Warburg Blog

Officially our recession is over. That said, there was more to our recent economic woes than bad mortgages. Too much borrowing by everyone – the Federal government, investment banks, individuals -, a NIMBY attitude towards any sort of economic pain inherent in realigning debt with equity, and the difficulty of competing with incredibly cheap third world labor in our globalized marketplace, all have their part in bringing us to our current economic identity crisis. And we are seeing a similar scenario play out in other nations around the world. So what does this mean for our local real estate marketplace?

First, condos, especially the prime buildings and locations, will be more in demand than ever. The US is still seen as a safe place for money, and buyers from all over the economically destabilized world want to park money here. The recent sale at 15 CPW for $10,000 per foot is only one of numerous examples, although the price is unique. But large units in ultra luxury condo buildings all over town are seeing multiple offers as Russian, Korean, Chinese, European and South American buyers compete for them. Alongside this phenomenon we still see an overhang of smaller condo units from the overbuilding of the last few boom years. Increasingly these units are moving from the rental market, where the developers had parked them while there were no purchasers to be found, back into the sale inventory, where they are being absorbed when properly priced. Increased sales activity in FiDi, Harlem, and the East 20s attests to this. This market for smaller units is at least as likely to be domestic as foreign, and buyers are shopping price point more than anything else. My prediction is that this inventory will be substantially absorbed within 12 to 18 months, and then what? The city’s population is growing but very little is being built. We will move from glut to scarcity – the only condos for sale will be resales. That will put upward price pressure on the existing condo housing stock.

We are already seeing that upward price pressure in the co-op market, especially at the higher end. Admittedly there has been enormous price capitulation in the past two years. But here too the excess inventory has mostly been absorbed and buyers have returned to the marketplace, eager to take advantage of the new pricing. And very little is for sale. Each appropriately priced new listing, whether 7 rooms or 12 rooms, receives a flood of visitors and often multiple offers in the first few weeks. There is far more demand than supply. That said, the dynamic of this process is very different from 2007. Almost no-one pays more than the asking price. Buyers are cautious and care a lot about value, even in the most expensive properties. I do not expect that this situation will change much as 2011 unfolds. Buyers will continue to be astonished throughout the year that there isn’t more to look at.

In 2011 we need to begin to get our national and individual debt/equity ratios back under control, so banks will lend money and creditworthy buyers will have access to it. We need to incentivize our developers to build so we can accommodate the growing population of our city. We need appropriate taxation, Federal, state, and local, which will pay for what we need but will not drive business and opportunity away from New York. We need inventory to sell, and purchasers to buy. And, of course, brokers to manage the process!

Last week I wrote about the advantages of living in a co-op. This week I want to say more about the process of becoming a co-op owner. Buyers at every financial level feel trepidation about assembling a strong, coherent Board package which they must submit to the building’s Board of Directors for approval, and in my opinion many agents do not give enough guidance. So below I have put together a number of tips for making sure your Board package, whatever the specifics, is clear, concise, and doesn’t leave you tearing your hair out:

* Figure out up front if you really want to live in a co-op. Co-ops require FULL financial disclosure, a number of reference letters, and a willingness to adhere to the Board’s rules about renovation, carpeting etc. If this isn’t for you, buy a condo or a townhouse!

* Once you find the co-op of your dreams, make sure your attorney alters your purchase contract to give you at least 15 business days, not 10 as in the standard printed form, to prepare your Board submission.  Two weeks is not an adequate amount of time to prepare a good package.

* Remember that the package is your calling card; it is introducing you and your family (if you have one) to a group of strangers. Try to make it as informative as possible.

* Most buildings are looking for at least four social letters of reference. Use those letters to let your friends really give some information about who you are and what you care about. What leisure activities do you enjoy? What sort of family background do you have? What are your philanthropic pursuits? If you have kids, what are they like? The more diverse information the social letters provide, the better. And the best letters come from other co-op dwellers, ideally members of their own Boards of Directors, ideally in the neighborhood of the property you are buying. Always get more letters than you need. At least one of them is bound to be only two sentences long and therefore not of much use.

* The business letters, of which two are usually requested, should be similar: as much career history as possible, combined with the traits which make you a successful and outstanding exemplar of the work you do.

* The most complex part of the Board package is always the financial statement. Most buyers do not keep a running tally of all their assets and liabilities, so assembling them all can be daunting. Here’s how to go about it:

1)      Pick an “as of” date. All of your financial information will be compiled as of that date – it should usually be the end of the most recent month (so you can get back up bank and brokerage statements).

2)      Begin to compile ALL your liquid assets and liabilities as of your chosen date. Make sure that EVERY number you enter onto the financial statement has a bank or brokerage statement to back it up. The numbers on the bank or brokerage statement must match EXACTLY the numbers you place on the financial statement.

3)      Stock options or Restricted Stock Units MUST be vested to be counted.

4)      All real estate assets should include either a broker’s letter or an appraisal confirming value.

5)      Personal property, such as art, jewelry, or furniture, should be confirmed by insurance binders declaring the insured value.

These pointers, and a knowledgeable real estate agent, should have you well on your way to creating a seamless Board presentation. Every buyer is different, and creating your Board package is an opportunity to tell your story in the most flattering possible light!

A few weeks ago I was having dinner with a friend who after our initial catching up was all over, asked in a hushed tone if there was anything I would rather be doing since the market was so “tough.”

I gotta admit, her query threw me. Since the Lehman crash, while there were days I really didn’t want to get out of bed–I got up–most days. My income was not as commanding and there was absolutely no such thing as an easy deal. But the idea of abandoning the real estate life was more chilling than a second Lehman crash.

And let’s examine what a “tough” market even means. Right now the market is “tough” if you are trying to make your money back from an apartment you purchased at the height of the market or it can be “tough” if you are selling an overpriced studio on the Upper East Side. It can also be “tough” if you are buyer of a true 3 bedroom downtown around $2M or a buyer of a townhouse over $15M because there is just no inventory. Truthfully it boils down to supply and demand, as it always does. And the  only trick to beating the supply and demand equation is time–if you are a seller, price your apartment tightly so you will have bids in no time. And if you are a buyer–and you see the right apartment early in your search–bid because the good ones are going.

I just want to go back to my friend’s question with this story. Today I went to a home I had helped to sell to a lovely couple a few blocks from my own apartment. It was an apartment that needed be gutted and redone from top to bottom. They have been renovating since January 2010–and they just finished. It was…breath-taking. The wife took the time to show me every painstaking decision from paint to tiles to appliances the two of them had made and it reminded me that the reason most of us are in this business (other than the rush of the deal and the money you cynical readers)–it is to assist customers to sell and buy homes. Nothing is more gratifying.

A bit of history to start.Loosely speaking, Lenox Hill is one of the neighborhoods within the neighborhood of the Upper East Side generally agreed upon to be from 79^th street down to 60^th street, with an eastern boundary that varies and a western boundary of Fifth Avenue.Some people say Lexington Avenue is an eastern most boundary,others say Second or First Avenues or  even out to York Avenue . Lenox Hill was named for a tenant farm in the 1800s of the Scottish immigrant merchant Robert Lenox. Lenox Hill Hospital, curiously, was formerly known as German Hospital and was renamed in 1918-and is actually not on property that would have originally belonged to the Lenox family.

Lenox Library was on 70^th and Fifth Avenue, in 1871 and along with John Jacob Astor’s Library was one of the two original cornerstone libraries of the New York Public Library. It was torn down in 1911,and now the Frick Museum & Library stands where the library once was.

What’s in the neighborhood today? Well a whole host of choices, from fine dining, to bagels, to book stores, libraries, shoe stores, grocery stores and gourmet emporiums!

Some places to keep an eye out for:

Barnes & Noble, Zitomer’s,Butterfield Market (they have a great selection of Tate’s baked goods, and Payard pastries as well) ,Crumbs Bake Shop,Corrado Café & Bakery, Eli’s, Citrarella, as for those famous New York Bagels, a bit of a bagel sandwich with H&H Bagels to slightly east and  Pick-a-Bagel as you head to the IRT train on Lexington.

A few local yoga studios include New York Yoga & Bikram Yoga, there are also several gyms and fitness centers. Restaurants galore- check out Flex Mussels and Due ,two faves. In the area you also have Gracie’s Market Place, E&J Luncheonette, Bloomingdales, Gracious Home and Kate’s Paperie. Few blocks north brings you to another shopping promenade along 86^th street, with retailers such as Best Buy, PC Richard, hopefully soon to be a new Fairway, there’s a Shake Shack and Barnes & Noble. This great neighborhood has many great local shops, such as Delfino, Shoe Box,and Muska Milano.

Have a cocktail at Atlantic Grill,brunch at Le Pain Quotidien. Discover your inner Julia Child at the new Sur La Table.

Does this sound like it could be the neighborhood you call home ? We invite you to consider it-why not start here ? 201 East 77^th Street, #10D

Did I miss any of your favorite neighborhood spots ? Let me know !

via yournycrealestateresource.com

Why do so many New Yorkers live in co-ops? I live in one myself. Are co-ops small minded, snobbish and a huge pain in the neck to get into? Well, no, not really … Sometimes they can be difficult and seemingly arbitrary in their rules and rulings. But there are enormous advantages to the co-op system. Here are a few of them:

* There is a real sense of shared purpose. Co-ops have always been, and have increasingly become, vertical villages. They are like a small home town. Most have basement amenities such as gyms and playrooms where residents meet, and many throw several annual parties where the residents can mingle. They create a small town feeling in the big city.

* Co-ops are self-governing democracies, observant of the wishes of the residents. And most Boards have term limits, which guarantees that new blood and new ideas make their way into the governance structure. Everyone cares about where they live. And Board service is fun and interesting. I spent many years on the Board of our building on Central Park West, several of them as President. I learned an enormous amount about the running of this little enterprise which has made me both a better neighbor and a better broker.

* Co-ops have a high level of financial solvency. They scrutinize the financial statements of prospective purchasers carefully and tend to discourage excessive  borrowing among their constituents. This led to minimal defaults in co-op buildings over the last couple of years where throughout the rest of the country mortgages were being foreclosed right and left.

* Since co-ops tend to have strict rental and residency requirements, your neighbors will actually live in the building with you. You will never have that feeling which can afflict condominium owners in which you feel like you are the only owner who really lives in the building. You know you are surrounded by people who care about the good health and reputation of the building as much as you do.

* New York’s historic apartment stock is mostly co-ops. If you long to live in an old building with high ceilings, large square rooms, and plaster walls – or if you only want an address on Park, Fifth, or Central Park West, chances are you will end up in a co-op.

* While Co-op Board Admissions Committees do sometimes make decisions I disagree with, they are most often both reasonable and perspicacious. They want to safeguard both the financial security and neighborly feeling of their communities. And residents are mostly appreciative of the work their Board members, who are all volunteers, do on behalf of the building. In the end, the Board application process is not a high price pay for the pleasure of the well run community into which you integrate yourself as a co-op resident.

Next week I will write about preparing a Board package and lay out clearly the steps which can be taken to simplify and  demythologize the process.

The New York real estate market was a study in contrasts during the fourth quarter of 2010. The ultra high end market, which had languished for much of the last two years, came gradually back to life (albeit at substantially reduced prices), while the ongoing shock waves from the recession and lack of confidence in the recovery, combined with inventory still higher than usual, depressed trading at the lower end. The six to ten room prewar markets, still hobbled by lack of inventory, saw brisk trading, sometimes at prices only a few percentage points off the highs. And many developers have begun tentatively moving the excess inventory they had rented back into the sales market. So many conflicting factors influenced the overall market, making it difficult to draw simple conclusions.

Properties above $10 million fared better than at any time in the last two and a half years. While inventory is always limited at this rarefied level, there still were a number of trophy trades, although in almost all cases these trades involved discounting of enormous percentages from the original asking prices. Perhaps the best example is the Brooke Astor apartment, occupying a high floor and a half at 778 Park Avenue, which apparently sold for less than half its original $46 million asking price (admittedly stratospheric) placed on it in early 2008, in a world we can now barely recall. A  townhouse on East 70th between Park and Lexington also sold over the summer close to its last asking price of $14,900,000, but FAR below its original December 2009 asking price of $20.2M, and barely more than half the price ($28M at that time, $26M today) being asked for its neighbor next door. The increase in sales volume is attributable to two distinct factors: first the gradual and reluctant acceptance by sellers of the changed climate, especially at the highest price points, and second the willingness of buyers with the money to make these purchases to actually step up to the plate. Both uncertainty about the future and apprehension about ostentatious spending during recessionary times had restrained these buyers. Today, with more confidence that a recovery, albeit slow, is underway and that prices are sufficiently low to make purchasing attractive and not flamboyant, upper end buyers are back in the market.

At the other end of the spectrum a very different scenario has played out. Purchasers for under $1 million to $1.5 million simply backed away from the market in August and September. Although the stock market ascended throughout September, confidence about the economy, about the outcome of the November elections, about the security of jobs, made renting a more attractive prospect for many. Inventory in the studio, one-bedroom, and small two-bedroom markets is still high, especially in such newly developed areas as Harlem, Greenpoint, Wall Street, and Madison Park, developers have begun to re-price and relist their inventory. In this climate an increase in inventory slows absorption further, as buyers comparison shop by the numbers. My prediction is that it will be at least 12 to 18 months before we see real stability return to these markets where an overhang of newly constructed smaller units still needs to be absorbed.

In contrast to the inventory overhang characterizing the smaller apartment market, a continuing dearth of listings drove the market in the middle and upper middle price ranges. All over town larger two and three bedroom properties were scarce, and when appropriately priced were frequently the subject of competitive  bidding.  The return of competitive bidding is actually one of the most interesting phenomena of the second half of 2011. It generally unfolds over days or weeks, not hours as it did in 2006 and 2007, and all the bids are generally below or, at best, AT the asking price. But the lack of urgency does not signal a lack of interest. There is a deep market for these 1,800 to 3,500 square foot properties, all over town, since buyers see in them both scarcity and  financial opportunity (they know sooner or later the prices will go up). 

One final observation: condition increasingly plays a crucial role in marketability. Buyers are reluctant to renovate, and the apartments which linger on the market are more and more often those which require extensive remodeling. 2010 has been the year during which staging has arrived in Manhattan. Today brokers realize, and are persuading their sellers to realize, the extreme importance of first impressions. As I tell Warburg sellers, buyers don’t decide what they want to buy during the first thirty seconds but they do decide what they DON’T want to buy in the first thirty seconds. More than ever, if a property is to sell well, it needs to look uncluttered, clean, and bright when the buyer walks through the door.

I don’t see big changes ahead in 2011: minimal price appreciation, a balanced flow of deals with more demand than supply in the larger property market and more supply than demand in the smaller, gradual easing in  credit offset by higher interest rates, a strong rental market at most price levels, and little in the way of new construction. Urgency has not re-entered the residential sales environment and probably 2011 is not the year when it will. Prices seem fair to both buyers and sellers with typical negotiability anywhere from 3% to 10%, but rarely more. And New York is still New York, the greatest place to live  in the world. Happy New Year!

 ….which was a commentary on peoples’ dress.  Today the neighborhood between 72^nd and 79^th Streets from Fifth Avenue to Park is still one of the most prestigious locations in Manhattan. It’s a block from one of the most fantastic parks in the world, is overflowing with fine shops, hotels and all kinds of eateries. 

 This is a sampling of some of the great amenities on this strip:

 Starting at 72^nd and Madison Ralph Lauren has just built a townhouse to house his women’s store.  It is across the street from his other store which is in the famous Rhinelander townhouse.  Give it a few years and the new one will look like it’s been around for a long time too.

 Moving uptown – do you need some superior produce or take out?  Try Marche Madison.  The fruit is luscious enough to photograph and eat.

 You can fill a prescription at Clyde and Zitomer Pharmacies as well as buy handbags, toys and a whole host of personal products.

 Three of New York’s most luxurious hotels are on this route, The Surrey which houses the famous Café Boulud, The Carlyle with not only their legendry restaurant, but also the Café featuring renowned performing artists and the newly renovated Mark with the Jean Georges’ restaurant.

 Looking for some culture? Visit the Whitney Museum with one of the finest contemporary art collections in the world.

 For an informal bite try the Greek influenced 3 Guys Restaurant or Café Viand known for great turkey sandwiches.

 Have a sweet tooth?  Sant Ambroeus, Lady M and La Masion du Chocolat have outstanding gelato, pastry and chocolate.

 The New York Society Library on 79^th between Madison and Park is a membership library with a large collection and interesting events.

 More shopping?  J.Crew and Brooks Brothers anchor 79^th and Madison.

 In addition to all these luxuries, some of the tree lined side streets with rows of brownstones feel like they are out of Henry James. If you think you’d enjoy living in this ambience, contact me and I can show you some wonderful properties in the neighborhood.  Also check out my listing at 42 East 73^rd Street.  This charming one bedroom with high ceilings and a wood burning fireplace in a brownstone makes a great full time home or pied d’ Terre.

I just thought I would share this stunning photo of the Albany Bahamas Marina, it was snapped on New Year’s Eve during the club’s “Casino Royale” bash. As you may recall the club house was featured in the recent James Bond movie Casino Royale. The two center yachts pictured top out at over 200 feet in length.   

Albany resdients kicked off the New Year not only with an amazing gala, but also with an Albany Founder’s Club Golf Tournament. Given the number of professional golfers who have homes there, I bet the competition was pretty tough! 

Pro golfer Ian James Poulter, who is a resident of Albany, was tweeting about the tournament: playing with Tiger and Justin Immelman on the Ernie Els designed course. Here’s what he had to say about the new years’ eve party at Vespers: “Great opening party last night. 1200 people going for it. License to Thrill; Sean Connery was there in fine form, a proper legend.” 

Wouldn’t it be great to have a second home at Albany Bahamas to get away to when the winter snows decend on us?

While areas like Arizona, Florida and Nevada are at risk for more declines, Manhattan’s residential market seems positioned to stay the course.  Will our recovery be stalled or substantial?  Halevai—it should only be substantial!  Read my Manhattan Market Watch to be published in the February issue of Mann Report. 

On December 24th as 2010 was drawing to a close, a front page New York Times headline reported “Experts Citing Rising Hopes for Economy.”  Heralding a “new optimism” and quoting forecasters and policy makers who were revising earlier predictions, the Times journalist declared that our recovery “will gain substantial momentum in 2011.”

The key word above is “substantial” and to that we add the Yiddish word “halevai.”  Pronounced phonetically in three syllables, sometimes dropping the initial “H,” ha-le-vai is a wonderfully expressive sentiment.  From the Hebrew meaning “would that,” it has come to mean “it should only be so.” 

Less than six months ago, another lead Times story—“Existing Home Sales Hit 15-Year Low”—informed us that these sales were at their lowest level since 1995.  Less than six months later, the trend had reversed itself and by December, National Association of Realtors’ Chief Economist Lawrence Yu observed that after bottoming out in July, residential sales nationwide had regained traction in November with stabilizing prices.  Despite an expected slight rise in mortgage interest rates, Yu predicts a year of growth for 2011 with modest appreciation. 

As I write this column, days before the New Year, numerous economic factors are contributing to a renewed optimism.  Retail sales have been improving steadily, rising 5.5% in year-end spending with a gain of 8.4% in jewelry purchases; large corporations are reporting strong profits; both the Dow and S&P 500 reached a two year high Christmas week; and new claims for unemployment benefits declined this December.

We’re on significantly firmer ground than we were three years ago as we begin 2011 and move from a stalled to an improving economy.  As our jobless recovery continues to gain strength, consumer confidence is growing.  We’ve definitely turned the corner, but as the European debt crisis spreads and as U.S. unemployment statistics hover at 9% levels, we remain vulnerable.  Thus the reason for the refrain “Halevai.”

A short primer for buyers and sellers

For buyers:  If you’ve been thinking about buying, now is the best time to take action.  Hire a broker to help you to navigate open houses and to evaluate purchase opportunities.  You won’t be saving money by going it alone.  On the contrary, you’re more likely to lose the property you want because you lack broker representation.  In point of fact, in today’s challenging market, although a direct deal means more dollars to the seller’s broker, by and large experienced agents prefer to do a deal with another experienced broker representing a buyer than dealing directly with the buyer because of inherent conflicts of interests.

For sellers:  If you’re thinking of selling, now is the time to prepare your home for showing.  Consult with your broker and staging professionals, strip the place of clutter and scrub everywhere.  Sales activity is increasing steadily, and quality inventory is still lacking.  Interview several agents before hiring an exclusive broker.  Resist the temptation to choose the one who tries to win your business with a high but unachievable price.  When you price above the market, valuable time is lost, and subsequent price reductions serve only to devalue the property by raising buyer doubts—why has the property been on so long, what’s wrong with it?  Rather than test the waters with an unrealistic number, it’s advisable to set a price that is close enough to the target to generate interest and stimulate bids while still leaving room to negotiate. 

The best bet for buyers and sellers alike is to enlist the services of an NYRS certified agent.  New York Residential Specialists comprise a new breed of top brokers from the city’s leading brokerage firms.  Dedicated to providing the finest customer service, they are experienced, skillful negotiators, committed to ethical behavior, and understand the highs and lows of real estate cycles.

First awarded in 2007 by the Real Estate Board of New York—REBNY—the NYRS designation identifies those Associate Brokers with a minimum of 5 years experience and $50M in sales who have successfully completed an advanced graduate program designed specifically for the nuances of the New York City market.  Created by brokers for brokers, these courses are taught by industry leaders and cover real estate law, macro-economics, commercial real estate, ethics, negotiation, marketing and technology.  For a complete list of NYRS certified agents, see the Leadership Directory at https://members.rebny.com/nyrs_why_hire.jsp.

As our recovery gains momentum, the balance between buyers and sellers is being restored.  Halevai.  May it be so. 

What can residential real estate agents do to make the industry better for themselves and for the consumer in the coming year? Here are a few ideas, in no particular order:

* Lobby effectively for changes in the laws governing tax abatements. The loss of the 421a and J-51 abatements, which granted developers tax benefits when building or rehabilitating property for residential use, means that very little development of any sort is now taking place in Manhattan. While it is certainly true that these advantages were misused in being applied to ultra-luxury projects, we are now throwing the baby out with the bathwater. Residential construction provides economic benefit down the line: let’s facilitate it again in New York.

* Work more effectively with sellers to price property appropriately. Overpricing is a particular danger in a fragile market like the one from which we are still recovering. Every price should be ambitious but justifiable. We want to reach for the stars while still having our feet planted on the ground. Otherwise it is just a waste of everyone’s time.

* Respond quickly to requests for information and appointments. While most agents are terrific at this, there are some, especially at the very high end, who make showing their exclusives almost impossible. I often wonder what the sellers of these properties would do if they knew just how many calls and e-mails were required just to schedule an appointment to view these listings!

* Become more involved citizens. Recently The Federal Home Finance Association threatened to refuse to permit Fannie Mae and Freddie Mac from purchasing mortgages in buildings with flip taxes. This would have been a disaster of major proportions for our industry, and the Real Estate Board sent out numerous pleas to the membership, numbering in the many thousands, requesting that letters be sent to our political representatives. The letters were already composed and the entire process of sending them took about 3 minutes. Nonetheless, fewer than 700 were written. This was a source of enormous frustration to me and other leaders of the residential community. We all need to wake up, agents and consumers alike, to insure that we prevent policies like this from wreaking havoc with our marketplace.

* Understand the national economic and political scene. Our clients and customers, even those sophisticated in these matters, depend on us to explain how our market intersects with the other economic indicators of which they are aware. We should pride ourselves on being a good source of local market data, unbiased by hope or political opinion.

* Publicize our pride in and love for our city. Agents are often the first line of inquiry for people moving to New York. Each of us is an ambassador for New York, its cultural richness and beautiful housing stock.

This is a short list of what I expect from Warburg agents and what you, as consumers, should expect from YOUR agent. Don’t offer your business to an agent who offers less.