I Like August

August was remarkably busy at Warburg Realty. Formerly the month when nothing happened, when buyers were “out of town” and sellers did not want to list, August morphed this year into a bonanza, with more contracts signed for more money than during almost any month since 2008. This phenomenon has led me to think about how this busyness differs from the busyness of five years ago, and how it is the same. These two eras, separated by only a few years, stand on different sides of the serious recession of 2008-2009. So in spite of the competitive bidding, the scarcity of inventory, and the harried buyers, the landscapes seem to me more different than similar. Here’s how:

 

1)         First, the active market of today does not carry with it the sense of optimism which characterized the middle years of the past decade. Although people are buying, they do not sense limitless possibility in the world or the economy. For some real estate is a hedge, for others just a decision to focus on enhanced quality of life. But today’s New York buyers, as a rule, don’t feel like residents in a world of endless growth.

 

2)         Probably as a result of this guarded perspective, most buyers don’t anticipate a big windfall in the value of their purchases. Yes, they believe it is appropriate to hope for appreciation keeping pace with and maybe even exceeding the Consumer Price Index, but unlike the buyers of 2006, they do not believe they could turn right around and sell their property for 15% more the week after the closing. And generally, they’re right.

 

3)         The upper end of our market is far more dominated by high ticket condominium purchases made by non-Americans. It is an ironic fact that just as the high flying Wall Street bankers of the early 2000s faced a day of reckoning, our market has been flooded with Asian, European, and South American buyers with vast purchasing power and a desire to park part of their wealth in New York condos.

 

4)         Competitive bidding has resurged in 2012. But in spite of that resurgence, American buyers remain cautious with their dollars. The desire NOT to overpay has never been stronger, and most multiple bid situations are created by the perception of real value in the property on offer. Importantly, even with many bidders, prices rarely stray much outside appropriate price parameters. 

 

5)         While co-op boards have always been stringent, the recession has made them particularly anxious about new applicants and their overall profile. Throughout the industry, agents are reporting a higher incidence of board turndowns than ever before; one of my colleagues at another firm has referred to 2012 as “the year of the turndown.” Buildings are going through applications with a fine tooth comb, and every co-op package we submit elicits additional questions and requests for explanation from the members of the board. We have also seen multiple examples of extraordinary requests from boards: 10 years of maintenance in escrow, a multi-million dollar deposit until a renovation is complete. These requests are unprecedented in my long experience. And the condos are following suit. Since they cannot turn buyers down (in theory a condo’s only two alternatives are to permit a sale to proceed or to buy the unit themselves), they use delay as a tactic, requesting one piece of paper after another until the buyer (hopefully) gives up and walks away. At Warburg, where we are hyper-careful about the quality and content of our board packages and each is reviewed multiple times, our board turndown rate is up 40% over last year.

 

So we find ourselves in a strange positive/negative environment. The market is strong , but customers are not particularly optimistic about the future. They buy as a hedge or for quality of life reasons (always, in my opinion, the best reason to acquire a home) without anticipating a huge return on their investment. The really big bucks are spent more by foreigners than Americans. And the boards are tougher than ever, so skilled agents are more integral than ever to the process of shepherding  transactions to a successful conclusion. In many ways, I prefer this environment. It feels rational. It moves (usually) at a reasonable pace. It expands our horizons. For 2012, this is the new normal.

Reset Password

Start an account to create alerts and save your searches and more...

Get notified when new listings match your saved searches.
Save listings and get updated of any changes in price, status and new open houses.
Hide listings that aren't for you so you don't have to see them over and over again.
Get recommendations and stay up-to-date with your dashboard.

Start an account to create alerts and save your searches and more...

Get notified when new listings match your saved searches.
Save listings and get updated of any changes in price, status and new open houses.
Hide listings that aren't for you so you don't have to see them over and over again.
Get recommendations and stay up-to-date with your dashboard.

Sign in instantly with Facebook or Google!

Or sign up the old fashioned way