I decided to catch-up on my WSJ reading today during my lunch hour reprieve. In return, I got a bit fired up with the many comments I was reading regarding NYC real estate. Where are all of these fortune tellers coming from? I simply cannot stand when people post comments as “anonymous” or with a fictionist name. If you have something worth saying – say it with conviction and use your real name! Ok, I guess I am getting off track of the subject with this personal annoyance…
So, as an individual that has no fear of voicing my opinion (even if I may appear to be a fool to some!), I had to respond to some of the comments:
1:24pm
“I am by no means an economist; I am a real estate broker (yes, I know I have opened myself up for attack by admitting this).
Over the years I have disagreed with the masses in my profession that the housing bubble would never hit Manhattan real estate. Furthermore, I noticed the signs spring 2007 and voiced it many times on my blog. Trades involving sales were down and the rental market was not as “hot” as years previous. I have always felt that the NYC rental market foretells the sales market. This being stated, the “experts” in NYC during 2007 were only focused the on price per sq ft and not that the number of closed units were fewer than in 2006.
Now that Manhattan has been hit, I feel that an estimation of Manhattan’s future housing market needs to be explained by this Broker.
Have we witnessed the bottom in NYC – no.
But, Manhattan real estate is not going to be consumed by the mass devastation felt by the rest of the country.
THEORY:
The national housing crisis as we all know was lit in 2001 by many factors: an increase in the supply of check book money capital while making it possible to for banks to operate with lower reserves; HUD reduced lending standards- borrowers did not have to provide documentation to obtain a loan and with borrowers that fell under the reduced lending standards of HUD; etc.
Unlike the rest of the US where one can purchase (and close) a property in 15-30 days, Manhattan has an anchor unlike the rest of the country. That Anchor is known as the condo & co-op board.
Boards carried the “due diligence” that was not performed by the lenders: Resulting in a buyer being turned down by the said board if one did not meet financial standards.
Examples of standards:
To purchase an apartment in NYC one IS required to pay cash or obtain a mortgage. 100% financing was never an option here – the minimum has been 10% over that past years; a purchaser is required to submit tax returns (avg. 3-5 years); verification of financial assets along with additional supporting documentation.
Another note: the consumption of home equity loans that now have many homeowners in a negative equity situation has not been a factor in NYC. The criterion to obtain such a loan had a different set of rules (and transfer taxes that also intervened).
*Where the housing crisis may play a big part in NYC: New developments. The only requirement to purchase in a new development is to provide a 10-15% down payment without further financial verification outside of the lender. Time will tell with these new development buyers.
My message to BUYERS in NYC (as mentioned in November):
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 will always be 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 along with an increase of corporate relocation).”
