Watch a video of three NYC real estate professionals, including Sofia Song of StreetEasy, analyzing the latest Manhattan market reports.
According to a report released by Core Logic this week, national single family housing prices have declined on a year-over-year basis – but not in New York City. Here, we experienced a 2.2% increase in prices from 9/10 – 9/11. That increase reflected the effect of distressed sales on the marketplace. With those sales excluded from the data, NYC posted a 2.9& year-over-year increase.
Nationwide, prices were down 4.1%. That number reflects the persistent distress that has beset many markets. Short sales and REO sales tend to weight the market down. Had those been excluded, the national market was only down 1.1%. This seems to suggest that the nation has largely reached the bottom of the market but many areas are still bouncing along it with little hope of appreciation in the near term.
Washington D.C. was the only other major market to post price increases (1%).
Yesterday New York City’s Rent Guidelines Board agreed to an increase in rates for lessors of all apartments in New York that are rent stabilized. The approved changes would raise the limit on rent hikes to 3.75 percent on one-year leases and 7.25 percent on two-year leases.
The vote comes after the state agreed, at the last minute, to extend current statewide rent regulations until new laws can be agreed upon. As with the controversy upstate, city tenants have taken issue with the steady rent increases. Joe Strasburg, chairman of the Rent Stabilization Association, told the New York Post that the decision was yet another step towards the elimination of affordable housing in New York.
The meeting, held at Cooper Union, was fraught with tension as tenants voiced their anger at the Rent Guidelines Board. Protests were held outside of Cooper Union as tenants objected to what they see as landlord greed. New York’s rent-stabilized apartments are viewed as the last refuge for affordable housing in a city that is getting progressively more expensive.
Jesse Duperon, a 51-year-old East Village resident, told the New York Daily News that the decision was “economic injustice.” She added, “They’re chasing us out of our own city.”
The board decision is the latest increase for rentals in New York. Last October, rent hike limits on New York apartments increased to 2.25 percent for one-year leases and 4.25 percent for two-year leases.
Trulia has released a new tool that allows consumers to check a number of interesting data points in any zip code they are interested in. The tool displays the average listing price, the average number of days listings were on the market before a price reduction, the average amount of the price reduction, and the probability of a second price reduction before the property sells. The data was culled from all active, non-foreclosure listings on the market between March 31st 2010 and March 31st 2011.
The 10014 zip code (the West Village) showed average listing prices of $2.9mil, 93 days on the market before a price reduction, an average reduction of 5%, and a 34% chance of a second price reduction. This type of data can help sellers and their brokers decide when to consider making price adjustments with their listing and can assist buyers in determining if a listing that has been marketed for a while should be visited by the price chopper.
Historically, the U.S. housing market has lead the country out of recession. But that has not happened during the Great Recession of recent years. In an interview with CNBC (video below) Jonathan Miller, CEO of Miller Samuel Inc., said the housing market “will be one step behind the economy” because tight credit conditions related to legacy lending conditions are preventing consumers from taking advantage of market opportunities. He did point to a few bright spots with relatively strong markets such as Manhattan and metro D.C. That being said, we should not expect to see substantial price increases in Manhattan either. In a different interview, Mr. Miller said of the local market, “We’re not seeing prices rise very much . . . 2011 will be rather boring.”
There is a common refrain amongst long-time Manhattan brokers and investors. When it comes to real estate downturns geographically wide in scope, “Manhattan tends to be the last in and the first out.” Back in late 2005, early 2006 I was selling some investment property that I owned in Orange County, CA. The market had already begun to shift. It was if we were on the edge of a cliff and you could hear the wind racing down its face. The crash there was just around the corner. When I reinvested those funds in the Manhattan market not long thereafter, it was still going strong in the face of mounting pressures in states such as California, Florida, Arizona, and Nevada. As is typical of a bubble, the popular refrain was “but it’s different here.” And it was . . . for a while. It would be another two years, during the summer before the Lehman Bros. collapse in 2008, that Manhattan begun to feel the sting of the Great Recession that had begun. That downturn would last approximately two and a half years in the city and force residential equity holders to take as much as a 20% haircut.
As the saying goes, Manhattan is historically not only the last to enter the downturn, but the first to recover from it, and that is exactly what is happening now. According to an article in Crain’s this week, “it is clear that a turning point has been reached and that higher prices are sticking.” There is ample anecdotal evidence of sellers, including sponsors, testing the water with higher prices. I saw my first sign of the recovery back in May, almost ten months ago, and long before a trend could be called. A buyer my team represented made an offer about 10% below the $1.1 million asking price of a Central Park West condo. Not only were there multiple offers outbidding our client, but the property sold for almost $200k above the asking price. Now don’t get me wrong, I am not suggesting that we should expect bidding wars or dramatically increased prices anytime soon. I would suggest that we can expect to see increased competition over the inventory that is properly priced and in the more desirable neighborhoods. I would also suggest that the trend of the “sideways market” that started developing in 4Q 2010 will continue in many neighborhoods.
According to StreetEasy.com, 330 Manhattan listings have increased their asking price in the last 60 days. As we proceed through the spring selling season, expect sellers new to the market or returning after a significant break in active marketing, to test higher prices out of the gate. Expect sponsors with existing projects to flirt with higher prices, especially as their percentage sold rates creep higher. Because there has been little new construction coming to market, sponsors with quality inventory left over from the last building boom will benefit from the new market and they will do everything they can to take advantage of it.
P.S. 41 is a public elementary school that serves the West Village community. It has approximately 757 students in grades kindergarten through 5th and according GreatSchools.org, “it is one of the few public elementary schools to receive in New York a distinguished GreatSchools Rating of 10 out of 10.” The facility is located at 116 West 11th Street between Sixth and Seventh Ave. a few blocks from the 1, 2, and 3 trains. Its zone map includes all of the West Village, and some of southern Chelsea, Greenwich Village, Hudson Square, and SoHo.
So what will a budget of $1,500,000 get you if you are searching for an apartment in the
P.S. 41 area? Let’s have a look:
There is currently a two bedroom, two bath co-op on the market at 165 Christopher Street for $1.285mil. It’s in a doorman building with central laundry, it has been meticulously renovated, and it boasts city views. The monthly maintenance is $1,437 (which includes your property taxes).
Next, we have a gorgeous two bedroom loft with one bath listed for $1.345mil at 380 West 12th Street. It’s in a doorman co-op building with monthly maintenance of $1,685. The apartment has 11’ ceilings, a washer and dryer, and a 220 square foot covered terrace.
Lastly, there is a two bedroom, two bath condo available at 222 West 14th Street for $1.35mil. The apartment is in a doorman building with laundry and a gym and has monthly common charges and property tax totaling $1,855. The eleventh floor apartment has been tastefully renovated and has a private terrace.
There are currently 200 listings on the market in the West Village with a median price of $995,000 and a median price per square foot of $1,325. The three listings discussed above are the only two bedrooms currently available for less than $1.5mil in the neighborhood.
For more information about P.S. 41, start by checking out the Parent Teacher Association’s blog.
A review of data from Q4 2010* recently released in a report by Core Logic, suggests that the New York market has escaped much of the malaise that burdens the rest of the nation. Of great significance are the incredibly low number of property owners with negativeequity (aka “upside down” owners) and the absolutely extraordinary percentage of equity enjoyed collectively by homeowners. Here are a few interesting facts:
- New York has the third lowest percentage of homeowners with negative equity at 7.1% of all properties with mortgages
- The average loan-to-value (LTV) for residential property in the state of New York is 50. That means that the value of the loan amount is equal to 50% of the value of the property. Put another way, the average homeowner has 50% equity. That’s stronger than any other state in the country.
- New Yorker’s have the second largest total dollar value of homeowner equity, behind California, at $412,733,541,105.
- New York state has the second largest total dollar value of residential property, behind California, at $827,178,503,181.
Of course there is a direct correlation between the percentage of homeowners suffering from negative equity and foreclosure rates. Once an owner realizes that there they owe more on the mortgage than the property is worth, their incentive to continue servicing the debt is lowered. This is, in part, why New York has not suffered under the foreclosure crisis as many states have. In New York City, most analysts have attributed this blessing to the stringent co-op board requirements in a large percentage of buildings that require sizable down payments. Because the foreclosure rate in New York has remained relatively low, the market was able to establish equilibrium amongst buyers and sellers much more quickly than if it had been burdened by a never ending flow of distressed sales.
*The Core Logic report only included residential properties with a mortgage.
According to an article in Crain’s this afternoon, the Manhattan rental market is back to the pre-crash days when it comes to rising rents, decreasing inventory, and torrid demand. Only 16% of all Manhattan transactions in February included any landlord concessions (e.g.free rent or payment of the broker’s fee). In fact, that was down from 21% in January. The vacancy rate in Manhattan dropped to 1.18% and many expect it to slip below 1% as we approach the high-velocity summer rental season.
“Many clients come into our office expecting us to help them find that great deal their friend got last year” said Kate Akerly of Charles Rutenberg LLC, “but the reality is that they may not be aware that the market has shifted dramatically from those days.” On that note, a market report released today showed that the year-over-year pricing for studios is up 7% to $1,756, one-bedrooms increased 9% to $2,335, two-bedrooms rose 10% to $3,283 and three-bedrooms leaped 12% to $4,347 from February 2010. Keep in mind that those numbers are average rents for all apartment types across Manhattan (from walk-ups to high-rises and the West Village to Harlem). The averages are well below the cost of renting in the best neighborhoods or in doorman buildings and dramatically below if you want both!
So what does this mean for renters? The following are some tips and things to keep in mind if you will be searching for an apartment in the coming months:
- Choose your broker approximately five weeks before you expect your lease to start. In a low inventory market, a broker with access to up-to-date availabilities is more important than ever.
- Assuming that you intend to move-in on the first of the month, begin actively searching on the first of the month prior when tenants deliver thirty days notice to their landlord. The best inventory will rent quickly, so try to secure a lease by the 15th at the latest. It is possible to start sixty days in advance, but only expect to view apartments that are listed as available for your move date. Those may be limited. The landlord will not “hold the apartment” vacant for you until you’re ready to move.
- Speak to your broker about the paperwork that will be necessary and gather it all before you start looking for apartments. You want to be able to submit a complete application as soon as you find an apartment you’re interested in. If you require a guarantor to qualify, have their paperwork organized as well.
- Expect to pay a broker’s fee. The fee to rent a condo or co-op is typically 15% of the annual rent. In rental buildings your broker may agree to accept as little as one month’s rent. Don’t expect the landlord to cover the fee for you in this market. If you really want to avoid the fee, search for ads posted by management companies and owners online. Be aware that “No fee” broker ads are often used as a bait-and-switch by unethical agents. Additionally, they are very rarely that broker’s exclusive listing, which means that it may not even be available by the time you call about it. Also, keep in mind that landlords offering “no fee” rentals often charge more than their condo or co-op competitors. This is also a good time to decide if you want to live in a rental building owned by a large landlord or an apartment owned by a single investor such as a condo.
- Early in your search, consider expanding your criteria so that you may consider neighborhoods and buildings that may not be your first choice. Once you learn the market, focus on one or two geographic areas that you like the best and that you can afford.
- After seeing enough apartments to feel comfortable that you have a handle on the market, be prepared to submit an application as soon as you see something you like. With the vacancy rate hovering around 1%, good listings will be rented very fast.
- Don’t expect the landlord to engage in an aggressive negotiation. In a tight rental market the landlord knows that other applicants will likely be right around the corner if they don’t accept your offer.
- Have realistic expectations. If you view fifteen apartments you can assume that you have a reliable sampling of the current market. Don’t expect that any day now an apartment that’s 30% larger will magically appear for 25% less than everything else you saw. It probably won’t and you will miss out on the best inventory available during your search period.
If you would like to speak to a member of our team about your apartment search, give us a call at (212) 400-4838 or e-mail us at yourkeytothecity@AkerlyRE.com. Feel free to to start your search here in our database of currently available NYC listings.