Warburg Blog

How do co-op Boards manage the purchaser approval process, and are they acting in an appropriate manner when doing so? These questions are the driving forces behind a contentious new bill which is currently before the New York City Council. The bill has been proposed to end hidden discrimination in the co-op selection process; it would require that all Board members sign an affidavit every time they reject an applicant confirming that they have not discriminated based on the New York City Fair Housing guidelines, which are among the most stringent in the nation. The bill would also create some parameters around Board response time: Boards would be given a certain number of weeks to request more information, a certain number of weeks within which to meet or reject an applicant without a meeting, and a final number of weeks within which to render a decision after a meeting.

Last week at The Real Estate Board of New York, members of the Residential Brokerage and Residential Management Divisions met together to discuss the bill and how REBNY should best respond to it. All were in agreement that, as long as they are reasonable and leave the Boards some latitude, time limits make sense. It is simply not fair to punish prospective purchasers, who only want to buy a new home, and prospective sellers, who only want to sell the home they have, by forcing them to waits months for a decision, or by issuing a seemingly endless series of requests for additional information. And of course these delays are particularly dispiriting when the ultimate answer from the Board is a “no”.

The other part of the bill requires a more nuanced response. First, those of us who have been in the industry for many years must acknowledge that co-op Boards do occasionally indulge in  discrimination. It is not the norm, but it happens. Many protected categories, including  race, children and family, sexual orientation, marital status, and religious faith, have been known to lead to turndowns in certain buildings. That said, the vast majority of co-op Boards act with the utmost integrity in pursuing the greater good of the buildings they manage. Evaluating prospective purchasers occupies a small percentage of their time; most of their work as a group is devoted to overseeing the staff and physical plant of the buildings for which they are responsible. And let’s not forget that this often thankless and time consuming task is done on a volunteer basis.

So the question is: is this bill the most effective way to guarantee that Boards do not illegally discriminate in their choices? I would argue that the answer is no, for several reasons. First and foremost, the proposed law is simply an invitation to litigation. Even if it does not cut back on discrimination, it will certainly discourage any well-informed person from wanting to expose themselves to lawsuits by serving on a co-op Board. Insurance costs for co-op buildings would almost certainly skyrocket. And who would be in charge of all those affidavits? And affidavit or no affidavit, who will admit to discriminating? Often Board members are not even aware that questions they ask are illegal or inappropriate. And some believe that because a co-op Board  is a private corporation, these laws do not apply to them.

At the REBNY meeting I attended, Hall Willkie, the President of Brown Harris Stevens, had a terrific suggestion: Board education. Real estate agents are required to complete Fair Housing training. Why not do the same for Board members? One hour each year, why not require that an attorney come in and school the Boards on what they can and cannot ask, or consider, when evaluating a candidate? Before the law is punitive, it should be didactic. I am certain that Board education would substantially reduce discrimination of all sorts in the co-op world.  And that would be a win/win outcome for buyers, sellers, Board members, and brokers.

As of Wednesday, I have moved to Long Island City for a whole week. How do I feel about my new neighborhood?

I love it!

I am originally from California and grew up in a small community called South Pasadena. Imbedded in my life style is the strolling in the park walking speed and the infinite love for open spaces. After I moved to New York, I adapted to the New Yorker speed walking and charming studios (isn’t it funny that brokers descript small studios as “charming” or “cozy”). When I moved to LIC a week ago, not only did I find my “California”, but even better, “California” in NYC!

My apartment is in one of the new developed high-rises along the Gantry Plaza State Park. Every morning around 8am, I walk about 8 to 10 minutes to the subway stop at Vernon Jackson Ave. The walk is pleasant. I pass by a couple half empty newly built parking lots, a semi-new condo called The Gantry and a children’s playground named Andrew. There are trees along the entire walk and the streets are very clean.  If I have to compare my commute to the subway stop to any of that in Manhattan, it will be the walk from The Aldyn at 60 Riverside Boulevard along 65^th street to the subway stop at Lincoln Center; minus the noises of course. (Although, I have been warned that LIC is very windy and cold during winter and there WILL be days that the walk seems 100 miles long.)

At night, the neighborhood is quite. Not the Financial Center after work dead silent, but the central park on a misty spring morning quiet. The Piers at Gantry State Park attracts locals for an evening glass of wine with its ready for tanning beach chairs. Needless to say, my wife and I are regulars; she even has a favorite seat with a front row view of the Manhattan skylines. The atmosphere is both romantic and peaceful: couples holding hands strolling along the pier, parents pushing strollers and dog owners chatting with each other while their dogs rob noses.

How’s the view from the pier? Fascinating! The buzzing Manhattan composed a curtain of lights across the East river.  Standing on the Cove, if you look toward the south, you will see the newly erected Beekman Tower at 8 Spruce Street, the tallest all residential building the entire Western Hemisphere. Look straight across the river; you will see all the architectural wonders that have defined New York Skyline for generations: Empire State shining in 3 colors, Chrysler with is spiky crown, United Nations which is currently undergoing complete window treatment, marble black Trump World Tower and even the new addition, Bank of America tower, with its ever-so-pointy “light saber” into the sky.  Turn to the right, there is the Queensboro Bridge painted yellow and red by the busy traffic. If you take a picture in any direction, you will get a postcard perfect shot of Manhattan.

But LIC is not Manhattan. What I truly miss is the convenience of fabulous restaurants and bars around every corner; 24 hour convenience store, a surplus of yellow cabs (except when it rains). And Lincoln Center, Central Park Festivals, 5^th Avenue shopping, Union square markets… just to name a few. And once in a while when the 7 train breaks down (happened twice last week), I will get a harsh reminder of the convenience from NYC subway system that I used to enjoy so carelessly.

So is it worth it to move to LIC. For me it is. My son enjoys the quietness of the neighborhood and my parents, whom are staying with me to help with the baby, enjoy the benefit of the extra bedroom.

So should you move to LIC? Up to you! Different people have different opinions. How would YOU know? Just call me and I will be happy to show you around my new neighborhood!

Vincent Zou

May 27^th, 2011

The Pier at night

My wife’s favirate chair (The one that is “occupied”)

The View

After 4 years of living in Manhattan, I decided to try something unspeakable, moving across the East River to Long Island City!

And so far, I Love it here!

I live at the EastCoast community tower managed by TFC. My 1,000 sqft 2 Bedroom sits 30 floors above the Gantry Plaza State Park and has an open view of the east river and downtown Manhattan.

How much am i paying for this apt in the sky? the price of a midtown 1 bedroom, or the equivalent of a studio with a central park view.

Vincent

This wonderful opening line from Keats’s poem “On First Looking Into Chapman’s Homer” also accurately describes my excitement (Philistine that I am!) every time I open the Select Register to look at a floor plan! In many ways I became a real estate agent, back in 1980, because of my love of floor plans. What makes them so great? I will try to classify my obsession:

* Through floor plans you can trace the history of the deployment of space in Manhattan. Manhattan is one of the world’s great apartment cities. From the late 19th century, when multiple dwellings first entered the architectural vocabulary of New York, until now, the way we think about our lives and what is important is reflected in how we use space. 5 maids’ rooms? Not any more!  Few people have that sort of staff. Efficiency kitchen? SO 1950s and 1960s. Today everyone hangs out in the kitchen. Formal dining room? In the first few decades of the 20th century, it was the second largest room in the apartment. Now for most owners it is a multi-purpose TV/play/eating space.  And the foyer – an important element of early apartment plans, it was then abandoned as “wasted space” for decades before making a triumphant comeback in the condo construction of the last 10 years. Architects have figured out that “wasted space” is rarely wasted-that it gives a sense of space and connection to everything around it.

* Through floor plans you can observe the ebb and flow of wealth and how it expresses itself.  The early apartment buildings were tenements, definitely not planned for the wealthy or even for the middle class, since they lived in houses. Early grand apartment buildings like 998 Fifth Avenue, built by McKim, Mead, & White, struggled to find tenants. 998 had to offer cut rate rents to appeal to the rich man’s ever present sense of economy. And 998, with its towering ceiling heights, 40’ entrance halls and sweeping staircases, and multiple reception rooms all with fireplaces, resembled a private house as much as an apartment building possibly could. It wasn’t until the 1910s and 1920s that a truly specific New York apartment style was born, with buildings like Emery Roth’s San Remo and Rosario Candela’s 720 Park providing a variety of apartment sizes for wealthy clients who might need only one bedroom but still wanted maids’ rooms, a formal dining room, and a paneled library. Later, glass towers like Trump Tower and Museum Tower catered to globe hoppers, some American but many not, who found midtown a convenient address but who lived elsewhere, or nowhere, commuting between continents.

* Through floor plans you can watch the refining and redefinition of New York architecture. The tortuous plans of the early apartments, usually just a long hall with a series of rooms off it, are often echoed by their heavy neo-Gothic or Queen Anne facades. As the interior gives way gradually to the far more pleasing central foyer layout, there is a coincident move towards the iconic Manhattan apartment buildings which grace our skyline to this day. The beautiful interior planning of the Beresford, or the Normandy at 86th and Riverside, or 1220 Park, are echoed in the graceful exterior shapes with which the buildings occupy their lots. The sleekness of the International Style and its aftermath find residential expression in such buildings as Museum Tower or 860 and 870 United Nations Plaza, where neutral curtains were provided in every window so the visual line and sweep  of the space would not be broken by chintz!  And today postmodernism shows itself in every prewar imitation, every red brick and banded limestone exterior; their interiors have updated and imitated the foyers, dining rooms, fireplaces, and setbacks of buildings conceived and created 80 years ago.

But my greatest fascination with floor plans lies in what they allow me to imagine about people’s lives. How wonderful to walk down that 30’ gallery towards the dining room for a dinner with friends. How beautiful to pause halfway up that semi-circular staircase to gaze out over the skyline of New York from the fan window. Our apartments embody us; they tell our stories. And for thirty years I have had the privilege of bringing those stories to the customers and clients I serve.

Here’s my market update from the Warburg agents about what’s hot and what’s not in the current New York real estate environment:

·       There is no consistent “market.” Depending on the size, condition, and location of the property, there are a variety of submarkets which are behaving dissimilarly to one another. 

·       There are plenty of studios and one bedrooms, especially on the Upper East Side east of Third, going down through Midtown and Murray Hill all the way to 14th St. There is still a buyer’s market for these apartments. 

·       The house market in Brooklyn, especially in Park Slope, Windsor Terrace, and Prospect Heights, is incredibly hot. Everything sells immediately at the asking price or higher with multiple offers. $1 million does not buy you so much any more. The same thing is happening in Greenpoint and Williamsburg. Prices in Brooklyn Heights are astronomical. 

·       Three bedroom apartments, particularly those in great condition, sell right away all over town with lots of bids. The worse the condition, the slower the sale. And larger places, in the luxury and ultra luxury markets, are moving briskly, with layout, condition, and views driving this marketplace which doesn’t seem inhibited by buyer financial constraints.  

·       Generally speaking, Open House attendance declines fast after the first few weeks. A number of agents reported having 25 attendees the first week, 15 the second week, and 3 or 4 by the fourth week. This tends to reflect the pace of sales as well. If it doesn’t sell within the first few weeks, it may hang around for a while. 

·       The rental market is hot. One of my agents says there is less inventory, at higher prices, than ever before. 

·       Loan commitments have become slightly easier to obtain, although appraisals are once again an issue as values increase. And as of October 1, 2011, Fannie Mae is scaling back the limit on loans it will purchase in “high cost areas” from $729.500 to $625,500, thus further complicating the jumbo loan marketplace.

·       Condos all over Manhattan and Brooklyn have sprung back to life. While many of the current purchasers plan to live in these units, there is also a huge resurgence of interest in New York from foreigners looking for investment vehicles. We are seeing this from Harlem to the Battery. Buyers from Russia (and other former Soviet bloc states), Brazil, India, China, and Korea are particularly in evidence, But Europeans (especially southern Europeans) are active as well.

Overall, the market continues to show a quick pace for larger units while the smaller ones, and those in poorer condition, move much more languidly. The very rich are snapping up trophy properties and setting price records. Competitive bidding situations abound. Meanwhile, finding a rental seems as hard as it has ever been, and what IS out there costs a fortune. And we see very little new inventory feeding either the sale or the rental pipeline. It’s a busy market, and often a fast paced one.  We will see what the summer brings!  

For all you customers out there in the NYC real estate market- you only have three options: rent, buy, or stay put. Each of these options has its benefits and drawbacks which vary as the market ebbs and flows. Here is where I see it at the moment:

OPTION 1: If you are choosing to rent today it should only be for a couple of reasons-either you need someplace to live right away, you are only going to be in the city for two or three years, you want some time to figure out your next step, you have just graduated from college and you and six friends hope to find a one bedroom to share, or you don’t have the money for a down payment. Otherwise renting just doesn’t make that much sense these days.  It is VERY expensive, all paid for with after tax dollars, and the sales market is in recovery. Which means that by the time your lease expires you will have to pay more for whatever it is you like today.

OPTION 2: If you are planning to buy at some point, my advice is to do it now. Interest rates are still historically low and even though we are now nearly two years off the bottom there are still opportunities in the market. For example, properties in need of work. These days we are seeing premiums paid for mint condition. Most people do not have the time or stress tolerance for renovation. If you do, that can save you money. Bur whatever your preference, if you are contemplating a purchase, do it now! We are at the beginning of the new cycle and I don’t see prices going anywhere but up for the next few years.

OPTION 3: Staying where you are is always an option. And frequently it’s a good option. But you need to assess your needs for the next few years. Are you likely to need a lot more space? If so probably finding it now will be cheaper than finding it when you need it, and you will be under less pressure. If your current space really doesn’t work for you and only inertia is keeping you there, remember, inertia is almost never a good reason for anything.  And, while we are on the topic, competition is almost never a good reason for anything. If you are living in an appropriate space but others you know have much more, don’t let it bother you. It isn’t a contest and there is no correlation at this level between money and happiness. You already live in the greatest city in the world. Enjoy it!

Spring Fever is in the air and the NYC Real Estate Market has lots of budding inventory, causing both Sellers and Buyers severe allergies. Symptoms include the following: (more…)

Many of the blogs and quarterly reports covering our New York real estate market continue to talk about “shadow inventory.”  This term refers to the backlog of unsold condominium apartments, many converted to rentals in the last couple of years, which developers built during the boom but were unable to sell when the market declined after the mortgage debacle. Clearly the shadow inventory issue is huge in Miami and Las Vegas. There, an unprecedented number of apartments were built for an anticipated market which, when the bottom fell out of the market, never materialized. But New York is different. So here’s why I don’t see shadow inventory as much of an issue here:

·        Manhattan is an island. The prime spots in the city which are available for development are few and far between, and most of the great real estate locations have been constructed already.  The same is true in downtown Brooklyn, and increasingly in Long Island City.

·        New York is an international business center. Of course, Miami has unique attractions for the South and Latin American markets, but EVERYONE wants or needs to come to New York. Plus, the dollar is still cheap and we are still seen as a financial safe haven. So foreign buyers are flooding our markets again.

·        Absorption is accelerating as the market improves. Much of the excess inventory which was converted to rental is gradually coming back onto the sales market. And it is being snapped up. We anticipate that within two years most of these units will have returned to the sale market and been sold.

·        The tax climate is currently not very friendly to new development.  Changes in the tax laws, followed by the decline in values, disinclined many developers to new condo projects in New York. So there is not much in the pipeline. And anything which is begun today will take at least a few years to come to the market.

In my opinion the bigger threat to our New York market is undersupply. We already have a dearth of inventory in many segments of the co-op market. As the four factors described above play themselves out, we are in real danger of running out of units to sell well before we run out of buyers to buy them. New York enjoys a  growing population. Tourism reaches new heights year after year.  We as an industry need to worry less about today’s unabsorbed inventory, and more about where tomorrow’s homes for our new residents and foreign visitors will come from!