Who really represents your best interests as a buyer or a seller? About a year and a half ago, written agency disclosure became law for New York City real estate agents selling co-ops and condominiums. What that means is that every buyer and every seller, in every transaction, must acknowledge in writing whether the agent they are dealing with represents them, the other party, or both. This has been true in most of the rest of the state for years. My opinions about the disclosure requirements have evolved since they were first imposed, in some (at least to me) surprising ways. When I first learned that we would be required to get signed acknowledgment from everyone, it seemed like a terrible inconvenience; now it increasingly seems to me like an excellent idea. I don’t think most of us real estate agents fully understood how much people really ARE confused about whom we represent! For one thing, most people think we represent the person who pays us (in fact, representation and compensation are unrelated.) For another, buyers who show up without an agent at an Open House often really don’t understand that the on site agent represents the seller. Meaning, it is the agent’s job to get the highest price for the seller. Period. When buyers figure this out, many of them decide they want an agent of their own. And I say, all the better. Deals in which each side has representation proceed in a smoother and more orderly fashion. It works better for everyone.

At the time the law went into effect, we agents were pleased that the law recognized dual agency, in which an agent represents both the seller and the buyer. I was just as pleased as anyone else, because we tend to make more money in transactions in which we are the only agent. But here my thinking has changed. I have realized as time goes by that I don’t actually think dual agency is possible. How can I, or one of my agents, actually represent a buyer AND a seller, whose interests are frequently diametrically opposed, in the same transaction? It just isn’t possible. The buyer wants to pay as little as he can; the seller wants to net as much as he can. What agent can fight simultaneously for both those outcomes?

To use another example which happened with one of my agents in recent weeks: a buyer came to her directly with interest in one of her exclusives. Both the buyer and the seller signed the Disclosure Form acknowledging her as a dual agent. They made a deal. The next day, an agent from another firm brought my agent a higher offer, which the seller chose to accept. So how could my agent be fair to both sides? Representing the buyer, she should have thrown all her weight into persuading the seller to stick with the offer he had. But representing the seller, she had to acknowledge that he was getting considerably more money and might be swayed by that. In the end, the seller took the additional money from the new buyer and the original buyer was angry at my agent, claiming that she had not really represented him. And the buyer was right! She simply could not be an advocate for both sides.

So in the end, this is where I have come out: written disclosure confirming that you are a buyer’s rep or a seller’s rep is all for the best. It clears the air. It educates the consumer. And straight dual agency, while a convenient idea in theory, is laden with possible conflict in practice. So I make the same recommendation to consumers and agents alike: don’t do it! The most successful transactions have an agent on either side.

Buyers, sellers, and agents struggle to work effectively in stratified real estate markets. We have such a market at the moment in New York. Because one segment of the market is not necessarily behaving like another, it can be challenging for everyone to understand how value fluctuates from price point to price point. Reporters avid for an interesting story can just make the problem worse. So I will try here to deconstruct what my agents and I are seeing on the ground:

At the top of the market, unique co-op properties in good condition are frequently selling quickly with competitive bidding. That said, this surge in the $15,000,000 and up market is by no means comprehensive. There are also many properties, actually MORE than those that rush out the door with competitive bids after two weeks, which are remaining on the market for six, ten, even fourteen months. Many are beautiful apartments in top buildings on Fifth and Park Avenues. Why are they staying on the market for so long? Perhaps they don’t have outdoor space. Perhaps they need renovation. Perhaps they are not on high floors. Perhaps they are just too expensive. Unfortunately, the press is filled with stories of top prices and bidding wars for billionaires. So all ultra luxury sellers believe that this is going to happen for them. More often than not, it doesn’t.  Even in this range, most apartments are still boundaried by market considerations. So if it’s too expensive, or needs too much work, or doesn’t have great views, it can as easily sit on the market at $22,000,000 as at $2,000,000.

One more thing: if you are a seller contemplating listing your property, PLEASE do not be taken in by the hype which seems to be circulating in the marketplace and the press about “whisper listings.” It simply does not make sense for ANY seller who hopes to achieve the best price to limit access to just a few brokers to whom the information is “whispered.” No seller ever knows where his buyer will come from. Only by opening the listing to everyone (and making sure that a skilled broker has been hired to pre-screen) can any seller ever be sure of achieving the highest possible price.

Sellers are struggling even more to determine how to price their properties in the $3M to $7M range. Only a year ago, these co-ops were flying out the door. Now this marketplace has slowed dramatically and the buyers are much more cautious. Whether that is attributable to job insecurity, bonus anxiety, or overall second-decade-of-the-new-millennium malaise, many of these desirable six, seven, and eight room apartments are going for 10% less than they would have commanded a year ago. Sellers find this hard to understand, and it IS hard to understand! Sure, many of these units have been heavily used by the current owners and need refurbishing. But still, the economy looks better than it did a year ago. Stocks are higher. Employment is (slightly) better. Nonetheless, in this segment of the market buyers rule. They kick the tires of every available apartment. They bid low. They get cold feet. And finally, the apartments which sell are those with sellers who capitulate to the changed reality.

So here’s my parting advice for buyers and sellers alike; DON’T believe everything you read in the newspapers. Generally the trends which are being reported, based on closed sales on which deals were made 60 or 90 or 120 days before, are already old, outdated news. And reporters are looking for zippy stories. That is their job. And it is much more exciting the write about the $35M “whisper” listing which is creating buzz than the eight or ten other listings which have lingered for months. In the end, unique, special outliers aside, most properties in every price range respond to market forces. Those forces are complex, nuanced, and highly changeable. But they CAN be understood and interpreted by expert agents.  Or…just read my blog!

In art and movies of the thirties and forties, the quintessential depiction of loneliness is often the same: a man or a woman framed in a pool of light inside an apartment building window in a soulless urban environment. There is no place, the message seems to be, where you are more alone than in the big city. And what city is bigger or more indifferent  than New York? It is thus one of the particular pleasures of a career as a residential agent in New York that today, we sell community as much as property.

Over the last twenty years co-ops have become more and more focused on creating internal communities. Buildings have in-house newsletters. There are Board committees which plan internal events. Annual or semi-annual cocktail parties in the lobby bring residents together, as do Halloween parties and chance encounters in the gym or the yoga room or the playroom or the library. Today there is a context for the neighbor you see in the elevator: you have almost certainly seen them around the building SOMEWHERE before.

As a child growing up in a New York co-op I experienced none of this. There were no gyms in the co-ops (of course, there were more or less no gyms, period, except in schools.) There were certainly no playrooms where the kids became friends. Basements were devoted first to coal storage, then simply underutilized by building residents, who would only go downstairs to visit their storage areas or use the laundry machines. Not much community building there!

Over the years the buildings gradually perceived an opportunity to make their residents not only happier, but also more united and cohesive. Co-owners do have shared interest in the value of their investment, and increasingly they also share pride in the quality of their home environment. These buildings have become real vertical villages, with the elevators and lobby the equivalent of sidewalks, the gyms, libraries, and playrooms standing in for shops and clubs where like minded people encounter one another.  And like any village it is all overseen by an elected group of residents, making decisions for the public good.

An interesting sidebar to this community building is that it works much better in co-ops than condominiums. While condos, especially the newer ones, may have spectacular amenities, the presence of part time residents and investors among the ownership ranks more or less guarantees both chronically empty apartments and a substantial transient population of renters rather than owners. Short term renters will, by definition, be less community oriented, less concerned about property values, and more indifferent to the comfort of their fellow tenants.

As agents, we are frequently frustrated by the judgments of co-op Boards, which can sometimes seem (and be) arbitrary. But we are also aware that, in addition to safeguarding the financial stability of their buildings and, by extension, our entire real estate market, these buildings provide an oasis of small town connection amidst the chaos of our urban lives.

The purchase and/or sale of residential real estate unfolds at the juncture between business decision and lifestyle choice. It is thus subject to a series of beliefs, on both the buyer and the seller sides, which reflect the uncertainty of that rather hazy intersection. Neither strictly a nuts-and-bolts, by the numbers choice, nor one in which the splurge mentality which can apply to shoes, or cars, or jewels, easily applies, this very large, yet very personal purchase has given rise to its own mythology.  Herewith a few of those myths, and my attempt to debunk them:

Myth 1 – I might as well hire my cousin’s sister-in-law’s aunt as my agent. They all do the same thing. Actually, no. Residential brokerage is a highly skilled profession which takes years of experience to develop real expertise. A broker who is intuitive, savvy about the intricacies of the market, a good negotiator, and a strong but reasonable advocate will save you money (and often the deal)and facilitate every aspect of the process

Myth 2 – It only takes one person to fall in love with my property. While this is self-evidently true, it is usually code for “I don’t want to lower my price.” It is thus in the same category as “Why don’t they just make an offer?” The answer is, these days if they think the price is too high, they will just move on. They will doubt that a reasonable offer can succeed. While W.C. Fields may have been right about a sucker being born every minute, you cannot count on any of them showing up on your doorstep.

Myth 3 – It cannot hurt to make a very low offer. In fact it can. It risks angering and alienating the seller. And once the seller is alienated making ANY sort of deal with him/her will be that much more challenging. Be an aggressive negotiator, but be reasonable. It is no longer 2009!

Myth 4 – I know the market will be going down, because (fill in the blank…) I will buy after it does. I have heard this line, mostly (with apologies) from finance professionals, for over 30 years. Here’s the interesting truth: when the market really DID go down, in 2009, almost no-one had the courage to buy. Those who did got amazing deals, but most did not. No matter what they tell themselves, and us, most people just don’t have the stomach to go against the prevailing tide.

Myth 5 – I know the Board has a financial formula. Just tell me what I need to show. Very few Boards have a formula. And every application, like every buyer, is unique. So there is only one way to go when preparing a co-op Board package: full disclosure. The buyer who tries to outwit the process is most often the buyer who gets into trouble. Tell the truth, the whole truth, and nothing but the truth. Show and document all assets; don’t puff them up or scale them back. 

Myth 6 – If I sell my property for less than I paid for it, I am losing money. Not necessarily. The all important issue when selling relates not to the absolute price, but to your next step. If you are selling to buy a bigger place, a lower price can, oddly enough, work in your favor. If you bought for $1,500,000 but you are selling for $1,350,000,that means the market is down 10%. So the property for which you would have paid $2,000,000 is now going to sell for $1,800,000. You actually end up $50,000 ahead. It is always better to trade up in a down market; it saves you money. When you are selling and buying in the same market, all that matters is the difference in price between the two transactions. The absolute numbers (tax considerations aside) are irrelevant.

Our job as agents is to help our clients maintain balance between the personal and financial aspects of these highly fraught transactions. Deflating the urban real estate legends is part of what we do.

As we move into the middle of April, many of us in the business are wondering, will there be the traditional spring market? Usually at about this time there is an uptick in inventory, prices begin to ascend (especially with help such as Vivian Toy’s upbeat article about real estate sales in the Sunday New York Times) and deals begin to flow fast and strong. So is it happening in 2012?

Let’s start by acknowledging that the market is already strong. We have seen plenty of deals so far this year, especially, as I noted in my first quarter market report two weeks ago, in the upper and lower echelons of the market rather than the middle. At Warburg we expect the market to remain on track, maybe even accelerate a little, but we don’t anticipate a big jump in prices and certainly not one in inventory. Here’s how I predict spring will come to real estate in New York:

* Over all, the market will remain strong. This is particularly true in the new condominium market, to which foreign money flocks; the small apartment market, which every day embraces more refugees from the overheated rental market; the major co-op market, which is never long on inventory but is currently long on demand; and everything in northern Brooklyn, which seems to be in an ongoing best and final offer situation for property after property.

* If it is going to sell fast and well, it will have to be priced right. We have noticed that almost all of our new listings have the same experience in the market: 25 showings the first week, 12 the second week, 4 the third week, and if you don’t have an offer by Week Four then you have to settle in for a while. So, this spring, pricing right at the get-go is vitally important. The units which are still on the market after six months have one thing in common: they were not priced right at first and did not sell during the early days of excitement and pent up demand. Our market is efficient that way.

* Buyers are going to be choosing from limited options. There are not going to be a lot of inventory alternatives for most buyers. Much of what is available has been around a long time, for the reasons described above.  And not much new is coming on, even though it is April. So once they have seen what is out there, buyers will not have a lot more options in the weeks and months ahead. 

* First impressions will matter more than ever. Sellers hate it when we bring up staging. But every property needs to be staged. Less clutter, a clean paint job, shiny floors, edited furniture – very few properties, even those in excellent condition, don’t need one of the above. And each year, buyers have less patience. They don’t revisit and generally they don’t reconsider. So sellers: don’t wait to stage. Make it part of your initial plan. Since the recession staging has taken on critical importance. Buyers just expect that properties they view will look nice.

Principals and brokers all fare well in a market like this one. Prices (except in the aforementioned Brooklyn) are not runaway, negotiations are expected (caveat: see Brooklyn, above, where all the negotiating is up!), and most deals are struck at a point of acceptable discomfort for both sides. We might wish for a little more inventory, but we cannot have everything. The weather is beautiful, Central Park and the planters on a thousand terraces and balconies are in bloom, and the dream is just waiting for us to live it.

As we sat around the Seder table Friday night, I was struck as I often am by the profound importance the notion of home has for people. Far from being just a place to sleep, the notion of home is central to our fundamental sense of place in the world. We accumulate memories, which over time seem to actually imbue the bricks and mortar (or sheetrock) with personal significance. Because I understand the importance of this sense of place, I am frequently urging customers to see their home purchase other than in terms of investment. Given that historically (although not necessarily if you bought in 2007 and sold in 2009) real estate has been a great investment, and that none of us has a crystal ball about the market 10 years from now, I urge Warburg clients to think long term and not fine tune too much. If you are living in a place a minimum of five years, an additional 5% in the purchase price probably isn’t going to make that much difference if you have found the place you want to call home. And most of us, on some level, recognize it when we see it.

Concern about the same issues motivates me when I am interviewing agents who wish to join Warburg. Two things I never want to hear are “I love architecture” (who doesn’t?)  and  “I really like people” (as opposed to really DISLIKING people?). But among the things I am hoping to hear about are an understanding of the importance residential real estate plays in the psychic lives of the people we serve. They want analysis, of course, they want an appropriate price, of course, but even more they want a place which speaks to them when they walk through the door. And when we are doing our jobs right we hear that voice, even if it is disguised and we need to listen between the lines to make it out.

Every sales business requires an understanding of the psychology of the buyer. And buyers are motivated by different things. However, selling a suit, or a car, or even a boat, is not the same as selling people a home. Each may be an expression of personal style, but buying a home involves creating the architecture of a life in a way the others do not. And we, as agents, are the midwives of this profoundly significant passage.

Where you live both reflects and shapes the life you create. Although everyone has a budget, the most important thing about buying an apartment isn’t the money, it’s the fit. It’s the way the right place can intertwine with your life.  And although almost everyone has an agent, the most important thing about finding an agent is recognizing whether the person you have chosen will match you with the place which will open and enhance your life. I am embarrassed for our industry when I see agents on TV talking about the size of their commission, how much they will earn if they make this deal or that deal, how they want to push the buyer and the seller into the deal which will earn THEM the most. For me, and for the agents I respect, this business doesn’t revolve around the glib presentation or the slick speech. It’s discovering that mysterious vibration between the person and the property which keeps us working seven days a week year after year.

The New York real estate market has shaped up in an interesting configuration during the first quarter of 2012. While the condo market in Harlem, priced appropriately after a couple of years of settling, has seen substantial absorption, and while apartments and townhouses all over Brooklyn are seeing multiple offers and prices over asking, the co-op markets on the Upper East and Upper West Sides, the raw real estate material from which the boom began, has a strong top and a firming bottom but a weak middle. There is, so to speak, a hole in the donut.

At the upper end, the three months which have just ended continued the trend which was already strong during the latter half of last year. There has been a dearth of good properties for sale above $10 million, and most of those which were on the market last year have been sold. The much anticipated apartments at 907 Fifth belonging to the late Huguette Clarke came onto the market three weeks ago, and the jewel in that crown, the soaring property on the top floor with windows facing the Park which stretched the whole length of the building, lasted less than a week before being sold in excess of its $24 million asking price. The good property goes fast, and when it doesn’t, there is a problem either with the price or the property. These buyers did not need a good bonus year to afford a purchase. They already have the money.

At the other end of the market, activity has also picked up, though for very different reasons. For the studio, one bedroom, and small two bedroom market with prices under $1.5 million, the lowest rental vacancy rates in recent history have driven rental prices up to a level at which buying simply makes more economic sense. While financing can still be difficult to obtain for these buyers, many of whom are first timers, we see an ongoing reliance on the Bank of Mom and Dad. The recovery of the smaller apartment market, moving as it has hand in hand with the thawing in the national real estate market, in consumer confidence, and in job growth, has been one of the halcyon stories of early 2012.

The market which is experiencing more difficulty is the broad one between the high and low described above. Neither fueled by high rents, nor buoyed by the extremely and enduringly rich, many six, seven, eight, and nine room properties priced between $2.5 million and $7.5 million are spending six months to a year on the market. They face a number of challenges. First, this market has actually declined slightly in overall value since Memorial Day of last year. When the overall news is positive, it is difficult for sellers to make the necessary price adjustments to keep the property competitive. But the pool of buyers for these units isn’t so deep. My agents report to me that, when they bring on exclusives in this price range, there are 15 showings the first week, eight the second, three the third, and then the phone (and e-mail) more or less go dead.  If these units are not sold to one of the buyers out there waiting, they may be on the market a long time.

What factor distinguishes the buyers for these properties from their less expensive and more expensive counterparts? Here, more than anywhere else, we see the effects of the changes in the finance industry.  Up until the fall of Bear Stearns (four years ago last week, amazingly enough!) these apartments were the bonus buys. Fueled with the big handful of cash from their bonus, mid- and upper-mid-level Wall Street financiers would buy apartments into which to move their expanding families. Now, with the industry so contracted and the cash portion of the bonuses all but gone, that simply is not happening any more. So what buyers there are for these apartments want great buys, or great condition, or both.

The notion of stretching for an apartment is gone. And no-one does renovations piecemeal anymore. Thirty five years ago, when my wife and I bought our apartment, we painted it ourselves. A year later, we did the kitchen, a few years after that, air conditioning. We actually decorated a decade after the purchase, and then did the bathrooms a decade after that. But now no one does THAT, so every price is calculated with the cost of an immediate renovation, including carrying costs for two homes while the work is being done. This often leaves buyers and sellers far apart. Thus many of these apartments languish on the market, even as their much bigger and much smaller counterparts are being snapped up.

Heading into the next quarter, we at Warburg do anticipate that the gradually rising economic tide will help float all boats. Realistic pricing remains key in ALL markets, but perhaps nowhere more than in the $3 million to $7 million range. With a smaller constituency of buyers, many made anxious by fundamental changes in the way the finance industry operates, sellers in the donut hole will have to be very realistic about what the market can offer them in the current environment.

Last week I wrote about the values which we at Warburg have tried to embody in our culture and in the way we do business. Of course, principles are all very well in theory; it is only in action where you can judge how much sticking power principals really have. And there is no topic on which the rubber of principal more jarringly meets the road than the topic of money.

As agents, one of the most complex issues we face, again and again, is whether a handshake has a price. Once a buyer and a seller agree on a price and terms, should that be sacrosanct? In many other states, agents are empowered to draw contracts; in some of them, each offer is written up as a simple contract and the seller signifies his acceptance of the offer with a signature. Game over. No lengthy delays, no fights between lawyers about which clauses in each of their riders are objectionable to the other. The negotiation of the deal and its finalization are concurrent. That would be a beautiful world for most of us agents to live in (although, I get it, not so great for the lawyers!)

Not so in New York. While it is rare that attorneys, given time, will not resolve whatever contractual issues there are, the week or two (or these days, even three) during which the contract is being negotiated leave the property in limbo; with no signed deal, is it available or isn’t it? There are two schools of thought, both arguably valid. One is, if the buyer can change his mind with no penalty and walk away, why not the seller? The other of course is that an accepted offer is the negotiated equivalent of a handshake, and that it should bind both parties regardless of what other temptations might appear. While I understand the first perspective, I am more in sympathy with the second, although it is not much in fashion today.

For most sellers, temptation is relative. Once they have an accepted offer, they will stick with it if someone offers them $50,000 more. $250,000, however, is another story. It is really hard to leave that sort of money on the table, even if there is already an agreement with someone else.

Over the years we brokers have learned that there are a variety of dangers in switching horses. In a disproportionately high number of cases, as much as 25 or 30%, the second buyer flakes out and the first buyer is so angry that the seller is left with nothing. As brokers, we often find ourselves in the middle of the storm, blamed by the angry buyer if he loses the deal and by the angry seller if both buyers disappear. All we can do is advise that sellers stick with the deal they have, which is often not advice they want to hear with visions of sugarplums dancing in their heads when some enormous offer makes an appearance the day before they were to sign with Buyer Number One.

What rarely gets discussed is the moral question. Now I have to start by saying, in none of these cases is it MY money which is at stake. I would like to think that I would stick to my word, but a quarter million is a quarter million. Still, doing what you have promised to do IS the right thing. We increasingly live in a world in which values are relative, but in my opinion the notion that a man’s (or woman’s) word is his/her bond shouldn’t be a relative concept. It is not morality if you will stick for 50k but not 250k. That is just another sort of price negotiation.

Einstein famously said, “Not everything that counts can be counted; not everything that can be counted counts.”  I’m with him.

Little did I imagine, as a graduate student anticipating an academic career during the late 1970s, only a decade later I would be running the residential sales division of a major real estate company, or that a few years after that I would actually BUY it. Coming as I did to the business of business by the seat of my pants, it took me a while to learn the ropes and figure out my personal philosophy.  But over the years I have arrived at some conclusions about what is right for Warburg:

* If you don’t have your word, you don’t have anything. Often, my agents will come to me, lay out a situation, and ask me what I think is the right thing to do. My answer usually is “You already know the right thing to do. If you are struggling enough to want my opinion, it’s because something is getting in the way of your doing the right thing.” More often than not, that “something” is money. Don’t get me wrong, I like making money as much as (and maybe more than) the next guy. But it never takes precedence over doing what’s right. It has been my experience, over and over, that doing the right rather than the expedient thing repays you 100 fold, both in how you feel and what you earn over the long haul.  Always acting with integrity is the best possible business plan. 

* The customer must always be respected. As the President of a real estate brokerage firm, I have two layers of customers to whom I am answerable: internal customers (my agents) and external customers (our buyers and sellers.)  These constituencies have different needs, but each always deserves the fundamental respect of being listened to and taken seriously. There is no room at Warburg for denigrating attitudes or comments about either our agents or our clients. My customers may not always be right (who is?), but they are always heard and their concerns are always paramount.

* A service business requires that you perform the service. How is it that so many agents, when you e-mail them for an appointment, decline by saying, “I will be there next Tuesday at 10, can you come then?” The answer is no! Similarly, how is it that the exclusive agent unlocks the door for you, takes a cell phone call, then chatters away for the next ten minutes while you are left to show the customer around the apartment, which neither of you has ever seen before? The owner hires an agent to perform a service, and two big pieces of that service are availability and courtesy. Accommodation, of buyers, of other agents, of appraisers, of managing agents, is (along with providing expert analysis and advice) what we do. An agent who thinks accommodation and/or politeness are an inconvenience is an agent who should find a different career.

* In business, you change or you die. I am not by nature an agent of transformative change, but I have had to learn! The pace of change in our business (and in every business) has accelerated since technology first swept through our sedate lives in the mid-80s. Computers, the fax machine, the Internet, handheld devices, cloud computing, social media - one after another they have resculpted our landscape such that many aspects of it are unrecognizable today. Failing to embrace the opportunities of the digital age in their ever-evolving glory leaves established companies prey to younger, hipper models as we all compete for the next generation of agents. I am proud of Warburg’s cutting edge digital and Web 2.0 focus, in which I feel we have been leaders. But this race is never over.

* In the end, it’s all about relationships. The service Warburg provides to its agents, and they provide to our clients and customers, revolves around one of the most personal, financially significant, and life-defining choices in people’s lives: the creation or change of a home. Most people need to feel a relationship with the person who will assist them in this process. Everything I have described in the four points above comes together here: great agents are trustworthy, they are attentive, they are responsive, and they are fast on their feet – all in the service of creating a genuine agent/client bond.  It is my aim to create that same bond between the company and the agents who carry our card. No matter how much the world changes, a sense of personal connection remains the key to successful relationships: between me and my agents, between them and their clients, and between our brand and the world.

Every week, my agents at Warburg Realty receive calls from anxious buyers, asking “Has anything come up for me? Isn’t there anything new you can show me?” I make our buyers the following solemn promise: we are NOT hoarding these properties for family members or customers we like better. In fact, we are as frustrated by the lack of inventory as you. So I thought it would be interesting to write about the ebb and flow of inventory, both annually and over the arc of the last decade.

New inventory is more likely to arrive on the market at three major points during the year: on or about January 15th, on or about April 1^st, and on or about September 15th.  These dates are somewhat variable, the latter two in particular, depending on the exact annual timing of Easter, Passover, and Rosh Hashanah.  But generally speaking there is a post-New Year market, a spring market, and a fall market. Although the seasonality of our business has definitely declined over the last two decades, it is still rare for a major property to be placed onto the market in August, or the second week in December.

Of the three markets, the busiest is usually spring. Historically, the largest number of deals are consummated between April and June; prices also surge the most during these months. Mid-January, after the Christmas and New Year festivities decline, and September, at the end of the summer holidays, see less of a surge in listings than does the spring, but new offerings do often appear at these times.

The popularity of the spring market has primarily to do with the school year. For buyers with children, this is the moment to make a purchase which can then be spruced up over the summer and inhabited during the subsequent school year. And everyone’s real estate adrenaline flows a little faster in spring: daylight lasts longer, views look prettier, terraces feel more accessible.

That said, the flow of inventory has been constrained ever since the tax laws changed in the 90s. Until then capital gains from the sale of personal real estate could be rolled over from purchase to purchase over a lifetime; only when the buyer ceased owning or passed away were taxes due.  When rollover was replaced with the $250,000 individual exemption and the $500,000 marital exemption on capital gains, that meant that for most of the country, whose real estate never generated a gain that large, the sale of a home became a tax free transaction. For New Yorkers, however, the new law proved onerous, especially for those who had been many years in the same home. With a low basis, and Federal, state, and city taxes amounting to over 27%, whether selling made sense was called into question. And for many owners of larger apartments and houses, that question still stands.

The impact of a slowdown in one segment of the market is profound. If owners of large properties decide that it is not tax-effective to sell, then those who want those larger apartments have fewer alternatives. So they renovate and make do in the homes in which they already live. A logjam develops; less selling at the top reduces the number of transactions all the way through the marketplace. This, to a greater or lesser extent, has been the reality of the co-op market for the past decade and a half. Those who have owned for many years often prefer to let their heirs pay the taxes, impeding the flow from the top of the pyramid.

And so we all wait, agents and buyers alike, for birth, death, job transfer, marriage, or divorce to create a chink in the dam through which a precious property or two flows down to those waiting in the tier below.