2011 – The Year of The Buyer
Here’s a preview of my Manhattan Market Watch column to appear in the January issue of Mann Report. Thanks for reading!
After a major downturn in Manhattan’s real estate market, we turned the corner and regained our footing during 2010. We managed to repair the imbalance wrought in the tumultuous aftermath of Lehman’s collapse. In less than two years, we emerged from the crisis, and we look forward to a continued gradual recovery. Collective wisdom posits this next year of 2011 as a period to secure a firm foundation from which we will grow incrementally.
I see 2011 as a time to buy Manhattan properties at still depressed prices. By far, a real estate purchase in our borough ranks as the greatest investment. Where you live is still the best place to park your money. It’s insightful to compare stats for the end of the third quarter of 2000 to the end of the third quarter of 2010. In this decade, consider the following:
– the Dow is up 7.5% —10,650 vs. 11,407
– the S & P is down 15% —1,436 vs. 1,223
– the NASDAQ is down 30%—3,672 vs. 2,580
– Manhattan real estate is up 40%
Market timing yields 20:20 vision in hindsight only. From 2000 through 2006, with successive years of rapidly escalating prices, who could have forecast 2007 would become the peak of the market from which we would fall precipitously to a trough in mid 2009?
For much of 2010, media talk about foreclosures and short sales around the country created false expectations among our buyers, causing a lethargy and ambivalence in decision making. In point of fact, foreclosures in Manhattan have been minimal, and there’s no guarantee that a short sale which is fraught with seemingly endless difficulties will actually close.
Though transaction volume was up considerably in 2010 from 2009, for the most part buyers were taking their sweet time to make purchasing decisions. They might make an offer one day, and then you didn’t hear from them for weeks if at all. Except for isolated instances of competitive bidding, the market lacked urgency, as buyers sat on their bids waiting for new inventory to surface and hoping for further price erosion which didn’t come. In today’s market, it’s the sellers who are doing most of the compromising.
Make Way for the Buyers
The resurgence of the market’s over-$10-million high end in the 2nd half of 2010, after nearly two years of inactivity, demonstrates the return of buyer confidence. With dozens of jaw dropping, record breaking closings in all areas of the city, Manhattan’s top sector has been particularly busy spreading confidence through all market segments.
For Europeans, New York real estate provides more than shelter. As a safe haven from European debt worries, foreign investors have been returning to the Manhattan market. Beginning with Greece in the spring, then Ireland, Portugal and most recently Spain, debt woes in the sovereign states are worsening and threatening the euro. These rippling waves of global instability will keep Manhattan prices flat for the near term at least.
With interest rates at historic lows, there’s never been a better time to borrow. Stringent Fannie Mae guidelines wreaked havoc on our market in 2009. Sari Rosenberg, Managing Director at The Manhattan Mortgage Company, characterized 2009 as “traumatizing” but sees the lending industry in far better shape today, pointing to “many lenders who are able to provide loans above the Fannie Mae limit of $729,750 for those who can prove they qualify.” Last September, Congress extended the loan limit through 2011 in New York and other high cost markets. Without the change, the maximum government-backed mortgage would have fallen to about $625,000. Before 2008, the limit was $417,000 which is the level for most of the nation.
Opportunities abound for buyers today in both the resale and new development condo markets; during the downturn, as the latter struggled, many closed sales offices which have only recently re-opened.
Now is decidedly the time to collaborate with your broker to identify the right property for your specific needs. With new online tools available for the trade and the public, buyers and brokers can work in partnership to search inventory. At UrbanDigs.com, Noah Rosenblatt offers statistics on the pace of Contracts Signed in real time demonstrating actual buyer demand in an ever changing marketplace. Coming soon will be a break out by category of Contracts Signed by co-ops, condos and townhouses. Over at Streeteasy.com, a new Folders feature provides “a collaborative environment” to help users organize searches and communicate with each other.
Although the economic recovery remains stalled with unemployment as the impediment that won’t go away, our market continues to buck national downward trends. Manhattan is still one of the super cities of the world. In 2011, savvy buyers will be out shopping with their brokers in increasing numbers, taking advantage of deep discounts and reaping the benefits of living in their brick and mortar investments.