 years"...so....People, buy your apartment when you are ready, forget market timing...if you can afford to live here than buy. Historically odds are heavily favored your unit will appreciate over time, that means over years not months but years. So enjoy your life, get sensible financing, do well at your job and enjoy Manhattan and in 5-10 years you'll be very happy you purchased.
I'm not for one moment suggesting that anyone try to time the market but I also don't pretend that buying in uncertain times doesn't bring with it large doses of anxiety. The price ranges for my current buyers range from $1M to $15M and not one of them feels "warm and cozy" about market conditions. And BTW...anyone who took your advice in 1987 would have had to wait more than 5-10 years to recoup what they lost the last time the market went down. I don't argue that factors in today's market are very different than they were in the late 80's, namely that foreign buyers are coming from all over the world (not just Japan like the 80's) comprising 30% of condo buyers. That said, all of the "Manhattan is different" talk that I'm hearing is a bit unnerving.
And for the record, I agree that a long play on Manhattan real estate is likely going to be to one's advantage.
No matter how you cut it, getting front line reports like this is what make blogging so powerful and why people come here to get educated on what is happening NOW!
Information like this, which I see the same exact thing by the way, can be very profitable if used the right way during a buying search. After all, if your buying, then why wouldn't you want this kind of information.
Great report Doug!
Thanks Noah and congrats on that Rountable you'll be participating on for Inman's RE Connect. I look forward to it and quite an impressive panel of heavy hitters!!!
Thx! I go that panel together! It should be a lively debate!!
As a seller, I totally agree - except that I'm not one of your "stubborn" sellers. It is a very uncertain time because people think that disclosed losses on the Street are only the tip of the iceberg. So maybe there will be no bonuses except guaranteed ones. On the other hand, I know first-hand that there ARE lots of people with lots of money who are perpetually looking to buy something.
Who knows how this will end? But if you have an exceptional property, then I wouldn't worry. If you have a postwar, run-of-the-mill co-op that you have to sell, good luck!
Just for clarification purposes I want to point out first that deals haven't come to a complete halt...just more trepidation than I've seen in a long time. Also, none of MY sellers are stubborn...of course.
yea, my sellers aren't stubborn either. Just for the record. Hmm, is this a public forum?
Correct me if I'm wrong, but couldn't this be a good sign?? If you have tons of buyers, few sellers... isn't that the opposite of what's going on in the areas with major real estate problems (lots of sellers, no buyers)???
Spaceboy,
Indeed you are correct that more buyers and less inventory is a formula for real estate agent success. That said, I should have qualified that my buyers are prospective buyers. What makes them prospective is both the lack of inventory and more often these days their anxiety level about purchasing in an uncertain market. So I guess what I'm saying is that there are fewer seller AND fewer "real" buyers which results in fewer transactions.
Hi Doug,
I was just re-reading the September 20th blog on the effect of the Fed on housing. What's your take on it now that we have had 2 rate reductions?
Great reading your blog as always.
Thanks Ed. I'm still at a bit of a loss and I will tell you why. Obviously the 2 rate cuts have done nothing for housing and have weakened our dollar to a "dangerous low level" by many press accounts. I also just read a NYT's piece on how busy October was. Someone is smoking crack and I assure you it isn't moi. My anecdotal take is that there remains high levels of anxiety and trepidation. Fewer transactions seem to be happening in my office but maybe there is one agent out there who reports to the media who is selling everything else?
What are your thoughts? I always enjoy and respect your insight.
Thanks for the complement. Like you, I have seen a dramatic drop in activity. My primary source of customers are in relocations to New York. I have seen a dramatic drop in those referrals. As I mentioned in my September 20th posting, I had a number of buyers leave the market in July and August when the credit crisis started. I agree there is a very high level of anxiety as to the direction of this market and the recent news on bonuses from Wall Street is only adding to that. Even with the lower dollar abroad, they too are being affected by the credit crises.
However, with that said, there are a number of factors in our favor that were not present during the last down cycle. Inventory being the most important one. I think we will see a slowing of the market until the second quarter of "08", and then a more rational market rise. I do not see the 40% price drop I saw in the late 80's early 90's but I do not see double digit price gains going forward.
Thanks for letting me share my opinions with you.
Ok, I'm not on crack, I promise! But after having our worst August/September in 5 years, our October/November to date is our best in 5 years. I have seen some dramtic shifts though:
1- London, Dubai, London, London...All I am getting is foreign buyers. They are serious and let's face it, with the cheap dollar, our prices are bargain basement to them. I'd say my percentage of foreign clients has grown from 10% to 70% over the past 6-9 months..it's wild! Fortunately they buy the big ones in Manhattan.
2- Harlem- Faggedabout it. Suddenly, Harlem is toast. I used to get a dozen calls a week for Harlem, pioneering domestic folk, now it's been forever since I've had someone ask about Harlem.
3- Shhh...LIC is the place to be, especially Hunters Point. I once considered LIC and Harlem on a par for fringe markets, but LIC has remained very strong and these are where my domestic buyers are going. People are either on a budget or priced out of Manhattan, so at $700/ft. for a Karl Fischer building, they are snapping them up.
About bonuses, I am in complete disagreement with everyone in the world on this one, and even took some abuse from some commenters on curbed about it, but...Bonuses will be higher this year than last. YES, higher. Unfortunately they won't be spread out much, but the total number will be higher. The reason is Goldman Sachs. They have remained largely out of the crunch fracass and have put away as much for bonuses in the first 3 quarters of this year than they did in all of last year. Last year Goldman accounted for $16.9 Billion out of the $24 Billion total for the street. This year, looks like Golman alone will come in with $20Bil-$21Bil. Morgan Stanley is having a great year (way ahead of last), so they should put us over the top of the $24 Bil number from last year. Even Merrill who is having a nasty year has put away $11.6Bil in comp (about 50% should be paid out in bonuses) through 3 quarters. They will be paying those numbers because they fear people will be lining up at the door if they don't. I can't tell you the exact final number, but it will be over $24 Bil. 2009, well, that's another question.
Interesting Andrew. In which market segment are you seeing all of this activity?
Most of the foriegn buyers that I am working for are in the $1.5-$3.0Mil range. They love Manhattan, especially core Manhattan. Many of them are multiple-apt buyers. I am also fielding calls from foreign investors who would like a cash flow positive situation, and I have to explain that at today's prices it's nearly impossible to achieve, and then they don't call back.
Funny Andrew...I got a call from one such buyer today. Brit who wants to buy positive cash flow property for $1.5M to $2.5M. Her name was Hannah...you know her :-D
