A Micro-Glimpse into the Manhattan R.E. Market: The high-end picking up and the low-end favoring fresh renovationsTuesday, June 8th, 2010
With all the talk of tight inventory and markets picking up, I thought I would share a bit of what I’m seeing to provide some on-the-ground color on today’s sales environment. I’ll share two case studies to underline the primary trends I’m observing: 1) the higher end of the market is definitely picking up, and 2) the lower end is showing a material preference for fresh renovations.
Case Study #1:
· Property: a 3300 square foot 3-bedroom corner apartment on the East River on the market 2.5 years ago priced at $6 million.
· Activity last year: by last June, the price was reduced to $3.995 million, with several offers coming in around $3.2 million throughout the course of the year. One foreign buyer was going to purchase it for approximately $3.6 million, when he pulled away due to the strengthening dollar.
· Activity this year: the price was reduced to $3.3 million, which resulted in the property being bid up to a bit over $3.4 million by two all-cash buyers. The contract was signed in May.
· Takeaway: a well priced property can easily get bid up above its asking price, now that the higher end of the market is picking up.
The higher end of the market ($3+ million for the purpose of this discussion) is finally beginning to experience the activity and excitement that the lower end has been feeling over the last 9+ months. Some properties I’ve seen above the $5 million mark are receiving multiple bids if well priced and don’t require an excessive amount of work. Further, and somewhat surprisingly, prospective buyers and their brokers are coming across 7-10 days’ wait lists to just see new, well priced properties, particularly for those high-end buildings in which open houses are prohibited. ‘Nothing like a wait list to increase the sense of urgency in the market.
With respect to financing, the high-end market segment is clearly defined by all-cash or mortgage non-contingent buyers. Often times, many of them will still opt to take out a mortgage despite the all-cash financial wherewithal due to today’s tantalizingly low rates.
Case Study #2:
· Property: 1300 square foot 2-bedroom apartment in xxx neighborhood, on the market in XX, with an original ask price of $1.8 million
· Activity: lots of negotiations back and forth between $1.6 and $1.7 million. Buyers were finally willing to pay approximately $100/sq.ft. above “market” for the renovated aspect of the apartment, and landed at $1.695.
· Takeaway: many buyers in the market are willing to pay a premium for a turnkey apartment with newly renovated finishes.
On the lower end of the market, most buyers are looking to newly renovated apartments due to the lack of home equity loans available to spruce up the properties according to their own tastes. They are calculating that it’s cheaper to pay a bit more for fresh renovations and amortize that premium over 15 to 30 years, rather than decrease their liquidity by tapping into existing savings. All of this said, this pick-up in deal activity comes at a price, as it seems almost every deal getting done has a myriad of twists, turns and delays to overcome. Buyers and sellers seem to be more frustrated than ever in the process of coming to a meeting of the minds; buyers are tired and worn down after months and months of looking for the right place, and sellers are looking ahead to better times, less willing to compromise on price. This frustration only increases with the longer process of getting from signed contract to the closing table. Agents need to therefore be calmer than ever, and be part psychoanalyst, part financial advisor, part negotiator, etc. I see deals falling apart left and right due to the financial and psychological nuances of this market … choose your agent correctly and put your ego on the backburner, lest you want a truly bumpy ride.