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Apartment Shopping (An End of Year Round-Up)

    Home Uncategorized Apartment Shopping (An End of Year Round-Up)
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    Apartment Shopping (An End of Year Round-Up)

    By admin | Uncategorized | Comments are Closed | December 15, 2011 | 0
    This month I’m going to continue my discussion on buying versus renting.

    Even with clothing, this seems to be a more and more popular option with the advent of Rent the Runway.

    Renting can be a disruptive business model for the status quo, even in businesses that have been rentals for years- a la Zipcar etc.

    As a resident New Yorker, I definitely get to enjoy some of these ideas as they incubate.

    Of course, apartment renting has always been a major component of the market here, more than in most cities.

    Which segues me back to my monthly thoughts.

    To Rent or to Buy?

    But before diving in,

    let me indulge you with a moment of reflection on the year.

    In 2011,

    The Harris Residential Team was launched at Brown Harris Stevens.

    We have grown to a team of five, able to work with buyers and sellers from A to Z on the marketing and sales of apartments and townhouses, in Brooklyn

    and Manhattan.

    I am proud of the work that we’ve done for our clients, both on the buying and selling side.

    To those of you who have hired us to represent you,

    thank you.

    We look forward to

    advising your

    friends, family and colleagues on residential transactions of

    their own.

    Over ten years, I have built the business almost entirely on word of mouth.

    This blog, our soon-to-be improved web presence, our Facebook and LinkedIn presence, alongside my daily thoughts on Twitter (please follow @HarrisResiTeam) give you insight into the facets of the business which I manage.

    The Harris Residential Team has landed in the top 10% of associate brokers at Brown Harris Stevens, in no small part to you and your trust in me and my team.

    Thank you so, so, so much.

    Here’s to another decade of hard work and success.

    And so, what’s changed in the marketplace since November?

    First, the market has been as active as I can recall in

    December.

    Let’s split this into condo and coop.

    Condominiums and New development continue to sell briskly, the latter even better than resale condos.

    Most of these development buyers are foreigners, who are buying for investment.

    Returns on these properties as rental investments range from 3% to perhaps as high as 5%.

    There may be a resale condominium here or there with a return either lower or higher than these numbers, but with an all cash purchase, this is a pretty typical band.

    Avoiding the time and cost of renovating seems to be a driver, along with the appeal of the brand new.

    I’ve covered some of this ground in recent months (see link), so I won’t go over again.

    However, let’s say that brisk describes well-priced condominium.

    I don’t to appear glib, saying that all of the market is driven by foreign buyers. Sure, there are some local buyers buying condo, but those buyers taking a long view on

    investment-ready residential Real Estate appears to be non-American largely.

    Also, you may be happy to know that Coops are selling as well, provided that they are 1) 2-bedrooms or larger, 2) Well-located, 3) Appropriately priced, or 4) renovated.

    Two-, Three-bedroom and larger apartments are selling as they come on the market, provided that they are within 5% of their proper pricing.

    Sellers seem to be keeping reality in view, and keeping pricing reasonable- for the time being.

    However, one-bedrooms continue to sell slowly, even in the most active parts of the city.

    The exceptions are

    the must-have buildings, the view-apartments, the trophy 1-bedrooms- those are selling, if in mint condition.

    Anything that is an off-location, units East of 2nd avenue, really seem to have trouble selling right now.

    Too much inventory.

    Then for one-bedrooms it becomes a function of price and condition.

    So the buy vs rent equation comes in.

    What

    is the logic?

    Purchases of one-bedrooms with these mortgage rates can definitely be less expensive than rentals.

    What are the other factors?

    Economic fears.

    Coming on the heels of a recession.

    Lots of tinidity.

    Financial industry thinkers and pessimism about the short-term stock market future.

    Job losses.

    Investors fearing

    another downturn.

    Location Location Location

    And of course, the million dollar question- how bad is the job market here in Manhattan?

    The end of November numbers in the Heym Report were

    not terrible, 43,000 jobs added through October of this year.

    But when the media keeps trotting out the stories of the strength of the rental market, when every developer is

    speaking about the strength of the rental market, who is out there looking past this and thinking about the tipping point between rent vs buy?

    Should you be a contrarian?

    If rentals are so strong, where are all of these jobs to support it?

    Is nearly every former-one-bedroom buyer simply socking away money and renting?

    From my perspective, certain areas seem to be moving towards a rental housing glut.

    Downtown Brooklyn comes to mind.

    Thousands of rental units being built.

    We are seeing condos reverting to rentals because the pro forma works, even when the new development market is

    strong.

    Related Companies is betting on rentals

    in this article today.

    Williamsburg stalled out condos are “Rushing to the rental market?”

    Certainly in 2005-2008 a number of rental buildings

    converted to condominium, so there is room for inventory to be absorbed into the rental market etc. – but I’m wondering what the headwinds are that new rental development faces.

    So are the jobs here or not?

    I don’t think the rental market can have it both ways.

    Has New York City become such a destination that segments such as the

    rental development market can sustain such high prices forever?

    Aren’t we having with these rhetorical questions?

    Having been through a few rental cycles, I think we will see owner incentives on the rental side by the end of 2012.

    This rental cycle will not last forever.

    But in the meantime, on the sales side there will likely be

    a growing gap in pricing from 1- to 2-bedroom apartments,

    and that gap will likely keep moving in that direction throughout the year.

    I expect that pricing will continue to slide on bread-and-butter small apartments but ultimately there will be a pickup in volume.

    when

    prices dip to about $600-650 per square foot-

    I’m using this as a rule of thumb for these small run-of-the-mill units on the East Side.

    When that will happen is hard to say- I’m guessing it will time along with the election next year.

    For now, sales volume for New Yorkers right now

    consists mostly of need buying in the $600k-3mm range, including bidding wars across New York City and Brooklyn.

    I just heard a story of a 2-bedroom open house last Sunday with 110 buyers coming through.

    In December.

    There is low, low inventory for 2-bedrooms under $750,000 in Prime Brooklyn (in which we specialize).

    By the end of January, I’ll have more data on our company numbers and what our averages were for 2011.
    I’ll end by saying there

    continues to be

    some interesting fallout from the downturn.

    I know a buyer who lost a very large property in foreclosure- but typically these are overleveraged speculators, not primary homeowners.

    I love this article that speaks about foreclosures- there are so few foreclosures in Manhattan.

    When 16 foreclosures makes news, you know there isn’t a real problem.

    Any investors looking for short-sales here are going to have to find that needle in the haystack on their own.

    Hunting for unicorns, largely.

    Have very happy holidays!

    Let’s catch up in the New Year!!

    Best, Scott & The Harris Residential Team
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