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Is there another real estate bubble? I am reading and hearing this question all around me. While it is certainly true that, in the last few months, the market has grown extremely hot in certain areas, the differences between what is happening today and what happened six years ago are substantial. While no one can predict the future, my sense is that neither the national nor the local New York markets are in a bubble, although it certainly can feel like one if you are a buyer competing against seven others for a two bedroom apartment on Third Avenue or a house in Fort Greene. Here is my thinking:
The economy is expanding gradually. There is no talk of a “new paradigm” or a “new economy” in which unlimited expansion is possible. Improvement is cyclical, and real economic growth continues to be slow. Part of the interest in real estate actually hearkens back to one of its fundamental benefits: bricks and mortar. In spite of the stock market’s precipitous rise, most people are still fundamentally cautious about their longer term future. In such an environment, hard assets like real estate have a particular appeal.
Inventory in Manhattan and Brooklyn is at a historic low. Over the decades of the 20th century, America became increasingly urbanized. Jobs and quality of life both drew more and more people into cities. New York has always been a particular magnet for transplants from around the country and around the world. Because of the recession, and changes in tax treatment for new development, few buildings were begun over the last five years (although there is certainly more of a mini-boom in building today). So we are a city with an expanding population and a relative paucity of newly constructed places to live. Add to that the changes in the capital gains tax laws enacted in the beginning of this year, dis-incentivizing long time owners from selling their highly appreciated homes, and you have a perfect storm of scarcity. As people become more accustomed to the new tax laws, and as more mid-range properties reach the marketplace, I believe much of the urgency will become tempered and a more balanced market will resume.
There are three different market dynamics in the New York real estate scene, and each is created by differing realities of supply and demand. They are the internationally driven high-end new condominium market, the market for older co-ops and condominiums priced below about $5 million, and the higher end co-op market. Each of these is behaving quite distinctly.
1. The high end new condominium market continues to set records, albeit at price levels considerably lower than the world’s other most international cities such as London, Paris, and Hong Kong. The U.S. remains a safe haven into which flight capital continues to flow. I don’t foresee major changes in this dynamic in the years ahead.
2. Lack of inventory continues to drive the market for properties under $5 million. The two-bedroom markets in both Manhattan and Brooklyn remain the most competitive, particularly for units costing less than $1.5 million or those in mint condition. Affluent singles, young couples, and empty nesters returning to the city all vie for these properties. As one gets to the upper end of this market segment, condition and location become increasingly significant factors. It is actually still possible to pick up excellent buys on beautiful six and seven room apartments if they need work and lie outside conventional neighborhood boundaries.
3. The higher end co-op market is uneven. While park views and top addresses continue to draw buyers, this market shows price sensitivity not at all characteristic of its counterpart in 2007. There is no longer an army of mid-level investment bankers flush with bonus cash snapping these units up. The buyers of today, whatever the origin of their funds pay close attention to relative value. Many of these units, if not correctly prices, linger for months on the market.
Finally, a market which is driven from the bottom up feels healthier to me than which is driven from the top down. Young professionals all over the city, from the Upper West Side to Prospect Heights to Long Island City, are investing in homes and making a long term commitment to New York. They are, for the most part, fiscally cautious. They qualify for financing in today’s much more restrictive mortgage environment (or they get help from the Bank of Mom and Dad), they send their kids (when they have them) to local public schools in which they become activist parents, and they build their neighborhoods with like-minded colleagues. Today’s buyers in the critical $1 million to $3 million dollar marketplace are generally not investors. They are not looking for a quick profit. Their purchases reflect not froth, not a fantasy of real estate as a get-rich-quick vehicle, but a decision to participate in and continually re-activate New York as a series of vibrant, inclusive, multi-generational communities.
You can read more on www.warburgrealty.com/blog.
Courtesy of Abigail Jennings of Lake Norman Realty
The Lake Norman real estate market really roared in April, with buyers snapping up inventory faster than agents could put up signs. New contracts were up 44% for this April versus last April. Inventory remains in short supply, even with more new listings added this April than in the same month last year. But a higher sales volume doesn't necessarily translate into prices being up significantly for Lake Norman sellers. Despite gains in median home prices nationally and the Charlotte region, median prices specific to the Lake Norman area for residential properties have remained close to flat month over month, year over year, and in all price ranges for the past three years. However, although median prices have remained somewhat flat for single-family homes over recent years, when compared to 2004, we're up 19%!
*all data compiled from CMLS for Area 13, Lake Norman
Courtesy of Summit Sotheby's International Realty
Here is a quick snapshot of what is happening in the Park City real estate market:
Compared to the first quarter of 2012-
- Number of sales is up 17%.
- Sales dollar volume is up 28%.
- Best first quarter since 2007.
- Lowest inventory since 2006.
- 21% decrease in listings.
- Distressed properties (foreclosures and short sales) make up only 3% of active listings and accounted for 13% of sales compared to 13% of sales in the first quarter of 2012.
- Single family homes sales increased 18%.
- Median sale price of single family homes rose 30% to $619,500. Median home price within Park City limits was up 12%.
- Condominium sales decreased 3%.
- Median sales price of condominiums rose 22% to $334,128.
- Vacant land sales increased 45%. Median lot price dropped, but this decrease in price is not expected to last due to inventory constraints.
With interest rates at historical lows, today’s home buyer has 43% more purchasing power than they did in 2006, as reported by Rick Klein of Wells Fargo Home Mortgage.
If you are interested in learning more about a specific neighborhood or subdivision, please contact me at 435-901-0659 or email@example.com.
In my first quarter market report a few weeks ago, I noted the almost unprecedented lack of inventory in the Manhattan and Brooklyn real estate markets, and the havoc that shortage has been wreaking in the lives of buyers in particular. In the April 22 issue of New York Magazine, Jhoanna Robledo’s “Intelligencer” article reports on the same phenomenon. (To read my report and Jhoanna’s article, see links below.) She notes, accurately, that high six and low seven figure two bedroom apartments from Fort Greene to Bed-Stuy to the Upper West Side all attract vast crowds and command multiple offers, often above the asking price. What Jhoanna does not write about, however, is those areas of the market which are NOT so hot. Increasingly we agents see a market segmented by price and location, but not in the way most buyers and sellers might anticipate.
Michael Vargas, the head of Vanderbilt Appraisal Company, recently circulated a most interesting chart about Manhattan inventory absorption rates for the first quarter of 2013.
The absorption rate is determined by taking the average number of units closing per month (today in Manhattan it is about 900) and dividing that into the total number of units on the market (today that is about 4600.) That means you have just a little more than five months’ worth of inventory currently available. In most markets six to eight months is considered equilibrium, so there is no question but that, as Jhoanna points out and any real estate agent in New York or Brooklyn can tell you, demand exceeds supply.
The chart becomes interesting, however, when you look at the different price points. As you can see, demand exceeds supply all the way from 0 to $3 million dollars. This gibes precisely with what we are seeing in the marketplace. In particular, the 2 bedroom apartment market all over Manhattan and brownstone Brooklyn is on fire. Fifty buyers are lined up at the entrance to a building waiting for an Open House to begin. Offers pour in after only a couple of days on the market. And the same holds true for the less expensive three bedroom units. We have had several of these on the market in the past few weeks: pretty, modestly sized at 2000 square feet or less, available for under $3,500,000, which also generated a frenzy of activity.
But then something interesting happens. At $3 to $6 million, demand and supply are pretty much in equilibrium. What we see in the marketplace gives some color to this statistic: The top prewar apartments in this price point remain very much in demand, assuming the pricing is not too crazy. But if you head too far east, or too far north on the Upper East Side, suddenly there is inventory hanging around which seems reasonably priced but just does not move. This category of buyer, it seems, does not have too much location flexibility at these prices.
At $6 to $10 million, there is a fourteen month supply. One interesting fact: the higher you get in price, the clearer the divide becomes between the co-op and condo markets. Condo buyers, those from overseas in particular, do not seem to balk at the enormous numbers they are paying for the newest, snappiest condominiums. So that inventory continues to move quite briskly. At the same time, similarly priced co-ops often languish on the market; sellers often base their price expectations on condo sales but the co-op buyer, usually a local and almost always an American individual, tends to be more careful with her money. Thus many of the very highly priced units, especially those needing renovation, sit for months. So it is that the top price category in the Vargas report, $10 million and up, shows inventory supply of just under 20 months. It’s not that there are not buyers out there for these units. They just don’t want to pay what the sellers want.
I recently had lunch with a colleague who is a top agent at another firm. He tends to represent only the snappiest properties, and he was lamenting to me the fact that no one is coming to see or bid on them. To me it did not seem so surprising. They are big, they are by his admission a little overpriced, and they need some updating. I joked with him that if he could carve each of them up into a few two bedrooms units priced at $1,595,000 he could probably get 12 bids on each in the space of 72 hours. Empty nesters, young families, pied-a-terre purchasers, single professionals – they all seem to want two bedroom units. And there are just not enough to go around.
There is an adage in Park City that when the snow melts the “For Sale” signs sprout. This is generally true, but this year seems to be different than most, due to a lack of inventory and an increase in buyer demand.
The first quarter of 2013 we closed 94 single family homes in Park City and the Snyderville Basin, compared to 78 during the same period in 2012. What makes this statistic especially interesting is that while demand was up 21%, inventory was down 26%.
Rising demand means sellers are able to command more favorable prices and terms for the sale of their homes and, when priced right, their home is likely to sell faster than in years past.
I’ve been speaking with many people lately who are thinking of upsizing, downsizing or relocating. My advice is that if you are thinking of selling your home, list it now, while the demand is high and the competition is low.
Looking back over the first quarter of 2013, the real estate recession seems a distant memory. Prices have escalated to near, at, and even above their 2007/2008 highs, and demand relentlessly outstrips supply all over town. It is hard to imagine that, only four years ago, buyers were sitting on the sidelines, agents could not move the inventory we had on the books unless we aggressively reduced prices (usually anywhere from 25% to 40% below the high only a year earlier) and extraordinary deals were available to those with the fortitude to act. Ironically, many of those buyers who for years had claimed they were awaiting a drop in prices were themselves too apprehensive about the future to act when the opportunity DID present itself. It compelled many buyers to re-assess their willingness to really BE contrarian rather than simply claiming to be so. For most of us, doing what others are doing feels a lot more comfortable, even when we have to pay for the privilege.
There are few such opportunities in 2013. Nonetheless, today everyone with money wants to participate in our real estate market. Foreigners, be they from Russia, South America, or the Euro zone, continue to be drawn to the relative stability of New York and our bargain pricing compared to other international cities. They particularly like the luxurious Midtown condos: old favorites like 15 CPW and the Plaza now vying with newer additions such as One FiftySeven, 452 Park Avenue, and the Carleton House. Further uptown, the elegant new building at 135 East 79th, an updated version of the glamorous prewar buildings which surround it, sold out – with the exception of the penthouse – in a matter of months. And at the Macklowe conversions at 737 Park Avenue and 150 East 72nd, trading is brisk.
In the high end co-op market pricing remains the key. Since the post-2009 fade-out of the investment banker as our primary customer, a diverse group of careful, value-driven purchasers have inhabited this marketplace. They do their homework, and being mostly local people (as co-op buyers usually are) they are highly conscious of recent prices and how they vary from building to building. And often those willing to overpay are not acceptable to these highly demanding Boards.
The weakest marketplace in Manhattan remains smaller apartments east of Third between 96th and 23rd Streets. There is no inventory shortage in the studio and one bedroom marketplace, and prices remain somewhat depressed in response to the excess. But move into the two bedroom arena and suddenly everything is different. Two bedroom open houses have been mobbed with 40, 50, 60 visitors on a Sunday afternoon, followed within 24 hours by multiple offers and competitive bidding. The same remains true with reasonably priced larger apartments: one of my agents told me today that her mint condition, but small, seven room duplex exclusive received 100 visitors at this past Sunday’s open house. When buyers sense value, especially in desirable areas, they descend like locusts.
Only a few years ago the Harlem market looked to be oversaturated with new condos, many of which were converted to rental by developers eager to generate some income from these empty, seemingly unsalable properties. In the last 18 months West Harlem has done a complete about face. All those condominium units, and more besides, have been snapped up, leaving a shortage of inventory and escalating prices where buyers could still take their pick in 2010 and 2011.
Brooklyn seems the most frantic market of all. In Williamsburg, Park Slope, Prospect Heights, Fort Greene and Windsor Terrace, virtually everything with a somewhat reasonable price tag receives bids from a minimum of five people within days of appearing on the market. It is not uncommon to speak to buyers who have been outbid five or six times in their search for property, leading them to either drop out and rent or aggressively offer 10 or 15% over the asking price after one quick visit. These are the realities of today’s marketplace.
Barring unforeseen events, I predict that the balance of 2013 will offer more of the same. There are few signs of abatement in either buyer interest or inventory shortage. Depending on how much the rental market eases (and there has been a bit of easing in the first quarter), the small apartment market will either limp along (if the vacancy rate does not drop again) or firm up if buying once again becomes a better alternative than renting for younger people. Throughout the market the interest rate environment will continue to motivate buyers who know that these historic lows will likely soon disappear as the economy continues to improve. And asking price increases, which have been modest during the last three months even as competitive bidding has driven sales prices up, are becoming commonplace. A property which receives a Board turndown at price A will now come back to the market at A plus 10%, and often obtain that new price, or more! It’s a brave new world, again.
For up to the minute information, please visit the Warburg Blog.
The first-quarter overview of Lake Norman's real estate market shows a much higher growth pattern than the modest 2-10% increase economists predicted for 2013. Though it remains to be seen how housing will perform in the next three quarters and in total for 2013, we're off to a very nice start with a 35% increase in closed home sales for Lake Norman. Pending Sales, the "behind-the-scenes" indicator of what our housing market will do in the near future, are up tremendously as well: 70% over 2012's first quarter. Although not all of these pending sales will close, this rate indicates continued high numbers of closings through the next quarter of 2013.
This surge in market activity should allow Lake Norman homeowners to breathe a collective sigh of relief. But some caution is warranted as well. The question on the horizon lingers, "is this growth sustainable, or is it the origins of a new bubble in the making?" Hopefully, the growth will steady itself this year to provide us all with closing levels that can logically continue the course of a strong recovery.
*all data compiled from CMLS
Courtesy of The Dawn Thomas Team
Today we share with you an article that senior vice president and managing officer of Intero, Alain Pinel wrote entitled The Old World vs. The New World, speaking to where the wealthy are now buying homes – out with the old in with the new! In the old days if you were given the opportunity to live anywhere – with money being no object – the majority of people would pick London, New York, Paris. But that is the old guard, and the new is Dubai, Singapore and Sao Paulo – an exciting new world!
“Let’s say you have $20 million in liquid assets and plenty more in various investments. You are doing alright. You can pretty much buy whatever home you want, whether as a primary residence, a weekend pied-a-terre, a vacation pad, or just another gem of a property that you cannot live without. For the same reason that you can buy whatever you like, you can buy it anywhere you want, regardless where you work – if you still do. The world has never been more open and inviting.
So, if you were to lay a world map flat on the kitchen table, what dot would you fancy as a continent, as a country, as a town, as a district… that you may wish to call Home? Money is no object. Trophy properties, all over the world, are now very similar in price, precisely because big money and communication no longer have frontiers. Gee, it’s a hard choice, so many temptations, and even with considerable means, you cannot buy them all.”
To read the full article visit the Intero Insider blog here.
The Dawn Thomas Team is an award-winning Real Estate Agent team at Intero Real Estate Services in Los Altos 650-701-7822. We help nice people with selling and buying homes from Palo Alto to West San Jose!
In 1980 there was no such thing, as far as I knew, as a personal brand. There was, for that matter, nothing much known as marketing, at least in residential real estate. What we did was advertise. We got a listing, and we advertised it in the Sunday New York Times classified section. A number of other people probably also had the listing, and the chances were good they were advertising it too. There were no exclusives in those days. Hopefully, people called you on these ads, and you were able to sell them an apartment. Probably not the apartment they had called you about, more likely another apartment.
The classified real estate ads in the Sunday Times went on for page after page. The major firms vied for placement. I remember the pride I felt on the weeks that L.B.Kaye, the firm for which I worked as an agent at that time, had three full columns of ads and appeared at the head of the Sunday section. And on Mondays, we would huddle together in the office, comparing the ads we had circled: we tended to circle anything we did not recognize. Then we would try to use the language in the ad to decipher a location, and use our knowledge of layouts to narrow down the possibilities of what it could be. Then, once we had some idea, one of us would head out to canvass the doormen of the likely buildings; usually, with the exchange of a five or a ten, one could get the information about the owner, whom we would contact to get the listing for our company.
Then the world changed. The advent of exclusives completely changed the ad process: only one firm had the right to advertise the property. And since they were likely co-broking it with us, we did not have to figure out what it was. More information fell into our laps. As the Internet developed in the 90s, buyers began little by little to do their own searches and figure out what listings they might be interested in on their own. So even MORE information fell into our laps. As this evolution took place, the notion of advertising, in the sense of classifieds and display ads in the New York Times Magazine, or Quest, or Avenue, also changed. Many in our industry clung to the classifieds for years after their usefulness had clearly waned, but in the end even the die-hards had to admit that really, our business was no longer about advertising listings. Buyers had begun to find listings on their own, doing their own searches, refining their own criteria. We had entered the age of marketing. And what is it we are marketing? To some degree, it is still the listings, but I think that, more then ever, we are marketing our firms and ourselves. In other words, a brand.
Marketing a brand is very different from advertising a listing. Although both depend on creating an impression of uniqueness, the latter tends to rely on formulaic descriptions of qualities and benefits, long on adjectives, adverbs, and brand names. “Stunning”, “spacious”, “bright”, “mint”, “Viking”, “Sub Zero” –you get the picture! But creating a brand – either for a firm or a person – requires some thought. How do you want the entity perceived? Do you want to be cutting edge or traditional? Is integrity an important part of the image, or do you simply want to make sure everyone knows you are the 800 lb. gorilla? And once you determine the parameters of your desired perception, how best to do outreach to make it stick? Mailings? If so, what’s the message? A basic tenet of mailings is that in order to be successful they require a call to action? What will it be? Are you going to promote your personal brand on Facebook? If so, how will you curate it, given that too much personal information feels inappropriate, but too much business information tends to be a turn off. How do you build up a Twitter following? What Linked In groups should you join?
A fascinating part of the new marketing/branding culture is that it is additive. Warburg agents still have to write ad copy about their exclusives, even though now it goes onto the web or our full page ads rather than into the classifieds. We need personal profiles on our webpages. We need to do personal brand building on the social media sites. Mailings with a branding message are still popular, especially for those agents who do a lot of work in a particular neighborhood or group of buildings. Some of us even blog, week after week, year after year!
This is how the change looks to me: thirty years ago, we advertised for the purpose of selling apartments. We knew where (The Times), we knew when (Sunday), and we knew how. Today, we market for the purpose of selling ourselves. And the options are endless.
You can read more on www.warburgrealty.com/blog.
Recently one of my newer agents commented to me that she had no idea making it as a residential real estate agent would be so hard. It often takes a year, sometimes closer to two, before agents start making sales deals. Some never really get started. Because there is a low bar for entry (getting a real estate license is almost embarrassingly easy in New York State) people seem to imagine that there is also a low bar for success. Nothing could be further from the truth.
At the time I entered the business, residential real estate agency was primarily a woman’s business, as commercial was primarily a man’s business. Nonetheless, the successful residential agents of the generation above mine, at least here in Manhattan, were smart, tough, and unsentimental. Being successful businesswomen in their generation had made them more relentless as agents; most of them had to fight so hard to be successful that they had adopted many of the male traits associated at that time with major earning power: ruthlessness, competitiveness, and acute ambition. Within our “women’s business”, the most successful women were often aping masculine traits in order to make a name for themselves.
Over the years, the situation has changed. In our industry, as in most others, there has been a growing awareness of the value of emotional intelligence. Society increasingly rewards sensitivity mixed with strength. Being thoughtful or considerate in professional situations is no longer seen as a sign of weakness. Interestingly, this has taken place even as more young men enter the residential sales business as a first career. Both sexes have benefited from the change towards a more feminized version of professional behavior. And today, it is not just women who value the flexibility of an independent contractor’s life. New agents increasingly understand that, while you can make your own hours, no one succeeds in the New York market who regards brokerage as a part time job. Flexible time simply means that we are working or on call ALL the time.
When I entered the business in 1980 the prevailing image of the New York residential real estate agent was still a woman in mink who unlocked a few doors, then collected a large check. While that has never been an accurate view of our business, it has taken time for the stereotype to die. Now (I hope) that image is on the wane. Today’s successful agents are well informed, strategic, hungry for knowledge, driven, and client-centered. They must be closers, direct and firm, while always remembering that ours is a service business. They are collegial in their relationships with peers and helpful to, not threatened by, the next generation of up and comers.
Who is attracted to brokerage, and why, has changed substantially since I first entered the business (believing I could do it part time) years ago. Today, liberated by technology, people in every walk of life are increasingly interested in flex time and the ability to work from non-office locations. Real estate has always offered the benefits of mobility, excitement, and flexibility. But, as I tell every aspiring agent who comes to me for advice, those benefits come at a price. You have to create your own business every day, every month, every year. Most people can’t do it; this is an extremely difficult career in which to achieve real success.
On the DISC personality assessment we administer to our interviewees, we have learned that high D (Dominance) and I (Influencer) scores tend to be the best predictors of brokerage success. That seems to me to be the perfect pairing of traditionally masculine and feminine traits. You have to be both tough and gentle to make it in the brokerage industry.
You can read more on www.warburgrealty.com/blog.
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