Don't Get Duped : Mortgage Rates Didn't "Fall" To 3.94% | The Mortgage Reports : Today's Mortgage Rates & Strategy

This little gem popped into my inbox last week, and it's pretty interesting. Even as ads and the media trumpet "new interest rate lows", banks are raising fees to make up what they aren't able to make in interest.

When you speak to a mortgage professional, be sure to get the rate quote with points and without. If you pay no points, your mortgage payment will be higher. Depending on how much principal you borrow, the difference could be less than $20/month.

On the other hand, if your ratios are very close to maxed out (ie, debt close to 40% of gross monthly income), then paying points up front will reduce your monthly obligation and allow you to qualify for a mortgage that you might not otherwise.

Ask questions. Make sure you understand how many points you will pay up front in order to get that amazing low interest rate.

Don't Get Duped : Mortgage Rates Didn't "Fall" To 3.94% | The Mortgage Reports : Today's Mortgage Rates & Strategy:

Foreigners purchase one-third of city condos | Crain's New York Business

Many people pinpoint 2008 as the day NYC's real estate woes began. I put the date earlier. I knew something was up in February 2008, when rental apartments - some in very nice parts of the city - were sitting on the market for three or four days - even a week sometimes! But many people don't remember what I call the great hiccup of 2005. This was the beginning of the subprime mortgage foreclosures, when adjustable mortgage payments rose out of the borrower's reach. 2004-5 was actually when the majority of the United States started to go to hell, quite frankly.

In New York? It was a hiccup. Some loans didn't come through. Co-ops started tightening their reserve requirements. Properties that had taken 2 weeks to go into contract were taking 2-3 months instead. It was, as my colleagues said then, a "return to normal".

The market resumed going upwards after a few months in late 2005-2006, but at a slightly more languid pace. Up it did go, however, until the great crazy crash of 2008.

Even then, NYC hasn't done so badly. Prices went down 10%-20%. But what I saw more was the removal of properties from the market, with fewer sales actually taking place. In my own 80-something unit building, over a year went by without any closings.

Then something started to happen - cash buyers started buying again. This was important because they established comps that mortgage companies could use for lending purposes.

Thus New York City avoided what could have been the fate of many overheated metropolises throughout the country. How? Partially thanks to cash buyers - and the foreign buyers who chose to park their capital right here in Gotham. Sure, there are other cities with a lot of foreign home ownership, and you'll notice they aren't doing so badly either (Seattle, for instance).

In short, this article shouldn't be a surprise. It shouldn't be a surprise that people are buying what still looks like cheap real estate. And it shouldn't be a surprise that condos - shiny new with less strict financing and board requirements - are favored. Our foreign neighbors have helped New York stay one of the top cities in the country.

Foreigners purchase one-third of city condos | Crain's New York Business:

New York, New York

I came across E.B. White's classic essay Here Is New York the other day and wanted to share a passage that still rings so true:

"But the curious thing about New York is that each large geographical unit is composed of countless small neighborhoods. Each neighborhood is virtually self-sufficient. Usually it is no more than two or three blocks long and a couple of blocks wide. Each area is a city within a city within a city. Thus, no matter where you live in New York, you will find within a block or two a grocery store, a barbershop, a newsstand and shoeshine shack, ... a dry cleaner, a laundry, a delicatessen..., a flower shop, an undertaker's parlor, a movie house,....a drugstore, a garage, a tearoom, a saloon, a hardware store, a liquor store, a shoe-repair shop.  Every block or two, in most residential sections of New York, is a little main street A man starts for work in morning and before he has gone two hundred yards he has completed half a dozen missions....all between the corner where he steps off the bus and his apartment. So complete is each neighborhood, and so strong the sense of neighborhood, that many a New Yorker spends a lifetime within the confines of an area smaller than a country village. Lt3 him walk two blocks from his corner and he is in a strange land and will feel uneasy till he gets back."

Does that sound like you and your neighborhood? Do you have your favorite place to eat, drink, know the names of the guys at your bodega and laundromat? Do they recognize you by face and name?

How big is your neighborhood, truly? If you live in the West Village, is the East Village a major undertaking?

I personally live in Brooklyn at the crossroads of several neighborhoods but not really in any of them. The one-stop market on the end of the block gets much of my grocery business - when I don't absolutely have to bring some specialty home from Whole Foods. I visit my different neighborhoods disproportionately, but eventually I go back and am ashamed to notice some change I was absent for.

I spent nearly 8 years of my professional life working on Broadway near Union Square. I hardly get over there anymore. I've noticed some new yummy-looking restaurants on the blocks between 19th and 23rd. My favorite Starbucks is somewhere near there too (It's got the best seating, so I try to keep it a secret, but it hardly is). And there's now a fall market in Madision Square Park, but I've only walked through once or twice.

The West Side is now my Flatiron. I notice every storefront, every townhouse. In my office I am again on the cusp of neighborhoods: West Village, Chelsea, Meatpacking District. There is so much to love about this city. In another 60 years E.B. White's essay will be just as spot on as it is now.

Glad Someone Else Thinks So Too!

Last month I discussed a New York Times article about unilateral loan modifications that certain banks were offering to property owners. These modifications were outside the judisdiction of HAMP and were proactively offered by the banks.

Yesterday, the New York Times published an editorial urging President Obama to be very aggressive in creating homeowner aid programs. We all know that HAMP was basically a failure, with very few loans modified. The Times attributes this to the government (both legislative and executive branches) practice of urging, but not forcing, banks to do all they can do to help. The Times called upon the government to create programs - both through bank mandates and through Fannie and Freddie - to do the one thing I said needed to happen - reduce principal.

Let's face it: from 2004-2008 homeowners paid inflated prices. Now they are stuck with loans based on those inflated prices, while the air has gone out of the property value. It's possible the original loan can still be paid off, but this amounts to the banks taking the net worth that thousands of middle class folks are counting on.

People who couldn't afford their homes have, for the most part, lost them. People who weren't going to pay for their homes have, for the most part, walked away. Now what is left is the ever-harder-working, ever-shrinking middle class who would pay their mortgages if they could. And maybe today they can, but with more job losses on the horizon from big companies (including Bank of America, in a most wrenching irony), maybe tomorrow they can't.

The problem with refinancing on a young mortagage (less than 10 years old) is that once you lump the closing costs and taxes onto the mortgage principal, you effectively have the same payment that you did, which, we have already established, the borrower cannot afford. To lower payments, you have to lower principal.

The Times argues that people who are underwater on their mortgages should have their mortgage principal lowered. I think we should go one step further: all mortgage holders should have their principal lowered by 5-10%, and their payments recast at the same time to lower them over all. This may reward what few bad apples that are left, but it will reward all the good hard working homeowners who have scraped and struggled to make their mortgage payments as well.

If that's too much to swallow, then lower the principal of all borrowers who bought between 2003 and 2008. That ought to account for most of the bubble mortgages. Should you count people who refinanced ad nauseum and took money out of their houses? That's a question for debate. But I agree with the Times; something must be done.

The U.S. government cannot be effective with further tax brea. People who aren't earning a lot of money don't get much back in the way of tax breaks. And let's face it, the government needs that money (see: debt ceiling, deficit). Lowering the housing cost of 65% of American households by lowering their mortgage payment? That makes sense. The government is still bearing the brunt of the burden because it, along with GSEs Fannie and Freddie, own or guarantee more than 80% of residential mortgages in the country. 

In other words, it's within the government's power. We need to seriously study it as a possibility.

Tenants Catch a Break For the Moment

Tenants catch a (temporary) break on rent regs | Crain's New York Business

Governor Cuomo seems intent on renewing rent regulations that keep our rent stabilized apartments stabilized.  Like the debt ceiling, many people have based their way of life on rent stabilization regulations.

While the average cost of a one bedroom apartment in Manhattan was $2406 in 2009 (according to CitiHabitats, the largest rental brokerage on Manhattan by transaction), the median income for 2009 in Manhattan is only $68,706. And that income hadn't risen much from before the bust, while rental prices had certainly dropped.

Using the rule of thumb of 40% of income, that median income would qualify a "household" (and we don't know how large this household would be - it could be an individual, couple or family with1 or more children) for a monthly rent around $2290. So already the average household making the average income is paying more than the recommended 40% maximum of income.

On the face of it, it does seem that rent stabilization is needed. However, as an economist (well, I majored in economics and remember just enough to do damage), I recall that by creating an arbitrary ceiling in one part of the market, you can artificially inflate the other part. In other words, because there are a bunch of apartments that are regulated in rent, people don't move, and therefore there is a housing shortage that results in other people overpaying for the remainder of apartments.

In practice, I don't know if that is true. Most of the remaining rent stabilized apartments on Manhattan are in northern Manhattan above 96th Street. But anyone looking for an apartment below 96th street with a budget of under $2400 certainly knows that the pickings are slim (and even slimmer below 34th street). So, on the one hand, maybe people pay a little more for destabilized apartments than they would if all apartments were subject to the same regulations. On the other hand, in Manhattan that doesn't seem to matter much.

One thing I would say is that rent stabilization does give the impetus to turn apartments over and renovate them really nicely. Which would seem in contrast to the arguments that landlords can't adequately maintain their buildings. But when you have $40,000 or more in property taxes a year, and you have 5 apartments where just one is still rent controlled at $1000 a year, you can see where the math doesn't add up. Heating oil can run thousands a year, so can property insurance. And that's all before you start thinking about reserves for capital improvements. That's where rent stabilized landlords get bitten.

On the other hand, does rent stabilization serve as a deterrent for positive change on the community side? Intuitively I can think of situations where people stay in apartments just because they have such a cheap rent. But let's get all Freakonomics on this issue. Is there a wider or more tangential effect?

One thought I have is that rent stabilization could deter entrepreneurship. In otherwords, people can keep working lower paying jobs in order to stay in the same apartment. This follows from the idea that union membership in the industrial parts of the country made it less likely for businesses and people to innovate. After all, if you're making good money, why change what's not broken? Except that it is broken.

I am not for pushing protected tenants out of homes. They have rights and it does unfairly punish the elderly and lower earners. But from a theoretical point of view, is there some way we haven't looked at it yet that maybe we should?

Food for thought.

Rents Right Back Up To Crazy

Renters can kiss the days of negotiating with landlords and taking their time to find a nice apartment goodbye. According to Citi Habitats, the agency that brokers the most rental deals in Manhattan, rents are almost right back up to where they were in mid-2007, before the meltdown and all the market-dampening craziness that we've experienced since.

http://therealdeal.com/newyork/articles/citi-habitats-manhattan-five-year-study-shows-residential-rents-recover-faster-than-economy

Why are rents so expensive again? Most NYC brokers will point you back to Wall Street, where the annual bonus watch is just as keen among real estate agents as it is among Wall Streeters. Others point out (in this article as well as many other places) the likelihood of people who can afford to buy in the multi-million dollar range as choosing to rent until they see how the market works out.

I'm not sure if either of these explain 100% what's going on. After all, rents at the low end have increased too. Part of that is that people who had more expensive apartments chose to move DOWN to save money. Others who had lived with roommates felt that it was feasible to have their own place with the decreased rents. Finally, people who may have moved to outer boroughs or New Jersey may have moved back to the city. Overall, though, there must be some growth somewhere. You don't go from a vacancy of nearly 2% to just above .5% without having some growth. So give the next start up techie you see at the coffee shop a break. He's helping to save NYC from the worst of what's out there in the rest of the US.

Banks Easing Terms or Debt on Some Option ARM Loans - NYTimes.com

When I read this article last weekend, my head almost exploded. Take a look:

http://www.nytimes.com/2011/07/03/business/03loans.html?scp=1&sq=mortgage+principal&st=nyt

NYT points out that for some reason, some people have received unsolicited offers for loan modifications while others who are in default are losing their homes. This is beyond ridiculous. People who are in danger of losing their homes are the ones who should be first in line for loan modifications, especially if they had fully documented loans made on good credit and income.

When the crisis really hit the fan in 2008, I mused that perhaps a uniform write-down of mortgage principal would be one way to avoid mass meltdown of the mortgage market. After all, the stock market had experienced serious deflation. So did a lot of other types of retail and wholesale goods, commodities, and, of course, the real estate values that these mortgages were based on. It made sense to me at the time that we should adjust loan balances to reflect the deflation that had been occurring in most housing markets (NYC excluded) since 2005. This would allow people who took pay cuts to pay less or stay in their homes.

For whatever reason, this did not happen. I heard only one argument that rang somewhat true: that if institutions forgave part of the principal of their mortgage portfolios, they would reduce the paper value of their assets, and therefore cause a potential drop in their share price. That might open them up to shareholder lawsuits, as well as lawsuits from the investors who bought the derivative securities based on their loans.

This is one place that the government really could have stepped in. We were in a bubble. If we could have let some of the air out, then maybe we wouldn't have had the meltdown we did. After all, 95% or so of all mortgages kept current the whole time. The market meltdown was caused when the derivatives market seized up.

So here we are in 2011, with the market trying to push it's way up past 13,000 so that millions of baby boomers can get back to even, and we find that some mortgages were indeed modified in the past couple years. While others were allowed to go into foreclosure.

If this leaves you scratching your head, re-read the paragraphs which state that the two banks who were found to have done the adjustments were Chase and Bank of America, and that the loans that were modified all came from the portfolios of institutions that disappeared during the meltdown - specifically, Countrywide and Washington Mutual.

Suddenly this all makes sense. The toxic loans (or at-risk loans, as some of these loans apparently were never in default) were absorbed by Chase and Bank of America at a discount to actual value. So it's not a big deal - accounting wise - if they write down the principal, because they didn't pay for it.

However, the federal government is subsidizing the banks through HAMP and other programs to modify the loans they made - and they simply aren't doing it. Bank of America in particular has been pointed out as one of the most rigid to deal with.

This is where I think the government failed: instead of a mass forgiveness program (which yes, I would have benefitted from, but so would every person with a mortgage in the U.S.), the government printed out more money and gave it to the banks. The government could have passed a law, citing the same emergency situations through which they forced TARP, that would have indemnified all banks from investor and shareholder lawsuits. Would the banks' share values have gone down? Sure (maybe), but the chances are it wouldn't have been the bloodbath that it turned into. Baby boomers who now have to go back to work (to jobs that likely don't exist anymore) would have a lower standard of living in retirement, but at least they would have been able to retire!

So Chase and Bank of America are basically giving away what they knew they didn't have to begin with - loans that are less likely to get repaid. What do they get in return? Likely a higher rating of their own debt - after all with Fannie and Freddie likely to have a much lesser role in the mortgage market place, banks will have to do more bond offerings to be able to originate more loans.

And meantime, the stock market tries and tries to get back to even. Another bubble. The blame arm will likely swing around to the tech market - with amazing IPOs from Pandora, LinkedIn, Groupon and Zynga likely to be followed by the mother of them all - Facebook (don't be a follower, Mark Zuckerberg!). But let's face it, the real problem is still the fact that thousands of "regular" people - with no equity in their homes and decreasing purchasing power in their wages - search for capital somewhere - anywhere - to try and get back to even before the sands run out of the hourglass.

Not a happy thought.

Population growth to drive more compact housing | Inman News

Haven't had a second to read more than the most important of emails, let alone blog for the past month. Quick read on the summer rental market in downtown Manhattan: it is pretty busy out here! Most in demand seems to be 2+ bedroom 2+ bathroom apartments. Prices are definitely higher than last couple years. Why is this? Seems a lot of people are relocating to New York. The trend of selling a property and renting for a while is also holding on.

Not sure how much longer that will hold though. While the national press is trumpeting how home prices are the lowest they've been since the early 1990s, core New York is holding and even increasing. Studios are still the biggest challenge to sell. But if prices start to move up in unison, look for renters of large apartments to pull the trigger on buying first. Eventually people bent on buying will settle for as much space as they can get - meaning buyers hoping for a small 1 bedroom will be relegated back to studio apartments. There is hope yet for those little guys.

Here is a link to an interesting article:

Population growth to drive more compact housing

The idea of urban housing design is pretty interesting to me. Cities across the country continue to absorb population from smaller towns, as well as immigration from other countries. Cities are where jobs tend to be. And the cost of gas is making the far flung suburbs less popular. Urban Land Institute predicts (predictably if you see what's going on) that more people will move to cities. More people need more rental housing. And the largest increase is actually in one-person households, a fact I did not know. This means studios and one bedrooms will be in demand, and smaller apartments will be more popular.

Here in NYC, I'm not so sure. For a few years ending in 2008, 2 bedrooms were most sought after, as more and more families stay in the city. If smaller apartments are the norm here, then look for rents and sales prices for 2+ bedrooms to skyrocket.

Of course, this trend could take 3-5 years to play out. And it won't happen in a vacuum. There's a lot of news pointing to a downturn lately, but historically the stock market pulls back in the summer. A colleague said - and I tend to agree - that the NYC housing market depends less on what is happening in the rest of the country and much more on what is happening in the stock market.

Population growth to drive more compact housing | Inman News

FHA Loans for New York City

I wanted to repost an article on the availability of FHA loans in New York City. FHA loans don't have much foothold in the Big Apple. This was because the loan limits were far below the costs of an NYC apartment until 2007. Also, FHA loans can't be used for co-ops, which makes nearly 85% of housing options in NYC ineligible. Finally, condo developments MUST go through a certification process. Apple Unpeeled compiled a comprehensive list of of current qualified condo projects in Manhattan, as well as a primer of the latest FHA news.


Begin reposted article synopsis:

One year ago, almost to the day, we did some digging into the FHA market to compile a list of FHA approved condos.   FHA loans continue to attract first time home buyers due to:

As compared to this time last year, city wide, Manhattan has 58 condos (versus 32 in 2010), Brooklyn has 179 (versus 105), the Bronx has 21 (versus 16), Staten Island has 14 (versus 11), Long Island City has 12 (versus 8 ) and Queens has 3 (versus 2).

Based on reader requests that we refresh the list for 2011, you will find below the list of Manhattan FHA approved condos, with their percentage concentration to the right (nowadays, once a building hits 30% FHA loans, no mas):

To read full article, go to:

http://theapplepeeled.com/buyers/where-are-they-now-manhattan-fha-approved-condos-revisited-one-year-later/?utm_source=subscriber&utm_medium=rss&utm_campaign=rss

 
Associate Broker
M. Woods & Associates
718.696.7145

Anything but Hydrangea!

Last weekend my boyfriend and I got out the rakes and trowels and joined the rest of our co-op community in the annual garden cleanup.

The garden consists of a sideyard about 15 feet wide and the entire east-west width of the building, as well as a space some 25 feet wide that serves as the air shaft for many of the units. The two parts form a skewed T shape (with the topbar being very long, and the bottom of the T being very wide).

Every year plots are alloted to interested shareholders. Part of the sideyard is very sunny all day long, with relatively unobstructed eastern and southern exposures. That part is reserved for growing vegetables. The rest is for flowers.  My plot is right on the corner of the vegetable and flower part. I have lovingly cultivated it for about 8 years now, unfortunately with little success by my standards.

I'm not a "brown thumb", as it were. I successfully maintain several plants inside my apartment, a feat given that only one window really gets direct sunlight at all.  And my outdoor plot is actually one of the sunniest of the flower plots, with about half of it getting 4 hours or more of sun in the summer. The other half gets much less light, however.  And I don't really like shade plants that don't flower. Every year so far, we have trooped out, planted, watered, weeded (at least for a month or two), and stood back dismayed as very little of our plan ever comes to fruition.

What's wrong with it? I'd like to think it's not us. We're not prize growers but we are attentive to our plot. We  suffer the same as everyone else when it comes to squirrels. They eat rosebuds and dig up bulbs. I did get crocuses to grow one year, but construction in the building killed off everything in my plot as the construction workers apparently thought it was a pathway or something. (and unfortunately we may end up with that again, but I'm trying to avoid thinking about that).

Part of the plot is very sandy and easy to dig. But the other half (which coincides with the half that doesn't get much sun) has a large amount of red clay in it!  I am constantly digging up shards of glass, ceramics and/or metal (at least 2-3 eating utensils). It's like an archeological dig.  Over the years I have added topsoil and mixed in compost from the garden compost pile. But not much has been willing to grow in there.

I haven't sprung to have the soil tested (though apparently parts of the garden have high levels of lead in the soil - yikes!). But I have gotten a small number of plants to grow over the years. Not necessarily to thrive, but to live. Here they are:

- Common Jasmine: I love this flower because it is so fragrant. The plant is vinelike but it can grow like a shrub if trained. I planted two jasmines the first year I had the plot and they grew. Unfortunately they died when the winter came.  Apparently we have too harsh a winter climate for them to survive. Though I wonder if they could if I wrapped them like a fig tree?

- blue ageratum.  These little flowers actually do grow and thrive, at least they did most years - there were a couple where they didn't make it.

- Impatiens. I have to point out that I didn't actually plant these in my garden!  The woman with the neighboring plot planted them in hers, and they reseeded themselves into  my plot. Every year I still get them.  Oy. I don't really like impatiens, though I can get distracted by popping their seedbugs in the fall.

- Shasta Daisy.  A friend of mine from Michigan sent me several packets of seeds, but the only one that grew was the package of Shasta Daisies. They seem to like part sun the most but grew all over the garden. I had so many I had to get rid of some.  These guys reseed themselves. It's probably been 5 years since I planted any  but they still pop up around the garden. Not in my plot though. They grew fine the first year but I've never had any actually in my plot since. I think I spotted a few growing in the border between my plot and my neighbors. Sheesh.

- Heath. Ok, heaths (cousin to heather, the hardy moor plant known to be found on the English prairie) don't really like my plot. They just kind of survive there. They don't actually grow.  I have one heath left that's been there about 4 years. The rest have slowly died. I got ones that like acidic soil. Perhaps I don't have acidic soil?

- Hydrangea.  This is the super heavyweight champion of my plot!  I bought the first hydrangea as an 8" indoor plant from Whole Foods. I've always loved them since they were in my next door neighbor's yard as a kid.  I planted it in my plot thinking it would be a nice divider between my plot and my next door neighbors. Well, it just took off from there. First, I had to keep cutting it back. Then I moved it (a 3 hour process with a VERY BIG ROOT BALL) after 3 years to the other side where there was more neutral territory. There it has been since. I cut it back every season to keep the walk way clear.

It grows dark blue flowers dappled with pink. I know that means there is aluminum in the soil. I can't remember my chemistry. Is aluminum acid or alkaline?  Anyway, the flowers on one side are pinker than the flowers on the other. Very odd.

Last spring I discovered that a low hanging branch had rooted itself into the soil. So now I had two hydrangeas. I figured nothing else would grow so I moved it a bit to give it some space. It shot up quite a bit last year and is now quite established.

But wait, that's not all!  This year I discovered the mother and daughter hydrangea had each rooted a baby. Now we are totally overrun with hydrangeas. We offered some to other gardeners but no one wanted to take us up on it. So we have two mothers and two babies. I have clipped the lower branches on the more mature plants to try and keep it to four. I guess there could be worse things than having a beautiful lush leafy plant with gorgeous fragrant flowers overrunning my plot. But I wanted to seem like a real gardener who can coax a small plot into a coherent oasis worthy of extreme contemplation.

So, I'm throwing it out to everyone. Please send suggestions of plants that might work in my plot. Just not hydrangea!

What is a Mortgage Recast?

This essay by a Professor Emeritus from Wharton makes a lot of sense. We all know that paying extra principal on a fixed rate mortgage retires the mortgage sooner, but what about when financially responsible people have financial hardship? If the mortgage has been prepaid, then a recast will recalculate the amortization schedule, spreading the remaining principal out to the original payoff date. The result? Lower mortgage payments!

With a huge number of fixed mortgages falling delinquent, it would be a great idea to see this become a standard feature on a fixed mortgage - because it's already a feature of interest-only and adjustable rate mortgages! People who have prepaid a bit every month deserve to lower their housing costs gradually - at least once or twice during the life of a 30 year mortgage! This feature would also allow people to save more for their children's college and retirement, or just keep paying ahead towards a mortgage-free future.

Should the mortgage market continue to suffer foreclosures in enormous numbers, the government may look at ways to reduce existing mortgage payments as a way to keep more people in their homes. This can mean a forced principal write down, which would be catastriphic forr shareholders. A coordinated effort for fixed mortgage recasts to prepaid mortgage holders is a good idea to try first.


Http://www.inman.com/buyers-sellers/columnists/jackguttentag/little-known-secret-reduce-mortgage-payment
Associate Broker
M. Woods & Associates
718.696.7145

Renters beware: Prices are going up - Crain's New York Business

http://www.crainsnewyork.com/article/20110309/REAL_ESTATE/110309848&template=mobile

Associate Broker
M. Woods & Associates
718.696.7145

Whoa Boy, 8% Rent Increase 2010-2011!

While we're grateful for all the little signs that the national economy is perking up, the inevitable rise in New York City rents is starting to creep upon us as well.

Average apartment rents jump 8% in year - Crain's New York Business

This Crains New York article references a report put out by The Real Estate Group of New York, a respected brokerage. (You can see the full report here: http://www.tregny.com/manhattan_rental_market_report)

The report's analysis shows that rents have risen 8% year over year. If it didn't feel that bad, it might be because they have been flat over the past 2 months or so.

Also mentioned is the fact that current rent levels are actually very close to where they were in 2008. So they dipped a bit and New Yorkers got a reprieve, but they are on their way back.

Which makes sense when you think about it: all those new buildings and apartment renovations were done when rents were at all time highs. Landlords have been eating it for a while, and they want to get back to their projected profits as soon as possible.

What does this mean for the rest of 2011? If you have a lease renewal coming up, expect the rent to go up, though probably not as high as 8% - those apartments were the ones that went vacant.

As always, whether to renew, try to find something bigger/smaller or in a different location is a personal decision depending on your life. But be ready.

Fw: Bad Transit Slows Growth Outside Manhattan

While Manhattan remains the epicenter of the NYC juggernaut, its sister boroughs have been growing too. Which is great: Manhattan is expensive, and if the outer boroughs were boring or dangerous, more people would try to squish onto Manhattan, making it even more miserably expensive. Good news: the outer boroughs are growing. Jobs are being created in retail as well as light manufacturing, healthcare, media and even technology, with startup companies taking advantage of lower commercial rents or working remotely.

But this is a somewhat unexpected development for the people who built the subway 100 years ago. Back then (even though Brooklyn was recently its own city, while Queens was a collection of villages), it was imagined that all would seek a way to get into Manhattan and back. Few apparently dreamed that people would need to get from Brooklyn to Queens, or from Staten Island to Brooklyn, on a daily basis. And the subways reflect that. They aren't set up for that commute. This adds a lot of time onto commutes for those who have them. They must resort to driving their own cars (pollution, gridlock) or taking several modes of transportation to get there.


So what does this mean long term for the various parts of New York City, and it's real estate values?

Transportation infrastructure is costly to fix and even costlier to build. With the MTA facing yet another shortfall, it wouldn't be easy to plan more services quickly. Alternatively, express bus lines could be started with relative ease, though they are hardly a bargain at $4 a ride. The only all-outer-borough subway train - the G - has been shortened practically to impracticality, with major service changes planned for the next two years as the all-important Culver Viaduct is shored up.  Parts of Brooklyn (East Flatbush, Canarsie, Bergen Basin) and Queens (Maspeth, Whitestone, Kew Gardens) are barely if at all serviced by subways.

Also of concern is the real estate available for such improvements. NYC is already suffering a housing shortage. If we were to put in a new line, where would we find the real estate? Any use of eminent domain, though likely to prevail, would cost years in court. So, additional subway lines are decades away from happening.

One alternative that could from extinction are electric light rail street cars. These would be relatively easier to employ, requiring only rail to be laid on street level and electrical wires to be strung above.  Indeed, many of today's bus lines take the place of street cars of yesterday. The B68 is one such example.  The December snows churned up asphalt recently at Bartel-Pritchard Square (which is really a traffic circle), revealing a glint of rail  from the old streetcar turnabout in the circle.

For brand-based businesses that rely on name prestige, Manhattan will continue to sing its siren song. Advertising and media companies will likely locate hither. Financial firms will continue to seek a downtown address (though megafirms such as Chase and Bank of America are in Midtown). And New York's burgeoning Silicon Alley (now some 15 years old, but garnering more and more venture capital funds) will likely seek out accommodations in Manhattan.

Thus far, jobs in the outer boroughs seem to be in services, with education and healthcare leading the way. This makes sense. Families move to the outer boroughs for quality schools and a slightly lower cost of living. And lifelong outer borough residents want to age in place, and can't travel into Manhattan for the elder care and physical therapy services they need.

Outerborough jobs tend to require time in the field as well - traveling from one home to another, making field visits or sales calls. These jobs are hard to do without cars. They might be easier, however, with a little love from the MTA and NYC.

Coming Soon: New Website

Exciting News!

We at M. Woods & Associates are putting the final touches on a new website that we hope to launch sometime in late spring.   Although we pride ourselves on personal touches in transactions, we recognize that more and more people want to see a website to find out about us, and so we're going to give you that. Look for the announcement here later this spring.

New York City Real Estate Goddess will remain as my personal blog for commentary on national and local real estate issues, but there will be links to the new website as well. Thanks everyone for reading!

Triple Whammy - 3 Interesting Articles from the Wall Street Journal

Who is it that says "buy when everyone else is running away, and run away when everyone else is buying" ? I found this trio of articles - all published the same day by the Wall Street Journal - quite interesting.

The first two involve the financing of real estate. The titles say it all - many people find the mortgage process to be the most confusing part of the real estate transaction, and more and more deals in the past year or so have not had financing.

Survey Says Mortgage Process Has Become Too Confusing

Cash Buyers Boost Battered Housing Markets - WSJ.com

In New York, all cash deals are not uncommon. We are blessed with many high net worth individuals, and often older couples will trade down into a smaller residence bought with all cash.

Cash also has been a stabilizing force in the New York market in the form of the high down payment requirements instituted by cooperatives. Even condos tend to require at least 10% down here in NYC, although more condos have gotten FHA approval to qualify for the 3.5% down payment minimum.

The article's analysis points out that all-cash deals are stabilizing markets that are hurting pretty badly. All cash buyers can close quickly and don't require mortgage contingencies. And, well, they have that much cash, right? Somehow they got it. That means they often know how to make it. And they're deciding to invest in real estate. Remember, real estate = lagging indicator. Are these cash investors the early birds?

Which brings us to the third, in some ways most interesting article from the WSJ: their article on the affordability index.

Housing Affordability Returns to Pre Bubble Levels

This article's method for measuring prices is housing prices (average) to household income (average). By the height of the bubble, housing prices averaged nearly 2.5 times household income. That's pretty expensive.

To quote the great Inspector Clouseau: "Not anymore". Housing prices have sunk far enough in enough of the country that the overall average is now below the pre-bubble affordability.

WSJ kindly pointed out that that is not so true in New York (state or city not specified). The housing to income ratio is still higher here than in most of the country.

Why? I can think of a few reasons:

1) NYC has a wide range of housing types, locations and prices. There are boroughs where you can still buy a 1 bedroom co-op for $80,000. In Manhattan, you'd be spending at least $200,000, and that's in the northernmost part. And there are many multimillion dollar properties in Manhattan and Brooklyn. However, the median income of a New Yorker is still below $100,000. So that skews the average upwards.

2) There is more pricing stability in New York thanks to the higher down payment and investment rates required by both co-op, and to a lesser extent, condo, boards.

3) Many of the cities mentioned in the article as being below pre-bubble era prices are the hardest hit for manufacturing jobs. New York is still a vibrant city - our tech sector is just getting started even as other industries may be changing or phasing out.

4) New York's pricing strata do not move in lock step. From 2008-2009, luxury properties were doing terribly. Some brokerages that specialized had to close because of the lost business. The news since November 2010 is that the highest end properties are moving again, and in some cases (15 Central Park West for instance), prices are going up at that level. And let's face it, a 3% increase in a $5 million property is a lot more than a 3% increase in a $600,000 property. Meanwhile, studios - the most entry level of properties - have been lagging. However, studios were the fastest selling property type from 2006-2008.

The last paragraph of the article was interesting too - singling out my hometown of Washington DC as a market where prices, though falling, would likely not fall below the pre-bubble levels "due to structural changes in that market". What does that mean? Essentially it means people want to live in the city again, the infrastructure has (somewhat) improved, it's safer than it used to be, and it will experience higher population growth than other parts of the country which will eventually push prices up.

Reminds me of another city just up the coast.

Bottom line: you can read this any way you want.

Looking for Clues about Where Housing is Going

I really enjoyed the in depth breakdown of the sources of our Gross Domestic Product (also called Aggregate Expenditure) for Q4 2010. The number, which was reported before the weekend, was slightly below expectations, at 3.2% growth. But the good folks at Zacks provided a really great analysis. Take a look:

Where the Q4 Growth Came From - Zacks.com

In particular, the numbers on government investment and private investment told us that the private sector is starting to buy again even as government continues to taper off it's stimulus spending, a good sign that businesses anticipate more business. Most of the private investment came from building inventories, so businesses expect to sell.

Residential investment (specifically meaning the building of new housing units) was basically flat. That is good for now, as there is a lot of inventory out there across the country. But for New York, where there is generally a housing shortage, there isn't a lot of residential (or commercial) building going on. For now, that doesn't matter. If anything, it's keeping the market level. But if we experience a robust recovery (and 3.2% after a 1.7% in the previous quarter is a robust start), it could be a problem in 2-5 years. I'm not the only person saying that, either.

2 Easy Extras to Keep Up with the Times

When I first moved to New York, I heard all the cliches about New York apartments. They can be small, dark, dingy, etc.  And they had no amenities at all. No air conditioning, no garbage disposal, and absolutely no dishwasher.

Fast forward a decade or so. Landlords now have plenty of very inexpensive options when it comes to two amenities: air conditioners and dishwashers. And, I have to wonder if it's not time that all landlords realized how easy it is to upgrade all units if possible to include those two amenities.

Permanently plumbed dishwashers come in sizes as narrow as 18", which is appropriate for a studio or 1 bedroom apartment. Permanently installed dishwashers are the lowest maintenance option (as opposed to countertop or portable dishwashers) because the hose and drain connections do not have to be touched by the tenants, thus cutting down the possibilities for leaks. Basic models are very affordable . Installation may require the removal of the current counter top and cabinet base, but the look is far more modern, and tenants who would have objected to a lack of cabinet space in general will be less likely when they realize they are giving it up for an amenity. Overall, landlords looking to add a sense of the upscale to their apartments can accomplish it fairly cheaply.

Air conditioning is another amenity I would love to see included. Tenants expect to be running in the summer. Window units are very affordable and much appreciated in each bedroom and living room if possible. Have them installed securely with brackets and good insulation by a super - in the top of the window frame if possible -  so tenants will not be tempted to remove them. Landlords who don't want A/C units hanging out of windows can consider Floor A/C units, which are more expensive but completely interior. The ultimate is installation of Mr Slim ductless A/C units.  Though it is more expensive, the unit lasts much longer, and energy efficiency rebates are available for many of the models.

When I was in college, I sublet a room for a summer share with two other female roommates. Fresh out of the dorms, I was amazed to find out this apartment had a rare commodity - a portable dishwasher. My new prospective roommate said the three girls had each agreed to pay an extra $10 a month - total $30 a month - for a dishwasher. The landlord had agreed and provided a roller-type dishwasher that fit in a corner when not in use but had to be positioned in front of and hooked up to the kitchen sink to operate. The landlord spent $300 on this, made it back in 10 months, and had an amenity that she could tout to future tenants for the next 5-8 years. If she had installed it under the counter, it could have lasted longer. So in the long run, dishwashers pay for themselves.

Certainly there are still many "budget" New York apartments out there, but as the high end gets pushed higher, little traces of luxury in less expensive apartments will raise the bar. Universal dishwashers and A/C are a great place to start. These are the sort of amenity that is still rare enough to be highlighted in the pay-by-the-line newspaper ads, and apartments equipped with these small concessions to modernity will rent faster and for more.

Brooklyn, Queens see big drop in home sales - Crain's New York Business

Since I do have business out in Brooklyn, I thought this was an interesting analysis of what happened there this year:

Brooklyn, Queens see big drop in home sales - Crain's New York Business

So volume went down while prices inched up. Sounds like a lot of people who didn't need to sell decided not to, leading to a bit of a shortage in inventory, which kept prices stable, at least at the higher end.

Larger apartments are what sold last year, while smaller apartments were hurt (this has been happening in Manhattan too, as detailed in November 2010 Real Deal).

The continued slump in studios seems to be causing falling prices. 1 bedroom apartments are doing better, although 2 bedrooms and above are where the real movement has happened.

So what does this mean for 2011?

My take remains the same: if you are in it for the long haul on your primary residence, it can't hurt to shop now while interest rates are historically low (but they have risen a bit this year, from the low 4% to around 4.875% so far). Could prices still drop? Yes, that's always a possibility.

For me, it's simple: The big "if" is whether we have actually completed the "toxic mortgage" mess, or whether we are in the eye of the storm. Pay close attention to banks this year. Another wave of foreclosures (not the ones already in process, but a new wave of delinquencies) could be a similar shock to 2008's mortgage meltdown, which could lead to a drop in prices.

At the same time, another tightening in the mortgage market would make it tough to buy a property even at lower prices. So be careful what you wish for.

NYC Real Estate Goddess Quoted by AOL Article

I was recently quoted for an AOL article about a new feature that real estate website Trulia recently created.

Check out the article here:  http://www.walletpop.com/2011/01/24/better-to-rent-or-buy-check-out-trulias-city-by-city-index/ .

Trulia's graphic says that New York City is a city where the costs of owning are higher than the costs of renting.  While this was true for many years from 2001-2009, it is less true now.  And, as I say in the article, the benefits of owning may still be there, they just take longer to achieve in a place like New York.

Here are some reasons that people might want to purchase their home:

1) To stabilize their housing costs: Rents tend to go up every year. In a place like NYC, rents can jump a few hundred dollars from year to year. Buying a property with a fixed interest mortgage helps stabilize housing costs for long periods of time (you will still have increase in maintenance, property taxes, and home insurance over the life of your mortgage, but the percentage year over year is much lower than the potential increase in rents).

2) To have a place of your own: Ever lost out on a security deposit because you had to paint your bedroom blue or risk going insane from all that vanilla off-white? Not a problem if you own your own place. How about those "landlord special" stoves and countertops? Even in a nice building they are calculated to appeal to the most potential renters.  If you want a custom kitchen, you are pretty much out of luck. For liability purposes you can't even install a custom stove without your landlord's permission. Purchasing a place gives you more control. You might have to pass the work by a co-op board, but they won't deny you because they don't like your choice of backsplash tile.

3) To increase equity/net worth: To me this is the least important reason to purchase a primary residence, but it's still a benefit that you will acquire over time: instead of paying rent to your landlord - and receiving nothing long term - you are gradually building ownership of a property, and creating net worth for yourself. This benefit applies ONLY IF YOU SPEND 8-10 YEARS in your apartment at minimum.

Eatery sinks its teeth into revived W. Houston - Real Estate Deals | Crain's New York Business

So pleased to see this block is finally clearing away all construction and coming back to life!

Eatery sinks its teeth into revived W. Houston - Real Estate Deals | Crain's New York Business

What Do You Think?

It's a short article, but certainly relevant.  Most people think it's a good time to buy a home - the interest rates are low and the stock market is up. Take a look at the article here:

http://therealdeal.com/newyork/articles/most-americans-still-think-it-s-a-good-time-to-to-buy-a-home-despite-fears-about-a-double-dip-gallup-poll-shows

The article makes a great point about defining a home as an investment or as a place to live. While it's true that a house may represent the largest part of wealth that we accumulate in our lifetimes, it's not a strict investment. At the same time, it's pretty clear that we are not through with toxic mortgages and turmoil attached to them in the financial markets. So, it's probably not the best time to be shopping for a real estate investment, unless you are able to keep the property carrying itself, cash flow positive, and can hold it for a long period of time. But if you want to own your own home, save on taxes, and lock in your housing costs for the long term - as well as have a place to call your own - it's a good time to shop.  Happy hunting!