Warburg Blog

I’m a 28 year veteran broker, and a blogging virgin.  This is my first posting, and I’m a little unsure about this new environment.  For nearly five years, as some of you may know, I’ve embraced the challenge of a monthly deadline with a real estate column I call “Manhattan Market Watch” that appears regularly in Mann Report. 

I don’t read blogs.  Not yet anyway.  And up till now, I’m not part of any internet social networks–although I’ve accepted an invitation to Linkedin.  What with the balancing of business, family and community, who has the time? 

But the concept of an interactive, open-ended forum is alluring, perhaps even seductive, and I’m thrilled to join Warburg’s newest sphere. 

Generally, the subject of my columns comes from my own business and from what I see occurring in the marketplace.  You can check these out under Press Mentions:  http://www.warburgrealty.com/agent/SH1#press.  I’m always looking for material to explore.  So if you have concerns about real estate, I’m happy to share my insights and experiences.  And if you have questions, I’ll try my best at investigative reporting.    

I’m ready to embark in this fresh direction.     

I live in the Hunters Point Historic District in Long Island City, a neighborhood which has undergone tremendous change in the fourteen years I’ve lived there, and for some reason unknown to me last Friday night was party night.   I attended two of them, one with my kids and one without. 

The first was held in a re-modeled firehouse in the Dutch Kills section, just north of the 59^th Street bridge.  This is one of the most beautiful private residences I’ve ever been in and the view of Manhattan, especially at sunset, was spectacular.  It was a nice group of people, most of whom knew each other from working together at a soup kitchen in Manhattan every Friday afternoon, and a visit from the local City Councilman, Tony Avella, made it especially interesting.

The second party, in the Vernon/Jackson neighborhood, was more of an Artists’ gathering.  There were lots of kids underfoot, two dogs (why are there always two dogs at these kids of things?) a pot luck groaning board of food, a lot of it vegetarian (although there was one blues guitarist manning the grill out back working up some cheese-stuffed jalapeno peppers wrapped with bacon) lots of wine and beer, and a diverse crowd of people that included a couple of sculptors, some painters, several craftsman-style home builders, at least one filmmaker, several writers, a group of models, a couple of Native New Yorkers and even a few people who grew up in the neighborhood.  After a few hours there was a pick-up bluegrass jam session going on in the living room, and I was talking with our local Assemblywoman, Catherine Nolan, whose son, it turns out, plays in the local soccer league, where I am a volunteer referee.  Eventually my kids got tired of the video games which were going on downstairs and we all walked home past an iron foundry, some new condominiums, a vacant lot or two (read prime building sites) and some of the detached and semi-detached houses you’d expect to find in that part of Queens.

It was one of those nights where you’re glad to be alive, and living in a city as vibrant as ours.

The decline and fall of Washington Mutual, which swooned yesterday into the arms of J.P. Morgan Chase, is the “largest failure in U.S. banking history”, as the Wall Street Journal headline put it. Luckily depositors will not be injured; the bank’s debt- and preferred stockholders will not be so fortunate.

Are we nearing the bottom of a failure cycle which has the whole country holding its breath? Hard to tell. Certainly if Congress can get the giant bank bailout package signed that will help to stabilize things, and it is hard to imagine, for political reasons if no other, that they will leave Washington without getting SOMETHING done.

As for Manhattan real estate, mostly it too is holding its breath right now. Buyers are looking, Open Houses are busy, but many want to wait to see what happens next. Interestingly, several of those who ARE making offers are finding the sellers extremely reasonable. This is a moment of buyer opportunity.

I will end with my customary words of caution: residential real estate is an investment, but it is much MORE than an investment. If you can find the home you want and the price seems reasonable enough, don’t wait to outsmart the market. There are two reasons for this: 1) the market usually outsmarts you and 2) life is short. A beautiful home enhances your life in every way.

It has been a tough day in the financial markets, one of those days which will probably make history. As of today, three of the five major independent investment banks which formed the core of business activity on Wall Street over the last decades are gone, at least as we knew them. It feels like the end of an era.

At times like this most buyers don’t want to make real estate decisions. They want to move to the sidelines and see what happens next. Here’s what I predict will happen next:

1) opportunities will appear for those bold enough to take them. The buyer pool will be smaller and some sellers will be under more pressure as a result

2) inventory will increase, but not dramatically. On days like today we can appreciate the vigilance of those finicky co-op Boards. With their 50% down requirements and careful financial scrutiny, they have made sure Manhattan is one of the most liquid residential real estate marketplaces in the world. Most people, even if they lose their jobs, will not have to sell their home.

3) the ramifications of today’s triple threat will be felt for months to come. The credit crisis is like a car crash unfolding in slow motion. What happened today, and what happens in the ensuing weeks, will hopefully mark a bottom and allow liquidity to begin to flow back into the marketplace. Time will tell.

For those of us who work and live near the WTC, today is only a reminder of how precious life really is.  My heart goes out to those families and friends today who have lost loved ones from all over the world and the men and women who service this great land of ours.  Several of my agents were down in this area on that infamous day and witnessed first hand the tragedy that ensued.  May it be a constant reminder of the strength that guides us to move forward and make this world a better place for us all.

So it seems that mortgage giants Fannie Mae and Freddie Mac have returned to their roots as government programs. While this is certainly another sign of the tenacity of the credit crunch, it should also calm the market’s fears to know that the government will continue to support the financing markets with all that that implies.  Meanwhile, the credit pendulum goes on swinging too far in the other direction.  Because so many borrowers unworthy of credit received it, now too many reliable, credit-worthy borrowers can’t get it!

For buyers who CAN get a mortgage, all this uncertainty clearly makes it hard to pull the trigger on a purchasing decision. I am reminded here of Warren Buffet’s words that you always pay extra for a cozy consensus. It is certainly far easier to buy when the herd is buying. But no point in the market cycle is foolproof. My advice to buyers is always the same: don’t forget that the purchase of residential real estate is more a life decision than an investment decision. Do what is best for your life. Don’t try to time the market (none of us is that smart.) And remember that real estate, like any commodity, is going to fluctuate. Here’s the difference: while it is fluctuating, you are happily living in it. That’s what makes it unique.

Since I am blessed to have a windowed office one of the delights of looking out is watching the kids coming home from school with book bags in tow and I am reminded of another summer gone by.  Hope today marks the end of a successful week back.

We are excited to welcome all of the new Ivy owners to the neighborhood!

Closings began at the 10-story, 28-unit building in mid-July. The condominium has one- and two-bedroom residences, some with balconies. Prices start at $350,000. Amenities include a doorman, fitness center and storage. The condominium will be managed by Matthew Adam Properties, and Warburg Marketing Group is the exclusive sales and marketing agent. (The Real Deal)

To read the press, it would seem that the New York City real estate market has suddenly plunged into despair. The real picture is much more complicated. Here at Warburg, we signed our largest transaction ever. Foreign buyers are still active, in spite of the issues in their own economies. And co-ops continued to trade, often for strong prices.

Yes it’s true that properties are spending more time on the market (they could hardly have spent less time!) And it is true that there is more negotiability in the marketplace. Transactions are more balanced. The leverage is no longer all on the seller’s side. The asking price DOES matter-it has to be in line with the comps.  And saying that the market is off from 2007 is not surprising. 2007 was in the STRATOSPHERE!

This market requires more professionalism on the part of agents. It requires modified expectations on the part of sellers. It allows buyers some breathing space (though still not all that many choices.) To me, that all seems like good news.