New York's the Same, the World is Better, What's Going On?

I am no Wall Street guru, but I follow the market pretty closely these days, as well as economic indicators throughout the world. Here is what we've got going:   .

1) Interest rates made a rather large move (.25% not really a large move, but for bond traders it's a large move)

 2) Several large retailers - and today Cisco, which is like the GE of pure tech plays - have reported lower than expected 2nd quarter results (whose expectations? it's sort of an average taken across many investment firms' analysts' projections).

 3) Walmart also missed on revenues, though not earnings (earnings are the actual income reported after all expenses have been removed), and cut its own projections for the rest of the year.

 However, other things are not all bad! For instance:

 1) July unemployment nationwide FELL to 7.4%, the lowest since 2007 - that's a YEAR before the crap hit the fan in 2008. Remember that before the credit crunch caused by the failures of Bear Stearns, Lehman Brothers and Washington Mutual, among many others. Many people forget that the downturn began in late 2004, when the first of the subprime mortgage crisis started to be felt.

 2) Europe, which caused an echo credit crunch on these shores as analysts scrambled to discern which of our multinational banks held how many Greek, Spanish, Irish, Cypriot, etc. bonds, has suddenly peaked its head out of the recession pit, according to the official statistics office of the European Union. China, too, has seen a slight rebound that is pulling materials and mining stocks up ever so slightly.

All that, plus lighter volume (which exaggerates price swings in an individual stock) made for a 200-point drop in the market today.

I watch the stock market because it seems to have more correlation to the real estate market in Manhattan (and increasingly, Brooklyn) than the markets in the rest of the country (which is why NYC's prices kept going up until almost the moment Bear Stearns went down). But it's hard to say what's the new normal here: the Dow made new highs nearly every week until April, had a correction in May, resumed upwards in June, and now in August (traditionally not a great month for the market) it's heading down again, mostly lazily but today in a more precipitous fashion. What will happen in September? What indeed? It's a soap opera that doesn't end.

My personal experience tells me that buyers are less likely to buy in New York when the market goes down. This might be because the buyer is actually employed in the financial industry, or it may be sympathetic concern, as most people in New York are at least cognizant of the market's moves, even if they aren't invested.

Dearth of buyers can lead to price drops, but only if there is a glut of properties relative to the number of buyers on the market. A quick glance at the live listings infographic provided by Urbandigs.com shows that active inventory (ie, properties currently listed for sale) has dropped nearly 20% in the past 3 months. In addition, properties in contract, after a huge 43% pop four to six months ago, has declined by 6% in the past three months. Finally, properties that have gone off market have increased over 15% in the past three months.

So, to summarize, fewer properties are on the market, at a rate that exceeds the drop in contracts signed. This means the inventory seems to be right-sizing itself. So, for the moment, prices in New York should remain unchanged.

We'll see how that works out when interest rates really begin to rise.

Nice Place You Got Here....

Yesterday I had my first visit to the MiMA building on 42nd Street off Times Square. As someone whose areas of specialty are below 34th Street, it just hasn't been that high on my must-see list. But I have to say I was impressed. I had in my head that the building was all the way on the Hudson. This isn't true. It's actually at the corner of 42nd Street and Dyer Ave (which is basically 4-block long access road to the Lincoln Tunnel that intersects between Ninth and Tenth Avenues). So it's about 1.5 blocks from the nearest subway stop, and 2.5 blocks from the majority of subway lines that run through the city. That's not bad! Also, it's near the Playrights New Horizons Theater, and the new Pershing Square Signature Theater. Those are two buildings I wish I got to more. You're off Times Square, so no hordes of tourists, but you're nearby for those few times you feel the need to, you know, remind yourself why you love New York City so much. Also, there's two Starbucks about one block away. A very important consideration to me! MiMA was developed by the Related Companies, and they are known for doing upper to ultra-luxury apartment buildings (doorman, etc), but I liked the floorplans I'm seeing - particularly that for the studio - it actually has a separate sleeping area; in some buildings the studio layouts actually force you to put your bed right up under the breakfast bar (at least you don't need a night table that way). Also nice is that that there is laundry in EVERY apartment, even the studios. I really liked the common areas. There are several large rooms that you can book (My meeting was in club room M-1, which had a large conference table, comfortable looking couch and a raised bar/table). Also there is onsite pet care (Dog City they call it). The health club is impressive. The terrace is large and they have a separate area they call "the lawn" which also has a seating area and an outdoor movie screen! (There is also an indoor screening room, and a catering kitchen!) I loved the lobby, which was very large with several groupings of bright, comfortable seating. I appreciated that after I identified myself to the doorman as having business in the building, he didn't begrudge me lingering a few minutes to check email and pack a few things away before I left. When people are looking for very luxurious accommodations (and this building definitely is very high end - studios starting around $4500/month), often they don't want to be west of Ninth Avenue - either because they want to be closer to the action or because they don't want to be near traffic. I'd say this building really isn't affected by those things, and anyone with a budget of $4500 or higher should check it out.

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NY landlords embrace 7-line extension to NJ - Crain's New York Business

It may seem like pie in the sky for now, but as things get under way, all those condo buyers on the far west side of the 40s are going to get a great amenity to boost their property values.

The same is true of the eventual beneficiaries (who may currently feel like victims!) of the 2nd Ave subway. Hang in there guys - Rome wasn't built in a day.

NY landlords embrace 7-line extension to NJ - Crain's New York Business

Homes Priced Too Low??

While the real estate markets across the country appear to be stagnant, two articles have highlighted the fact that in New York, and certain other local markets across the country, the markets are doing quite well.

The first article appears today in the New York Times on the front page. It's titled "Can't Sell Your Home? Maybe It's Priced Too Low". When I saw the headling on the print edition of the paper, I thought it was going to be some kind of critique on various pricing strategies. Instead, it turned out to be a broadly-focused (if that's possible) article on how highly-priced homes are selling very well, and still selling above asking prices in some cases, in New York, San Francisco, Seattle, and other areas where there are high concentrations of affluent people. It notably excepted Washington DC and San Diego from this trend (much to my mother's dismay - she's a real estate agent in Washington DC).

The article offers little explanation for this trend except that people who were already doing well for themselves seem to be doing better. I'm not sure if this is true, but I can't think of a better explanation. It stands to reason that someone who had enough money to have a lot of investments is probably going to be doing pretty well right now. In addition, the article mentions foreigners coming in and buying homes in areas where they may travel or work often, such as New York or San Francisco. It's hard to believe that a $3 million condo would look like a bargain, but if you make allowances for the exchange rates, taxes in their native countries, and the fact that certain countries put restrictions on foreign ownership of property, it starts to make more sense.

The second article appears in this month's edition of The Real Deal, the New York City real estate trade publication, titled "Residential Market Weak In the Middle", discusses the same trend in Manhattan. It appears that in addition to the typical high-end buying that continues to push average and median prices up in New York, lots of first-timers are jumping in feet first as well. So, you have lots of activity under $600,000, and lots over $5 million. What's in the middle? Most of the new construction condo price points. The larger choice there seems to be causing a little slack in the sales prices and timelines, but one look at another article "New Condo Filings Fall Off" suggests that in a year, this might not be the case. Apparently, attorney general applications for new offering plans have fallen by 50% (2800 units as opposed to nearly 5000 a year ago). What does this mean? It means that there is not as much competition coming online for the condo units that are currently on the market, or about to come on the market. In market-speak, Manhattan will be able to "absorb" the current units, and that may put us back where we were in terms of low inventory two or three years ago. Co-op units are already extraordinarily low - people who are not in the market for new construction have been facing bidding situations for several months now, since the beginning of the year.

Now, this doesn't mean we will get back to the hot hot market of 2004-2005. That was insane. For one thing, a lot of purchasing power rides on the interest rates and the economy. Interest rates popped up a bit a couple weeks ago (affecting a couple of my buyers in the $400K range), and that can affect the monthly payments buyers can afford. But overall, the New York market seems cautiously optimistic that values will hold for the near future, and that gives buyers enough confidence to go ahead with their life plans.

As always, please email me to discuss!