Dominos in Real Estate

 

Believe it or not,  I have not had a buyer purchase with a mortgage since 2006. This being stated, prior to that magical year I have been involved with hundreds of transactions that involved financing for properties – even those that were foreclosures and short sales. The later being the most difficult of experiences (on the agent side and the appraiser side).

I am embarrassed to write that I missed a very, VERY important ruling (in red below) that was put in motion by Fannie Mae on March 1:

“The government-backed mortgage-finance company stopped guaranteeing mortgages in condo buildings where fewer than 70% of the units have been sold, up from 51%. In addition, the company won’t back loans for sales in buildings where 15% of current owners are delinquent on association fees or where more than 10% of units are owned by a single-entity.”

 

Those words in red affect every condo buyer I have ever represented –even the cash buyers. 

Three days and 2 sleep deprived nights ago, I received a call from an owner I sold to in 2007 (cash purchase)…. 

 

Because of the current low interest rates, the owners thought they would take a mortgage on the 2007 unit and purchase another unit in NYC because the prices are pretty good right now.

 

Their phone call was to inform me that the lender would not lend on their unit because “one entity” owned 18.14% of the units in the building and there are too many rentals in the building. The subject building had been put on the “list” of buildings not to lend to —- the owners were not happy and wanted to back out of the other deal because of the “principle” of it all –NOT because they did not necessarily have the cash to follow-through on the new apartment.

I have to say, I understood their perspective. Most of us feel that if you dump cash into real estate you are going to be able to draw on it in the future – right? Not the case anymore…it is a new time in the United States with a lot of change that concerns all of us on some level.

 

I was told by executive leaders in the NYC real estate community, multiple loan officers and other highly experienced brokers: “it is what it is-nothing can be done.”

 

Guess what? I said, No, it cannot be and I started getting to work. I am not going to get into all of the tedious things I had to do or all of the individuals I had to “push” to help me retrieve the info I needed; but, I got the building off the “list”.  

 

My entire life I have had (some) issues with simply not accepting: “it is just the way it is – let is rest.” At times it has been my demise…

I do not know why I am so compelled to say “No, there must be a way.” I guess if I have not had some success with converting the “nothing can be done” to something has been done (but, differently), I would not be the fighter that I am. The “believer” that everything IS possible…

Maybe, we are so accepting of the “nothing can be done” mentality because we are not ready to see that it CAN be done.

 

 

Dominos may fall; but, the real game does get started until they are down.

War & Peace: NYC 1Q09 Market Reports

The 1Q09 Market Reports were released last week. Of course each one of them varied:

 

Halstead -The Report

Prudential Douglas Elliman-The Report

Corcoran-The Report 

 

As well as the Media’s interpretation of them.

A recent example:

Housing bust hits Manhattan(with a sub-title: Prices still rising in Manhattan real estate) CNN/MONEY

Honestly, no wonder buyers and sellers are in a state of confusion!

The one thing that really disturbs me is the % basis experts, brokers, and the media throw out there…20% below prime; 40% current list price; etc.

 

 

The fact of the matter is that all apartments; each neighborhood; and every seller has a different story and price-point.  There is no secret percentage.  Some apartments are priced well from the beginning-some are not; some neighborhoods have a greater demand; some sellers are desperate-some are not….To say units should be trading at 40% below list price is just out right foolish methodology for me to communicate to my clients. Mainly, because there is not enough data that has been specifically scrubbed and brokers really need to dig deep for the actual pricing. How can one truly take heed to media reports of condos that include those on East 87th (a walk-up building) all the way down to Walker Street (a full service building)? To me, that is like comparing General Motors with General Mills.

 

 

I have stated many times to my buyers (and sellers): 

“Every apartment has a different story.”  Throwing an average percentage out there is just a lazy broker to me —One that reads the media head-lines as if they are Cliff Notes. One thing that all those years working in a depressed market (such as Cleveland) taught me was to do my homework as if I was tackling a novel by Tolstoy.

When a buyer is serious: I pull the original deed, I pull the recorded mortgages, I pull the closed comps and in this 2009 market those comps also need to be blended with the current list prices…and, yes, I ask a lot of questions.

 

 

Pricing real estate is an element of  history, a measurement of now, a fraction of need and component of balanced consideration…Not an average overall %.

 

 

“What is Your Personal Stimulus Plan?”

This late afternoon I took acute notice to a proposed question:

“What is your personal Stimulus Plan*?”.

I smiled as a response.

For the simple reason, that I have always believed that I am the mastermind behind all of my success and malfunctions on this journey called, life. I did not have to wait for a recession to re-evaluate my circumstances; I do not cast blame on others or even desire the government to offer Kensyian-like means to bail me out.

I indeed have a personal Stimulus Plan: written in the form of goals with deadlines. I simply call it, my Life Plan. It is by no means a masterful entrepreneurial manual wrapped with the fiscal prophecy of quick success; but one swathed with small goals quilted with even larger goals that will take many, many years to achieve. With the thread being all of my personal values.

Peculiar it is to me that individuals wait for others to determine their fate. Currently, I am surrounded by a chorus of citizens singing the parts of real estate buyers that are waiting for the market to fall further. I must say, it is time for this Requiem to fade…it is time to step up to the stage and be a soloist.

Housing prices will fall further; but, at the bottom there will be a new found fear…panic to buy. Once the economists with the media announce the “bottom is here” or even the real estate market is picking up the beat: all of self professed “bottom feeders” are going to rise to the surface and the bidding wars will begin (again). Many of the choristers will miss the opportunity of that “great deal”. The time to find that deal is now; in the art form of diva-like negotiation; but, with reasoning– by that soloist buyer. That buyer that knows the real fiscal return in the purchase arrives at their doorstep in many years.

One of my goals in my Life Plan: I will have a MIT and Harvard education saved for each of my children by the time I am 44 (the age they will be in college). Many of my friends ask, “How are you going to accomplish this as a single mother in less than a decade and as a broker??!”.

I always answer: “I am buying a studio apartment in Manhattan in 2009; two in 2010; etc. Then I will sell the first after owning 8 years (and so on), pay for their education (in full) and finally, buy my own personal residence that also will be large enough to fill all of my cherished books!”

As a first generation American (maternal side), I am a witness that owning real estate builds wealth. My grandparents’ case: owning 38 pieces of real estate…slowly, as if sewing a beautiful quilt full of will and prosperity..

Maybe, it is one reason I am drawn to downtown Manhattan…the view of Ellis Island is a remembrance of the near penniless arrival of my grandmother holding my mother as they entered America…

I am not writing this night as a helpless artist painting with words; but, as a real estate advisor with a conviction that this time of fear shall pass, bringing a resurrection of affluence to those that choose to act now. 

 

 

 

 

“A pessimist sees the difficulty in every opportunity. An optimist sees the opportunity in every difficulty” - Winston Churchill 

*Question from Wells Fargo’s Seminar: Meeting The Market Challenge in 2009