The below is part of an email response from a friend regarding my previous post:
“Who’s to say what’s realistic in this economy? Actual
sales in the next few months is the answer. However, it is a whole new
ballgame, and cash is king.
The problem with appraisals of residential real estate properties is
they it look backward when determining value. For example, all of the
appraisals at ***** (a certain mid-town development)are coming in on target because they are just
looking at the deals which have closed within the last two months–the
prices for those deals were set months ago. If they had the ability to
look into the future, it is my firm belief that they would be much
lower.”
My partial response today to my friend:
When a seller drops a price that is under what he paid for the unit – this is realistic & aggressive pricing. Yes, the buyer determines value for a subject property; but, only if the two parties have a meeting of the minds and a transfer of title/shares result.
Determining value right now:
According to the Appraisal Institute, one must always use 3 comparables that have closed within the last 6 months when determining value on a report. I have been using 3 months. We will have an issue 2nd/3rd quarter 2009 and even more so in 2010. This being said, the market cannot stop and we (brokers/buyers/sellers) need to push forward. There are plenty of “deals & steals” in Manhattan right now — but in general the majority of “newly listed” properties do not validate offers below 25% or more of the asking price.
Please know that this is not a self-serving philosophy. Even though I am in a capitalist profession fueled by commission -it is not about the money. It is about doing what is right for my clients while setting in motion a continual stream of fiscal measurement for the future. I have stated many times: Real estate is not a short-term investment. Yes, a few of us have been lucky with quick appreciation in Manhattan and other parts of the world; but, this method is not a durable approach to build one’s portfolio of assets–it should be a small part of the equation.
The current blight of desperation in Manhattan real estate is part economy and the other part is being stirred by the masses of buyers that are being influenced by the stories of distressed real estate in the United States. Unlike metro-areas that have the ability to build out into suburbia which significantly devalues real estate in a down economy: Manhattan is an island and there always has been a lack of land. I can write and advise with extreme conviction that Manhattan will rebound quicker than any other area and investing now is going to prove to be a very high return in five years. Additionally, looking forward to 2013, I believe Manhattan is going to experience a housing shortage and prices are going to soar within both the rental and sales arena (the current halt of new development projects is partially fueling this prediction).
