A: In case you missed it, UrbanDigs was mentioned in this past Sunday's DailyNews for a story about break-ups and NYC real estate market by Lucy Maher.
UrbanDigs mentioned in "Moving on...but not out" in Sunday's DailyNews. Here is the story:
A: If location is very important to you such that you are willing to pay a higher price tag to be in a prime neighborhood, check out these 2 generously sized alcove studio's that can easily be converted to a Junior-1 bedroom!
Converting an alcove studio to a Junior-1 bedroom couldn't be easier. You can do it the cheap way (usually under $1,000) by adding a pressurized wall (check out RoomDividers.com for their work), or you can spend $3-5K and have a contractor come in and build a permanent wall that will look as if it's been there all along!
30 West 60th Street; Apt. 15H
Size: 600 sft
# Beds: 0 (Alcove Studio could convert to JR1)
# Baths: 1
maintenance: $708 ($1.18/sft - seems fine)
Price Per Sq. Ft.: $831 (Paying for location/high floor)
Marketed By: Todd Stevens & Anne Butler of Douglas Elliman
**OH SUNDAY JUNE 4th 2:00 - 3:30PM**
200 East 24th Street; Apt. 1807
Size: 600 sft
# Beds: 0 (Alcove Studio could convert to JR1)
# Baths: 1
maintenance: $863 ($1.43/sft - a bit high)
Price Per Sq. Ft.: $831 (Paying for location/PH views)
Marketed By: Charlie Summers of Bellmarc
**OH SUNDAY JUNE 4th 12:00 - 1:30PM**
FRENZY: Intense usually wild and often disorderly compulsive or agitated activity
A: From January to May of 2005 the NYC housing market experienced a frenzy due to the lack of available inventory, rising lending rates signaling the beginning effects of Greenspan's monetary policy to slow the economy, and the sudden surge in buyer demand to lock in morgages which powered 7 out of 10 deals into bidding wars. Looking back, homeowners trying to sell now should realize that in 'times of frenzy' is when you will get top dollar for your property! Will greed kick in and cloud your investment vision the next time the 'frenzy' hits NYC real estate?
Selling today? Then you missed the top! Your NOT the best, and despite everything your broker or friends have told you chances are your apartment is worth a bit less than you would like. Buyers do have control in this market and will negotiate! Should you have sold? If so, than at the very least make sure you learned something!
Once you come to the realization that your apartment may NOT be worth what comparable units were getting 12 months ago, you will be able to get back to savvy investing strategy which is a constant learning experience. Although many homeowners are still pricing their units using comps from the year ago period, buyers just aren't biting! Therefore it's those homeowners offering the best deals right now that are getting the deals, forcing comparable units to stay on the market longer and reduce their price at a later, more desperate time.
If anything seller's should come out of the experience wiser after having lived through the experience of a 'buying frenzy' (JAN-MAY 2005) where the majority of transactions were going into bidding wars from mulitple buyers. The question of the year ago market was, "...how high do I need to go over ask?". The question of today's market is, "...how low can I get this seller down to?".
Not to say it was a bad time to buy 1 year ago, as I've seen a few studio and JR1 apartments recognize nice gains over the past 12 months. Its just that in hindsight you realize that 'buyer frenzies' are the types of times that savvy investors from years ago should lookout for to take profits in! Let me repeat that:
SAVVY HOMEOWNERS BUY FOR THE LONGER TERM AND LOOK FOR VALUE IN TERMS OF THE HIGHEST QUALITY PERMANENT FEATURES OF THE PROPERTY - SUPERSTAR INVESTORS RECOGNIZE TIMES OF FRENZY AND TAKE THE OPPORTUNITY TO SELL AND CASH IN PROFITSIf you bought a 'starter property' in the past year or so (with the strategy of owning then renting/selling) then be sure you remember what the NYC market was like from JAN - MAY 2005; the next time its like that you will want to SELL and realize the gains when buyers pay top dollar due to limited inventory and low lending rates (nyc real estate is cyclical and will rebound in the future). That should be your EXIT STRATEGY as you recognize the selling opportunity and cash out. Until then, you should live in your property and recover from the initial financial effects of homeownership (down payment + closing costs + renovation costs add up). So what if your sacrificing your lifestyle temporarily as you are on the right path to building wealth. After your save up enough liquid assets after taxes look to lease out the unit for rental income and wait to sell when the next buyer frenzy sets in.
Will you recognize it the next time around?
Examples of Savvy Investors Selling During Past 'Buyer Frenzys':
1. Mark Cuban Selling Broadcast.com to Yahoo for aprox. $1B (in pocket) in early 1999.
2. Donald Trump/Hong Kong Investors Selling Land on Manhattan's Westside to Extell/Carlyle Group in Mid 2005 for $1.8B.
A: Don't read too much into todays released #'s because articles are saying one thing while the markets/experts are interpreting them in another way.
The big piece of data was the Core Inflation # excluding food and energy that came in at 2.1%, which MET wall street estimates. This is ABOVE the fed so called 'comfort zone' for this number which tends to be between 1-2%. So, its 0.1% above the comfort zone and some might argue that the fed is overly concerned about it. However, this 2.1% number did meet expectations and the street took the news positively as stocks are moving higher; basically the street felt relieved that this number wasn't higher!
If anything, today's report will tell the fed that inflation for the most part is CONTAINED thus far, and that a pause at the June meeting is a distinct possibility.
UrbanDigs Says: Its just too early to make any educated guesses right now. I'm still leaning towards a 1/4 point hike because as energy prices and precious metal prices remain high, inflation can trickle down at a later time; so the fed must be vigilant. Also, Bernanke MUST show that he is tough in inflation fearing times like Greenspan was. To do so means another 1/4 rate hike!
A: If you are actively looking for a NYC apartment with a great terrace now is a good time to find some. In addition to one of my own listings at 245 East 93rd Street I just put on the market, here are a few other good looking terrace apartments that I found in today's NY Post Article titled, "Great Outdoors".
NOTE: When buying a terrace apartment you need to calculate how much of a premium the outdoor space is asking for when compared to other apartments for sale in the same building. So I included the PPSF (price per square foot) for the following terrace apartments as well as the average PPSF of the other apartments for sale in the same building; where there were more actives to compare to.
Upper East Side: 245 E 93rd St; Apt. 2M
Interior Size: 1,093 SFT
Terrace Size: 660 SFT
# Beds: 2
# Baths: 1.5
RE Taxes: $660
Price Per Sq. Ft.: $904 (Asking LESS Than Bldg Average - See Below)
AVG Active Bldg PPSF: $935
Marketed By: Noah Rosenblatt of Citi-Habitats
Upper East Side: 222 E 80th St; Apt. 11F
Interior Size: 800 SFT
Terrace Size: 270 SFT
# Beds: 1
# Baths: 1
maintenance: $1,366 (Co-op Includes RE Taxes)
Price Per Sq. Ft.: $874
AVG Active Bldg PPSF: N/A (Only Active Listing in Building)
Marketed By: Amelia Gewirtz & Andrew Phillips of Halstead
Midtown: 249 E 48th St
Interior Size: 800 SFT
Terrace Size: 630 SFT
# Beds: 1
# Baths: 1
RE Taxes: $402
Price Per Sq. Ft.: $1,186
AVG Active Bldg PPSF: $1,327 (Only 1 Active to Compare)
Marketed By: Nancy Lee of Corcoran
Murray Hill: 218 East 29th Street; Apt. 1
Interior Size: 750 SFT
Patio Size: 575 SFT
# Beds: 1
# Baths: 1
maintenance: $973 (Co-op Includes RE Taxes)
Price Per Sq. Ft.: $799
AVG Active Bldg PPSF: N/A (Only Active Listing in Building)
Marketed By: Anna Kahn of Halstead
So be sure to do your homework and figure out which outdoor space has enough room for your entertaining/gardening/lounging needs and at the same time is NOT asking that much of a premium compared to other properties for sale in the same building! When you go to resell you will have a property feature that sets your listing apart as you market to buyers seeking outdoor space in NYC (not many to choose from)! Good Luck!
A: As of right now even the experts are confused about whether Bernanke & Co. are going to raise the fed funds rate for the 17th consecutive time at June's meeting. In the past week or so I've noticed precious metal prices correct beautifully, but energy prices remain high. Today's GDP # showed a still strong US Economy but not as strong as wall street expected; in the end I think wall streets estimates are more important which tells me the markets view the latest GDP # as a sign the economy is not as strong as expected and inflation fears are not as troubling as expected.
Lets break it down this way in terms of what helps and what hurts the chances of another 1/4 point rate hike in June:
DATA FAVORING 1/4 RATE HIKE
The inflation leading indicator of high energy prices are still pointing towards a rate increase since there has yet to be a sizable correction in this market. Geopolitical concerns in Iran, Nigeria, & Venezuela are still leading to supply concerns for the oil markets keepin the price of light sweet crude around $70/Barrel.
For the fed to consider pausing at June's meeting we need the price of light sweet crude to correct to below $60/Barrel. At least that would warrant a 'WAIT & SEE' attitude by the fed.
To check oil prices & other commodity prices click here.
DATA FAVORING A PAUSE
The prices of precious metals have corrected substantially over the past 4 weeks, mainly as speculators (who have helped prices boom) took profits off the table and lowered their risk tolerance after the huge runup enjoyed over the past 6 months.
We are not out of the woods yet as the prices of precious metals need to stay down or even correct some more to convince the fed to pause at June's meeting. Here is a 6-Month chart showing the original runup and recent correction in the price of NY Gold:
The price of Copper, Silver, Platinum, & Palladium have had similar corrections over the past 4 weeks as the did NY Gold as shown above. The correction in precious metal prices will only help in convincing the fed to pause at June's meeting.
In addition to precious metal prices, US Economic data has shown that the economy is NOT as strong as wall street expected.
According to CNN Money article:
The nation's economy picked up speed in the first quarter, the government reported Thursday, but it didn't pick up as much strength as Wall Street was expecting. Consumer spending was up at a 5.2 percent annual rate, but that was down from the original reading of 5.5 percent growth. That was greatly responsible for the report coming in lower than forecasts according to Anthony Chan, chief economist for JPMorgan Private Client Services.
But Chan said the report was a positive for markets because it calmed inflation fears and gave the Federal Reserve more flexibility to not raise rates at its June 29 meeting if it decides to do so. A closely watched inflation measure in the report, which measures prices paid by consumers for items other than food or energy, remained at a 2.0 percent annual gain, the same as the initial reading, which lessened inflation fears in the markets.
CONCLUSIONS: Its just too early to tell but if I were to guess right now I would say we still have a 1/4 point rate hike ahead of us at the June meeting. I strongly believe that energy prices are the most directly related to future inflation concerns and prices today are still high. If I see the price of oil correct substantially over the next 4-5 weeks then I would lean more towards a pause.
A: On a positive note the Live Chat feature seems to be working as I'm meeting a lot of new people presenting me with very interesting questions. One question that I'm asked almost on a daily basis these days is, "...I was thinking of submitting a bid but I'm not sure if I should buy now or wait a bit?". So, I'll try to sum up the answer to this question so that it conforms to a variety of financial situations.
My soon to become favored real estate mantra:
MAKING THE DECISION TO BUY NOW SHOULD BE CLEARED UP BY ANALYZING YOUR CURRENT & FUTURE FINANCIAL SITUATION, YOUR PLANNED TIMELINE TO OWN, AND YOUR ABILITY TO FIND VALUE & HAPPINESS!
Lets anaylze this one at a time in YES/NO format and make a game out of this.
CURRENT & FUTURE FINANCIAL SITUATION
1. Is your job secure?
2. Will your TOTAL monthly housing payments be LESS THAN 1/3 of your current salary?
3. Do you have 6 months worth of TOTAL MONTHLY EXPENSES (Housing + Living costs) in liquid assets AFTER closing? *Note you might need more if you are buying a co-op.
4. Do you have a decent credit score?
5. Are rental prices rising and pricey in your target market?
IF YOU ANSWERED "YES" TO ALL 5 OF THESE QUESTIONS, THEN MOVE ONTO THE NEXT QUESTION
TIMELINE TO OWN
1. Do you plan on living/renting this property for at least the next 3-4 years?
IF YOU ANSWERED "YES" TO THIS QUESTION, THEN MOVE ONTO THE NEXT SET OF QUESTIONS
VALUE & HAPPINESS
1. Did you look at more than 5 apartments in your target price range? Have you educated yourself on your target housing market?
2. Do you have an idea of what possible houses/apartments are going for in your target market?
3. Did you find a house/apartment that satisfies your basic needs?
4. Can you picture yourself living in this new house/apartment for at least the next 3-4 years?
IF YOU ANSWERED "YES" TO ALL 4 OF THESE QUESTIONS, THEN I THINK YOU SHOULD
GO FOR IT & BUY!
However, if you came across a few "NO's" when asking yourself these questions than you need to prioritize what question you answered NO for. For example, if you answered "NO" to RENTS ARE RISING AND ARE PRICEY in your target market than you need to weigh that as a deal-breaker or deal-maker should you find a great home to buy. I do not think this would be a deal-breaker if a good buying opportunity presented itself.
If you answered "NO" to DO YOU HAVE AN IDEA OF PRICING FOR YOUR TARGET MARKET than you should continue to educate yourself until you do. When you eventually find the right property you can bid for it wisely given current market conditions and available inventory.
Depending on where you live and what your goals are, buying or renting is a decision tailored to each individual/family's need. Ideally, you would like to be building wealth. However, if your not in the right financial situation to start building wealth via real estate, than the whole investment process can backfire and you can be forced to sell at a much lower price!
BE SMART...THINK FUTURE..& RAISE YOUR CREDIT SCORE BEFORE YOU BUY!
Check out Suze Orman's tips to Paying Off Debt to learn how to prepare yourself for home ownership!
A: In a housing market where Fed Chief Bernanke just stated that "housing affordability is becoming much more difficult", real estate agents are focusing on getting loyal qualified buyers who are 'ready to go', instead of promising an unrealistic asking price to get a new exclusive that will sit on the market for months!
In today's housing market it just doesnt make much sense to me to promise an unrealistic asking price to a FSBO or homeowner looking to find a broker, since I will not be able to deliver on my promise and will wind up wasting much of my time and my client's time showing a property that is way overpriced! But thats just me. I'm sure there are plenty of real estate agents out there that feel fine about doing this and prey on unsuspecting, uneducated homeowners who need the comfort and confidence of a broker who lies to them about their property's actual market value!
In my humble opinion I would much rather spend my time looking for great values to pass along to my loyal and financially qualified buyers who are for the most part, 'ready to go'. I'm beginning to see a trend also with my colleagues, who "don't get" why their exclusives aren't selling. What I'm hearing is that, "..it's priced right, Im getting OK activity, just no bites"!
It's a familiar song for any seller in todays market because unless you drastically underprice your apartment, its probably going to take some time to sell! Buyers are very cautious about real estate right now and the one market force that is keeping buying in favor over renting is the very tight and pricey rental market that NY'ers are now facing; read my post "A Rent Induced Housing Surge" for more on this.
So, if you are a buyer working on your own don't be surprised to get follow up calls from brokers you visited on your Sunday Open House tour. In this cooling housing market good buyers are like gold and pricey, stubborn sellers are like mud. Now what brokers want to get dirty and what brokers want to shine?
A: In my constant hunt to find good value in this market I came across this listing that was reduced for the 3rd time just a few days ago. Listed with Corcoran, this large JR4 (Convertible 2 BR) apartment seems to have all the permanent features that I stress to my readers to go after & whose asking price is being reduced because of the high monthly expenses (read my post, "High Monthlys? Find The Discount")! In an environment of higher borrowing costs as lending rates rise this seems the perfect type of property to go after if you have the $$$ to do so and pass the co-op board.
Savvy real estate buyers should look to pay a premium for permanent features of any particular property that will help in the eventual resale value down the road. Permanent features that I am reffering to and that you SHOULD PAY for include:
3. NATURAL SUNLIGHT
4. RAW SPACE
I do NOT think this is the type of market where buyers should pay top dollar for renovations, crown moldings, or desired building amenities.
This property at 50 East 89th Street and marketed by Barbara Goodman of Corcoran, seems to have the permanent features that savvy buyers should look for: location steps from Central Park, high floor, open city and Central Park views, and 1,000 sft of raw space. The fact that the initial asking price of $1.1M has shaved off $205,000 so far to get the current asking price of $895,000 tells me this seller is ready to go and that the buyer will have to finance less money which is getting very expensive to borrow anyway! Here are the apartment details:
50 East 89th Street; Apt. 24C
Size: 1,000 sft
# Beds: 1 (Convert to 2 BR)
# Baths: 1.5
maintenance: $1,635 (High Monthlys Brings Price Down)
Asking: $895,000 (Reduced from $1.1M to $950K to $915K to $895K on 5/18/2006)
Price Per Sq. Ft.: $895 (Pretty Low for location & high floor)
Marketed By: Barbara Goodman of Corcoran
NOTE: This Co-op is requiring 30% down from the buyer which limits the marketability of the property; another reason besides the high monthlys why the asking price was lowered. So, this great deal really only applies to those with at least $400,000 or so of liquid assets as your down payment + closing costs will run you close to $275,000! You can read my post on "What The Co-op Board Will Look For" to get educated on the board process but generally speaking salary & liquid assets AFTER closing costs are the most important financial items that will be scrutinized!
A: So you've been looking for a new home in NYC for the past few months and you have seen a few good ones so far, but not the one that 'blows you away'. Then, you visit a brand new development set for occupancy by Fall of 2006, with every amenity you can possibly think of and design features to die for! Only one problem, the developer is asking $1,350 a square foot and its TAKE IT OR LEAVE IT! I ask WHY!
What makes developers' products so different from existing products on the market now that their asking prices are non-negotiable? Is it because each unit must bring in a certain amount of profit? Is it because new developments are immune to a housing slowdown and are worth every penny no matter how much housing corrects? Is it because early buyers of a new development paid a certain price and later buyers MUST pay more? What is it that makes these properties non-negotiable?
Unfortunately for me I am not connected with friends that are developers so I'm left to speculate over this 'outdated' behavior of not being able to negotiate on a new development property. It just doesn't make sense to me. The one thing that I do know and that no developer could ever argue with is:
A PROPERTY IS WORTH ONLY WHAT A BUYER IS WILLING TO PAY FOR ITIn a New York City housing market where buyers have much more control than they did a year ago, where borrowing costs are rising, where inventory and time on the market is increasing, where the costs of raw materials are starting to correct, why are new development properties special in the sense that buyers can't submit a bid and get a response to move a unit?
If developers stand pat on this behavior and refuse to accept any price lower than the pre-determined asking price, what will happen to all the unsold inventory should the housing market continue to cool over the years to come? Are developers immune to foreclosure? What about all the loans/investors that helped backed the project; don't they expect to see a return on their investment? I wonder how much lower the developer can go with the asking price to still bring in a profit?
It will be very interesting to observe what happens over the next few years as many new developments start to come to market; will developers compete with each other by lowering prices? Take a look at a portion of new developments that are currently being marketed (list excludes a ton of new devs in Lower Manhattan & Harlem):
Remy - 101 W 28th Street
Onyx Chelsea - 261 W 28th Street
Chelsea House - 130 W 19th Street
555 W 23rd Street
744 Greenwich Street
147 Waverly Place
1 York Street
21 Mercer Street
350 W Broadway
40 Mercer Street
One Ten Third
254 E 2nd Street
One Avenue B
The Milan - 300 E 55th Street
UPPER WEST SIDE
The Hudson Condos
220 W 93rd Street
UPPER EAST SIDE
The Stanhope - 995 Fifth Avenu
One Carnegie Hill
Now I'm not saying that these new buildings aren't gorgeous and worth every penny, I'm just saying that the # of buyers out there that can afford to pay $1,300+ a square foot in NYC are dwindling as the housing market cools. There certainly isn't a frenzy to buy these products, so I would expect developers to offer incentives first before lowering any asking prices or accepting lower offers. Look for these types of incentives:
1. Closing Costs Included in Sales Price - Look for developers to start with this incentive to buyers!
2. Flat Screen TV Included w/ Purchase - I don't know what it is about flat screens but they seem to go great with marketing a new property. Expect this to be one of a few possible products to be included in the deal.
UrbanDigs Says: The only way to negotiate on a new development property is to NOT buy during pre-construction marketing and wait for a speculative investor who did purchase with the intent of flipping to close and settle for a purchase price to below the price they paid. I do not know of any specific transactions thus far that shows recent speculative flippers losing $$$ on the deal, but then again it's not such a far out thought either. Keep an eye on these buildings as they start closing on pre-constrcution deals to see if you can negotiate a sweeter deal than the first owner did!
A: Check out this great loft deal in the heart of SoHo at 114 Mercer Street and marketed by none other than Carol E. Levy of Carol E. Levy Real Estate. The asking price was just reduced to a valuation of $736/Sq. Ft. and words 'MUST SELL' & 'MAKE OFFER' are written all over the webpage. Savvy buyers should keep an eye on this one as this seller is obviously motivated to unload this property in the very tight sales market of SoHo; low floor though and straight floor layout!
The neighborhood south of Houston Street has very little inventory to choose from and tons of demand from buyers and renters making it one of the pricier sections of Manhattan to live in. So when a listing like this gets reduced to $736 a square foot, buyers (especially all cash buyers) should pay close attention as this great deal reveals itself. I wonder how low the seller is willing to go?
The floorplan is a bit well straight, and the 2nd bedroom is a bit well small, but a keen eye can reconfigure an apartment of this size wisely to utilize every nook and cranny to get the most livable space out of it. I'm also not sure about the building itself (which has no doorman), building financials, property views or amount of sunlight it gets, but it certainly looks like a worthy stop on your Open House tour should you be in the market for 2BR's in SoHo!
114 Mercer Street; Apt. 2
Size: 2,300 Sq. Ft. (Loft)
# Beds: 2
# Baths: 2
maintenance: $1,350 ($0.58/Sq Ft..! Is This Real?)
Asking: $1,695,000 (Reduced from $1,799,000)
Price Per Sq. Ft.: $736 (Low for 2BR in SoHo)
Marketed By: Carol E. Levy of Carol E. Levy Real Estate
**OPEN HOUSE SUNDAY 12:00 - 1:30PM**
A: Talk about weird layouts! Take a look at this studio apartment in the Upper West Side in which the broker even declares, "Cookie Cutter -- NOT", on the webpage.
Tough to make a call on this property's asking price when the total size is not listed, but assuming it is 475 square feet, than this studio is asking $800/Sq. Ft.. A bit pricey for a first floor unit in a co-op requiring a 25% down payment, as it seems the low monthly's are allowing this seller to test out a higher price. In any event, here are the details for those interested!
210 Riverside Drive; Apt. 1D
Size: 475 Sq. Ft. (HARD TO TELL!)
# Beds: 0
# Baths: 1
Price Per Sq. Ft.: $800 (Again, need actual size for this)
Marketed By: Frank Russo of Halstead
**OPEN HOUSE SUNDAY 12:00-2:00PM & TUESDAY 5:30-7:30PM**
A: The CME will be going live on housing futures Monday with some minor changes to the final structure of trading. Here are some updates for those investors seeking to hedge against real estate holdings in their portfolio if they believe a housing slowdown is going to continue in the most speculative markets.
WHY HEDGE?: Buying puts or selling calls (both tradable options products w/ the same bearish bet) on housing in a particular tradable market, such as Miami, means that you are betting the housing market will fall and will earn a PROFIT if it does!
Speculators take these risks to protect their real estate heavy portfolios against a housing market slowdown; as the market and their real estate holdings decline in value their profit on the options contracts owned increase in value limiting the potential loss.
CITIES YOU CAN TRADE ON: Boston, Chicago, Denver, Las Vegas, Los Angeles, Miami, New York, San Diego, San Francisco, Washington D.C.
Here are some changes that I was made aware of by Dave Smith of the CME:
1. Minimum Price Fluctuation (TICK) for Futures Trading - The minimum price fluctuation or "tick" shall be 0.20 index points. Originally, the futures contracts were to trade similar to that of options trading and use 0.10 index points per tick.
2. Trading Hours for Futures - Housing futures will begin trading on SUNDAYS until THURSDAYS at 5PM(CT) and will go on overnight continuing to 2PM(CT) the following day. There will be a 3 hour trading rest before resuming again at 5PM(CT).
3. Trading Hours for Options - Housing Options will trade in the GFCI Pit (Goldman Sachs Commodities Index) beginning MONDAY through FRIDAY from 8AM - 2PM(CT).
**Trading Futures & Options are very risky and complicated. Be sure to discuss this investment strategy with your financial advisor before making any investments of your own. As with any tradable security, you can lose money trading housing futures and you should know that Options trading involves a time element tied to the value of the contract bought (meaning every trading day that goes by you are losing a bit of value in 'time value' as your options contract gets closer to its expiration date)! You can read up on Options Trading Here.
WHAT I WOULD DO: I consider myself a conservative investor after living the front lines of the dot com boom and bust as a NASDAQ equities trader and now the housing boom and, well we don't know what to call it yet, as a real estate agent. So, since this is such a new tradable market I would limit my investing to BUYING PUTS in a highly speculative market such as Miami, until we can see how this whole thing works in the real world.
By BUYING PUT CONTRACTS you are putting a set amount of money into the investment with no chance of losing more than the initial capital. Also, by betting on a highly speculative market such as Miami, where condo development has been overextended, I think all that inventory will at some point lead to lower asking prices. Since you bought PUT CONTRACTS, you bet that the market will fall and will realize a profit.
I WOULD NOT bet against New York City with a brand new options & futures trading market until we learn more about how the CME futures market behave based on actual market conditions. Plus, I strongly believe that NYC Real Estate is NOT AS OVER-VALUED as cities such as Miami, Las Vegas, Phoenix, Boston, & Los Angeles. Manhattan is mostly co-op (75% or so) and limited to speculative activity, an island with limited developable land, experiencing very low vacancy rates and rising rents, and is continuing to grow at an astounding rate.
With futures and options trading you MUST have volatility and sharp short term movements to make a lot of money! So, stick with the most overvalued housing markets I mentioned before.
WHERE TO TRADE HOUSING FUTURES: You can open an account at R.J. O'Brien to trade housing futures when they go live on Monday. R.J. O'Brien is a privately owned Futures Commission Merchant (FCM) and one of the oldest and best known independent futures brokerage firms in the industry. RJO is a founding member of the Chicago Mercantile Exchange
For more information on housing futures please feel free to contact Dave Smith at the Chicago Mercantile Exchange at 312-634-8921.
A: Inflation fearing people out there had a rough few days as some economic data came out showing a rise in prices beyond food and energy. Core consumer prices rose 0.3 percent in April, higher than expected and feeding inflation worries. This is why the stock markets took such a big hit the past 2 days because the data that came out will only strengthen the case for the Fed to raise the fed funds rate again at their June meeting.
Equity markets do NOT like inflation because that means the fed will be raising interest rates to slow down the economy by making borrowing costs more expensive and fixed assets more attractive for investments. On a side note, expect a stock market rally once we get clear word from the Fed that they will pause on their long interest rate hike campaign (16 consecutive 1/4 point rate hikes so far).
Lets take a quick look at some data/markets to see where we stand RIGHT NOW:
1. US ECONOMIC DATA: According to CNN Money:
Consumer prices jumped in April, sparking a fresh round of inflation worries on Wall Street, and economists say the report gives investors and the Federal Reserve good reason to worry.The Core CPI # is especially important to the fed because this reading excludes the volatile food and energy markets and provides insight into the level of inflation that is actually beginning to hit our nation. The comfort level is about 2% for the Fed, although in reality core inflation is now up 2.3% over the past 12 months; something to worry about if you are a fed governor or chairman!
The Consumer Price Index rose a surprising 0.6 percent in April, the Labor Department reported, compared with the 0.4 percent rise in March. Economists surveyed by Briefing.com had forecast a 0.5 percent rise in the government's key measure of inflation.
The so-called core-CPI, which excludes often-volatile food and energy prices, rose 0.3 percent, the second straight month that the closely watched reading came in at that level. Economists had forecast there would be only a 0.2 percent in core CPI in April.
2. Energy Markets: A week ago I predicted a correction in the energy markets to the low 60's for oil; which looked like a winning prediction until that Iran letter turned out to be more damaging than peaceful. Since, the inventories of light sweet crude and gasoline have jumped a bit higher than expected bringing with it some selling pressure in these markets.
According to CNN Money:
Oil slid towards $68 a barrel on Thursday, pressured by rising U.S. gasoline inventories and concern that high energy costs are leading to inflation that could slow demand. U.S. demand for crude and petroleum products in April fell by 1.5 percent from a year earlier, with high pump prices cutting gasoline use by 1.9 percent, industry figures showed on Wednesday.Combine these inventory gains with the OPEC minister's sort of bearish longer term forecast for oil demand and you are seeing some speculators and traders take some profits off the table.
But wait! We still have geopolitical concerns in Iran & Nigeria that could change these markets at any moment, and in any direction. This fact will keep these markets volatile until we get a clearer picture of what is really going on in these two countries. In meantime, expect a trading range of about $66 - $73/Barrel for light sweet crude oil; any drop below or above should be a signal of deeper fundamentals kicking in.
For the fed to PAUSE at the next meeting we will need the price of oil to drop to $60/Barrel or below! I recently suggested a price under $68/Barrel but no longer think that is low enough to warrant a pause by the fed in June!
NEXT FED MEETING: June 28-29th
WHAT TO EXPECT: Lets do it this way. If the news out of Iran & Nigeria remain generally positive (i.e. no more violence in Nigeria and just no news out of Iran will suffice) and the price of oil drops to about $60 or below, than I am 75% sure the fed will PAUSE to wait for future economic data.
However, if news out of Iran and Nigeria continues to be negative and uncertain and the price of oil hovers above the $68/Barrel mark, then I am 85% or so sure that the fed will tighten again by 1/4 point bringing the fed funds rate to 5.25%.
HOW IT AFFECTS HOUSING: Should the fed raise by 1/4 point again in June than expect lending rates to trickle higher for an extra few months down the road and buyers to feel a bit more pressure to buy NOW rather than wait. A 1/4 point rise should be enough to continue the slowdown that is affecting most of the nation; especially overheated highly speculative markets such as Miami, Phoenix, Las Vegas, Boston, & Los Angeles.
If the fed pauses then expect a short term positive rally (which might present itself by providing a bottom in today's slowing markets) with media coverage suggesting 'the end may not be near' style of articles. After that initial jubliation, expect a flat to down market for as long as lending rates continue to trickle higher; which should be another 6-10 months or so. Once we hit a top in lending rates the housing market will flatten out until we get a clear picture on what the next long term fed move is going to be. Should the US Economy start to show signs of an impending recession, the fed will act quickly to stimulate the economy by lowering interest rates and bringing lending/borrowing costs down again!
A: Thanks to Joe from the Curbed comments thread for suggesting a cleanup of the graph along with a longer dataset and smaller price groups. Here are two 30-day charts showing the # of NEW LISTINGS that have come to the market, this time including Harlem & Battery Park City, representing the past 30 days and the 30 days prior to that. Lets see if we can deduce any conclusions with this enhancement.
Neighborhoods Included: Battery Park City, Central Park South, Chelsea, Clinton, E. Harlem, E. Village, Financial District, Gramercy, Greenwich Village, Harlem, Little Italy/Chinatown, Lower East Side, Midtown, Murray Hill, SoHo, Sutton Area, Tribeca, Upper East Side, Upper West Side
Okay, now I know March has an extra day then April but for general analysis this is got to be much better than the last chart to draw conclusions from.
Conclusions: It appears that there is quite a jump in new listings inventory across ALL of the price groups in the past 30 days compared to the 30 days prior. I haven't checked into pricing so I'm really not sure if this new inventory is bringing prices down or not. I'll continue to do this every 30 days so we can keep tabs on the new listings trends and which price group is seeing the biggest percentage change from month to month.
I'm still learning this stuff so if you have an idea of what dataset can be added to make this analysis more useful, please let me know.
A: I thought it would be interesting to check out how much inventory came to the market in the past 7 days, in all the neighborhoods of Manhattan (excluding Harlem) for certain price ranges. Below is a chart of how many new listings our central system shows based on pre-determined price groups.
Neighborhoods Included: Central Park South, Chelsea, Clinton, E. Village, Financial District, Gramercy, Greenwich Village, Little Italy/Chinatown, Lower East Side, Midtown, Murray Hill, SoHo, Sutton Area, Tribeca, Upper East Side, Upper West Side
NEW INVENTORY FROM 5/10/2006 - 5/17/2006
As you can see the most new inventory that came to the market in the past 7 days were for properties priced between $501K-$999K! It is suprising to me that there were an equal number of new listings that came to the market for products between $1M-$2M & $0-$500K. I would expect that more listings under $500K will come to market as the lower end products in Manhattan have held up pretty strong in the face of the housing slowdown; probably because buyers have been priced out of the higher end markets and winded up settling for a smaller studio or Junior 1 bedroom.
I'll continue to do these inventory checks going forward to get a better idea of how inventory is changing in Manhattan! If you have any suggestions as to how I can better these charts, please let me know!!
For more detailed charts and housing data check out Superstar Appraiser Jonathan Miller's blog Matrix for the latest in depth information on NYC housing. Also check out his weekly 'Three Cents Worth' column on Curbed.com!!
A: If you are looking for more space for your dollar, if you are a first time homebuyer who barely has enough to cover down payment + closing costs, and if you want to put your money into renovations and not closing costs, then YES, buying a co-op is right for you.
A lot of people will tell you, "...never buy a co-op", simply because of the restrictions that the co-op board may place on its shareholders. "A Headache" is another common term that people use to describe some boards of co-ops.
However, in my humble opinion, this is a statement usually made by someone who has significant assets to his/her name, thereby affording them the luxury of buying a higher priced condominum.
Co-ops, short for Cooperative, are basically private companies whose buildings' residents own stock in the corporation, rather than real property. When you buy a co-op in NYC, you are NOT given a title but rather given a stock certificate stating how many shares of stock you are purchasing from the existing homeowner. A propietary lease is then drawn up, giving the purchaser the exclusive right to live in the apartment. The formula for deriving how many shares you wind up purchasing depends largely on the total square footage of the apartment you plan to purchase, with minor emphasis on floor, view, outdoor space, and sunlight.
There are pros and cons to buying a co-op when compared to buying a condo in NYC. They are:
Lower Closing Costs Than Condos
More Affordable Than Condos
More Space For Your Dollar
Tedious Board Approval Process
Tougher Restrictions on Subletting
Tougher Restrictions on Pied-e-Terres
Tougher Restrictions on Co-Purchasing & Parents Buying For Children
Tougher Renovations Restrictions
Tougher Pet Restrictions
While I understand why Condo owners prefer to stick with a condiminium as their next purchase, lets take into account the first time homebuyer and the overall NYC housing market.
For the first time homebuyer, buying a co-op is going to be less expensive with much lower transaction costs at closing. A good example would be to compare closing costs of a $500K Co-op vs. Condo:
500K Co-op Closing Costs
500K Condo Closing Costs
Now, as far as the state of the current housing market and its future, it can be debated that co-ops are more protected in a down market than condos because of the lack of speculation in the co-op market. Co-ops have a very tedious board approvals process, with many boards being extra strict on who they let into their building. As a private company, they can reject whom they please within the law. Condos, on the other hand, have a RIGHT TO FIRST REFUSAL system for passing the board. Quite simply, once your past criminal record is reported as clean, you are approved to purchase the apartment; if rejected, the Condo must buy the apartment from its reserve fund.
So, the fact that co-ops are more cautious to who buys in their building, and speculators generally only buy the condo marke, co-op homeowners are less likely to be forced to sell in a down market.
If you are looking to buy real estate in NYC for the first time, and you just barely have enough to afford a down payment + closing costs, then a co-op is for you! Dont listen to the bad press co-ops may get, or to your friends who tell you only to buy a condo. Rather, focus on location, raw space, low monthlys and STAYING WITHIN IN YOUR BUDGET as the main factors. After all, the building you buy in may have a very easy board that allows subletting and parents buying for children. If this is the case, than it will be that much easier for you to sell, when the time is right!
A: My heart goes out to the sellers in today's market who made the mistake of 'testing the market' by pricing their property too high or who agreed to do business with the real estate broker who promised the highest purchase price in exchange for an exclusive listing agreement. It is something that should be a learning experience for any first-time seller as they live through their first slow housing market in NYC. If you are having trouble selling your apartment, here are a few tips to hlep out.
THE DAYS OF $1,200+ A SQUARE FOOT ARE GONE (UNLESS YOU ARE A NEW DEVELOPMENT OR A PENTHOUSE ON FIFTH AVENUE). IN TODAY'S MARKET LOCATION AND RENOVATIONS DO NOT GET WHAT THEY USED TO AS BUYERS LOOK TO GET THE MOST SIZE FOR THEIR DOLLARS!
TIPS TO HELP SELL YOUR APARTMENT
1. RE-EVALUATE PRICING: Ask your broker, or go to Streeteasy.com and do a FIND YOUR BUILDING lookup, for a list of properties currently on the market in your building. Then divide the asking price by the total square feet for each unit to get the PPSF (price per square foot) that each property is currently asking. Now, do it for yours. Where do you stand? Are you asking the highest PPSF in your building? In the middle?
Some features that would warrant your property being the highest PPSF property for sale in the building include: HIGH FLOOR, VIEWS, & RENOVATIONS.
UrbanDigs Says: Lower your PPSF so that you are the BEST VALUE currently for sale in your building! I know its tough and that your property is always worth more than somebody elses similar unit in the building, but GET OVER IT and DO WHAT YOU HAVE TO DO to sell it in todays market! Remember that brokers do not determine the value of your property, the MARKET DOES THAT! By being the best value in your building you can tell buyers that come to view your property to compare your apartment to others listed for sale in the building; explain to them that your apartment is currently asking the lowest PPSF!
2. TAKE 1 WEEK OFF ADVERTISING BEFORE PRICE REDUCTION: Another tough concept for distressed sellers to understand. Believe it or not listings that have been on the market for 12+ weeks GET STALE! The same pool of buyers see the same listing at the same price in the NY Times and simply ignore it!
After you spent some time re-evaluating your asking price, take a week off of advertising in the NY Times before marketing the new asking price. The goal here is to offer a fresh ad (change text in ad too) with a new asking price that hopefully will capture the attention of new and existing buyers that are looking every week in he NY Times for their home.
UrbanDigs Says: Add a 4-point phrase of "PRICE SLASHED" or "MUST SELL" to the print ad with OH banner & apartment features underneath. A 7-8 line ad in the NY Times shouldn't be an issue with your representative agent and should be large enough to catch most readers attention. In the end, the ad's goal is to bring activity to your OH. Think to yourself, what would catch your eye if you were browsing for a property similar to the one you are trying to sell?
3. REQUEST A EMAIL BLAST TO BROKERAGE COMMUNITY: This is the type of market that sellers must be proactive in, NOT passive! If you already signed a exclusive agreement to sell with a brokerage than you have accomplished a few very important marketing tactics: LISTING INCLUDED IN CENTRAL SYSTEMS, PRINT ADVERTISING, BUILDING MAILINGS, WEBSITE EXPOSURE, etc..
However, the main marketing tactic will always be LISTING INCLUDED IN CENTRAL BROKERAGE SYSTEMS since most NYC real estate transactions are Co-Broke's; meaning that another broker brought in the buyer and shared in the transaction with your representing broker. Now, just because your listing is included in the brokerage central systems doesn't mean that your listing is being seen by brokers who are currently representing buyers that would be perfect for property! We need to bring your listing to the eyes of the brokerage community!
UrbanDigs Says: Ask your broker to do a email blast to the entire brokerage community that will include your property description, pictures, floorplan, and next open house date! Two popular companies that have been exploiting this new marketing tactic are Gotham Photo Company and On-Line Residential. OLR is a brokerage based system so if you are a For Sale By Owner than go with Gotham Photo Company to send an email blast!
4. ENCOURAGE BUYERS TO SUBMIT OFFERS: Its such an easy concept yet one that most sellers are afraid to do for fear of appearing too desparate. Forget that notion altogether and make sure you tell every buyer that comes in that your asking price is negotiable and that you encourage them to submit any offers within reason.
UrbanDigs Says: Buyers have control right now and they know it! By showing a property and having the attitude that you are ONLY accepting full ask offers is simply the wrong way to go. Instead, let buyers know that you know that they have control by telling them that your asking price is negotiable. So how do you do this?
When a buyer first enters your property you welcome them and encourage them to sign in and take a showsheet. Then you tell them to 'feel free to browse and let me know if you have any questions'; no buyer likes to be followed around by an owner/broker and hounded with seller babble! Assuming they stay for 5 minutes or more, you gently approach them and ask them if they know about the building details, "...by the way, are you familiar with this building and the amenities that are offered"? Chances are they will say 'No' which leaves the door open for you to take control. Describe the building amenities and financials (if you know them) and then pull a 360 and go into the best features of the apartment "...have you seen the renovated kitchen, incredible sunlight, or huge walk-in closets". After you stress the strongpoints of the building and the apartment tell the visiting buyer, "...just so you know the asking price is negotiable and that the seller advised me to encourage and review all bids submitted".
**Important Note** LOWERING YOUR ASKING PRICE WILL ALWAYS HAVE THE GREATEST EFFECT FOR SELLERS. THE OTHER TIPS I WROTE ABOUT SHOULD BE LOOKED AT AS COMPLIMENTARY TO A PRICE REDUCTION AS DONE ALONE WILL PROBABLY NOT SPUR ENOUGH INTEREST TO SELL YOUR PROPERTY FAST! SELLERS MUST UNDERSTAND THAT THIS IS A DIFFERENT MARKET THAN A YEAR AGO AND THAT LENDING RATES ARE MUCH HIGHER THAN THEY WERE AT THIS TIME LAST YEAR. AS MONEY GETS MORE EXPENSIVE TO BORROW, BUYING BECOMES LESS AFFORDABLE!
After last weeks hike in rates, all is dependent on the news this week. Inflation is the arch enemy of Mortgage bonds and home loan rates. The Producer price index comes out Tuesday and the Consumer Price Index comes out Wednesday. If the market shows signs of heated inflation, home loan rates will likely worsen. If inflation appears to be controlled, the markets will breathe a sigh of relief and rates may see some moderate improvement.
A: Its been a while since I posted on the High End Blues hitting NYC real estate, so here is one that might be of interest for those in the market to buy a townhouse. This Single-Family Townhouse is located on 64 East 7th Street and has been asking $7.9M since first being listed on 3/14/2006. With a recent reduction of $2M, investors/developers might want to keep an eye on this one as it looks like the seller still might be searching for a bottom!
64 East 7th Street Details
Year Built: 1837
Units: Zoned for 1 Residential & 1 Commercial
Width: 25 Feet
FAR: 3.44 (See Below)
Fireplaces: 4 (presently not working)
Stories: 3 + Extended Ground Level Commercial Space
Asking Price: $5.9M (Reduced from $7.9M!)
Marketed By: Stephanie Dennett & Judith Kleinman of Halstead
Some Website notes:
* RARE 25 Ft. 1837 FEDERAL TOWNHOUSE Originally part of Peter Stuyvesant's parcel of land. The house is configured with 13 windowed rooms: 3 interior rooms, a kitchen on the main floor, and 3 bathrooms, with many of the original details remaining throughout.
* The lease for the store occupying the ground level of the house expires September 30, 2006. Thus, the property can be delivered vacant.
* There are 3 stories and an extended ground level commercial space, a 30 ft south garden and a full basement.
FAR: (Floor To Area Ration) - The maximum size (or bulk) of a building on a lot is determined by the floor area ratio (FAR) assigned in the Zoning Resolution to each zoning district. This house has an FAR of 3.44 -- approximately 2,472 unused build-able square feet...an architect's dream!
A: The price of oil tumbled this morning below $70/Barrel again as the market beared some pretty rough news in Iran & Nigeria very well. The Saudi Arabia oil minister said that high oil prices will eventually hurt global demand as market forces will lead investments into alternative energys' that will come to fruition in the decades to come.
According to CNN Money:
The oil minister for Saudi Arabia, the world's largest oil exporter, said Monday high oil prices lead consumers to think twice before they spend.Also participating in today's selloff are the prices of Gold and other precious metals. Copper in particular was especially hard hit as this precious metal was off 8% in early trading Monday; Gold was off 2% and down to $695 or so. Here is a 6-Month chart showing Gold's incredible rise using Kitco.com:
"In general, when prices are high people check their pockets," Ali al-Naimi told reporters on the sidelines of an energy conference in Jordan.
"When they are lower, they open them."
The minister's comments follow a report from the International Energy Agency Friday in which the adviser to 26 industrialized countries cut its global oil demand growth forecast due to high prices.
KEEP IT COMNG DOWN!!
UrbanDigs Says: Confidence in Housing will rise, at least psychologically and over short-term, once the Fed decides to PAUSE with their interest rate hike campaign. For the Fed to consider pausing at June's meeting the economic data MUST show that the previous 16 interest rate hikes are having an affect and that the inflation leading indicators (high energy prices, high precious metal prices) are starting to correct.
The precious metal markets have been heavily invested in by hedge funds and speculators over the past 4-6 months and could see a correction. However, the oil markets have core fundamentals that are powering the rise in energy prices and a correction in this market could be short-lived as global demand still outweighs supply.
"The fundamentals are still for the price to go up," Dawnay Day Quantum's Mathias said. "If it drops much below $70 it's a good buying opportunity."Should oil correct to the upper 50's or so and stay there, it could be a sign that geopolitical concerns in Iran are less tense than first feared OR that the situation in Nigeria is more under control that first thought. Any positive news out of Iran or Nigeria should cause most speculative oil traders to PULL OUT, which would lead to a drop in energy prices to a new trading range until the next news making situation presents itself.
"We're still looking at $100 oil in a couple of years time, because there just isn't enough oil to go around."
A: I saw this New York Metro Article by S. Jhoanna Robledo which chronicles a broker who asked those who visited the Open House to describe what they really thought of the place; perhaps for future marketing strategy? Not a bad idea for sellers to know what buyers actually think of their place and then use that info to stress the strongpoints in the next NY Times ad!
308 West 103rd Street; Apt. 5E
Size: 998 SFT
# Beds: 2
# Baths: 1
maintenance: $950 (Below $1/Square foot)
Price Per Sq. Ft.: $760
Marketed By: Amy LaPeters & Petra Scholder of Halstead
WHAT BUYERS SAID
* It's on track with what we want. The closets are good -- there are three [just] in the foyer . . . The bedrooms were a bit small.
* I just didn't feel it. It's not a knockout.
* It's okay, but we want a closed kitchen -- we cook a lot and don't like the smell. Ideally, if it's L-shaped, we could create a third bedroom -- I'm pregnant, and we don't want to have to move again if we have more.
* The [rooms] are long, but they're too narrow. They need to empty the rooms out and paint them Navajo white . . . Our ideal [has a] garden to barbecue.
~ The Open-House Log
A: I wrote a post titled, "Bids Submitted No Longer Confidential", back in April after I discovered that the NAR voted that Buyer's Agents must disclose to their clients that the bids that they will submit on any particular property MAY NOT be kept confidential! Check out this ad I found in the NY Times this weekend that shows the results of this allowance by the NAR in the real world.
My feelings are mostly AGAINST this practice as I believe that a buyers bid should be kept confidential betweem the BUYER, the SELLER, and the BROKERS involved in the possible transaction. When the NAR voted to allow brokers to 'shop around' offers, they opened the door for potential complications while at the same time giving the seller a false sense of hope that they can get a bid higher than one submitted. I can just imagine the look on a brokers face when their client informs them that they would like to ADVERTISE THE BID they just received; what ever happened to being happy with a strong bid and accepting it?
It's a different market right now than a year ago; a market where bidding wars are a rarity and NOT the norm. In today's market, 'PRICE REDUCED' & 'MUST SELL' are the magic words in print advertising. When I see the ad above I can't help but feel that the buyer who submitted a strong bid of $2.799M or so is getting screwd and that if it were me, I would withdraw the bid and move on. What possible good can come from this if you are one of the buyers who submitted the bid? In the end I think the seller is pulling a very risky move unless they actually received 2-3 strong offers and can afford if 1 drops out.
When I look at the ad I see a 1,875 square foot 3BR that is asking aproximately $1,500 a square foot; very pricey for a new development that faces north on 79th street and can't possibly have that great of views or natural sunlight. But hey, thats just me and I have to come to terms with the fact that 'the market will pay what the market thinks a property is worth'.
In any event, for any buyers out there who are interested in getting into a bidding war for a very expensive new development, there is an Open House Monday from 5-7PM for this property! Good Luck and be sure to buy puts in the new housing futures to hedge against this investment!
A: I am starting a new category titled, "What The Agents Are Buying", to bring to light the buildings across New York City that the professional real estate agents are buying into. Personally, I think that it is interesting information to know although I'm not sure how much data brokers are going to be willing to disclose to me for these posts; i.e. Purchase Price. In any event, lets start out with Eddie Siso of Citi-Habitats who recently purchased a pre-construction unit at One Carnegie Hill.
Eddie Siso has been a Top Performer at Citi-Habitats for the past 2 years and continues to produce even as the NYC housing market slows. You may have heard of Eddie as he has been covered in The Real Deal, Real Estate Weekly, The NY Post, & The Mann Report over the past few years in recognition of his achievements and reputation in the NYC brokerage industry.
Eddie bought a JR4 on the 40th floor of One Carnegie Hill, a new condop by Related that is located at 215 East 96th Street. Here are some details:
One Carnegie Hill: 215 East 96th Street
Floor: Apt. 40A
Total Size: 872 Sq. Ft.
Building Type: Condop (Co-op w/ Condo rules)
# Beds: 1
# Baths: 1
Purchased: 1st Phase of Pre-Construction Last Spring
Expected Occupancy: Fall 2006
Building Amenities: Rooftop Entertaining Suite, Fitness Center, 50-Foot Lap Pool, Landscaped 43rd Floor Rooftop Sundeck, Spa w/ Massage Room and Mens & Womens Locker Rooms, Hi-Tech Home
A: I found this 6 month old listing which just had a $70K price reduction (a 15% reduction!) from $465K to $395K a few days ago. This 700 square foot pre-war doorman co-op in Midtown East is now asking $564/square foot; representing a nice value for the ultimate buyer!
Deals will pop up in cooling housing markets and buyers should be very savvy when they do, even if they have to sacrifice location, views/light or total size for a good buying opportunity! Here is one that will NOT last long with this last price reduction. Details:
227 East 57th Street; Apt. 6F
Size: 700 sft
# Beds: 1
# Baths: 1
maintenance: $823 (Aprox. $1.17/sft)
Asking: $395,000 (Reduced from $465,000 on 5/8/2006)
Price Per Sq. Ft.: $564 (LOW - see the value)
Marketed By: Mitzie Lau & Flavia Quint of Corcoran
One reason that could be limiting the marketability of this property is the 25% down payment requirement by the co-op board. Most buyers in this price range will not be able to afford this, and even if they do they will not have enough liquid assets AFTER CLOSING to pass the board! In any event, the seller of this property is doing what they need to get a deal done and at $564/square foot it should have sooner rather than later!
**OPEN HOUSE SUNDAY MAY 14TH, 11:00AM - 12:30PM**
A: The fed raised the fed funds rate by 1/4 point yesterday to 5.0%, the 16th consecutive 1/4 point interest rate hike which started 22 months ago. If you read UrbanDigs interest rate commentary both the rate hike & the issued statement should not be a surprise. The fed has decided to become data dependent and did NOT take a hard stance towards raising or pausing at the June meeting.
Use this philosophy for determining whether or not the fed will raise at the next meeting:
IF OIL REMAINS ABOVE $68/BARREL OR SO EXPECT THE FED TO RAISE THE FED FUNDS RATE AGAIN 1/4 POINT IN JUNEI know its hard to sum it up that easily, but then again the price of oil is linked to so many factors right now that as long as prices remain high, inflation fears will persist and the fed will be forced to keep raising.
Excerpts From Fed Statement: Still, possible increases in resource utilization, in combination with the elevated prices of energy and other commodities, have the potential to add to inflation pressures. "Some further policy firming may yet be needed to address inflation risks but ... the extent and timing of any such firming will depend importantly on the evolution of the economic outlook as implied by incoming information," the Fed said in its statement.
What the fed is doing is leaving the door open to both raising or pausing at its next meeting. It appears that Bernanke truly doesn't want to overshoot on interest rate hikes which might push the US Economy into a recession down the road; something Alan Greenspan became notorious for doing as he viewed a recession as a welcomed side effect to stopping inflation! By being more DATA-DEPENDENT, Bernanke and Co. will be able to monitor the effect of all previous rate hikes to date to see what effect they are having on the current inflationary pressures.
The problem is that right now oil is being burdened by geopolitical tensions mostly, as the surprise growth in inventory gave us a false sense of hope a few days ago. Right now the price of oil is being affected by:
1. Tensions In Iran: The letter that the Iranian President sent to President Bush did not include what the US was hoping for in terms of solving this crisis diplomatically. Instead, the Iranian leader discussed the poor state of the current world and the growing anonymocity towards America. He also included talk of democracy failing worldwide and why Israel shouldn't exist. Not exactly the best way to help with oil prices. The growing tensions in Iran are keeping oil supply fears in the minds of energy traders everywhere.
According to CNN Money:
Iran's top nuclear negotiator called the surprise letter a new "diplomatic opening" between the two countries, but Rice said it failed to resolve the dispute over the Iranian nuclear program -- the focus of intense U.N. Security Council debate this week.
2. More Violence in Nigeria: Well this is very unnerving as I seriously thought Nigeria was making headway into getting that 500,000 barrels/day back online. But, with a new wave of violence launched by militants do not expect anything to come back online anytime soon.
According to CNN Money:
The three foreigners kidnapped in Nigeria on Thursday are employees of Italian oil contractor Saipem (SPMI.MI), and at least one of them is an Italian national, industry sources said. Attacks by the Movement for the Emancipation of the Niger Delta (MEND) have forced multinationals to cut Nigerian oil exports by a quarter, and the group had threatened this week to carry out more attacks on oil industry targets and individuals.Both the Iranian letter & non-violence in Nigeria, combined with the surprise inventory report led me to believe that a correction in oil prices was looming. I now retract that thought and obviously the oil markets are telling us the same thing as the price of oil climbs back to near $75/barrel.
AS LONG AS ENERGY PRICES REMAIN HIGH THERE IS NO WAY THE FED CAN PAUSE IN RAISING INTEREST RATES. THE BEST WE CAN DO IS HOPE THAT GEOPOLITICAL TENSIONS EASE AND THE PRICE OF OIL CORRECTS IN TIME FOR JUNE'S MEETING SO THAT BERNANKE HAS REASON TO PAUSE AND SEE IF MARKET FORCES KICK IN TO CORRECT THESE INFLATION FEARS.
A: A MUST READ FOR ANY BUYER OF NYC REAL ESTATE! For the first 10 months of hosting UrbanDigs I have brainstormed and researched all the search logs and key phrases that users type in to end up at my blog in an effort to answer the questions that users really have. I have always did my best to think outside of the box and report what I honestly feel about the NYC housing market, even if it seemed anti-business to my colleagues. One of the items I have been stressing for some time now is to go out of your way to find the apartment with the 'low monthly expenses'. I'm beginning to think this strategy needs adjustment.
Monthly Expenses: maintenance Costs + Real Estate Property Taxes
Most buyers will learn that as they browse the available inventory of apartments that are in their price range, some have high monthlys and some have low monthlys. Generally speaking, the higher the monthly costs are for an apartment the less affordable the apartment becomes and the asking price will come down to compensate!
Some apartments w/ higher monthlys stay on the market so long that the seller must lower their price very aggressively to attract a buyer willing to bite. Perhaps this will become a more wise investment strategy? My thinking is this:
AS LENDING RATES RISE AND BORROWING BECOMES MORE EXPENSIVE, WOULDN'T IT BE CHEAPER TO CONSIDER A PROPERTY WITH HIGHER MONTHLYS WHOSE ASKING PRICE WAS DRASTICALLY REDUCED TO COMPENSATE?If I were to analyze what your monthly payment is for a $500,000 loan on a 30YR Fixed from 12 months ago, 6 months ago, today, and at 7% it would look something like this (obviously rates vary for different states or if you pay points; please use this analysis as a general one):
12 Months Ago @ 5.675%
Monthly Payment = $2,895.67
6 Months Ago @ 6.175%
Monthly Payment = $3,055.86
Today @ 6.625%
Monthly Payment = $3,203.21
6 Months From Now @ 7%
Monthly Payment = $3,326.51
So, we're looking at about a $300 increase using today's rate due to interest rate hikes from a year ago. While that probably doesn't seem like much I could have gone back to say March 2004 when 30YR fixed was at 5.2% or so and your monthly payment would be around $2,745.55/Month; some $460 lower than today's payment. Looking forward 6 months from now a buyer could easily expect to pay $3,325/month for the same loan.
Bottom Line: Money is getting more expensive to borrow!
What Do We Know? We know that the fed rate hikes take time to funnel down the economic system which would mean that lending rates probably will trickle higher over the next 6-8 months or so. We also know that the fed will probably raise rates today 1/4 point, and might even raise rates again in June by another 1/4 point. So, we can add on another few months to that trickle theory I just mentioned which would lead me to believe that lending rates will slowly creep higher over the next year or so.
Now lets take this train of thought and relate it to the real world of NYC real estate. Lets take 2 fictional identical apartments that are in neighboring buildings w/ the same level of amenities and service, whose units sell for exactly the same price per square foot. Lets also assume that every aspect of these 2 apartments are the same except for the monthly costs.
Apartment A - Low Monthlys
Size: 700 sft
RE Taxes: $350/Month
Total Monthlys: $850/Month
Asking Price: $625,000
Apartment B - Higher Monthlys
Size: 700 sft
RE Taxes: $450/Month
Total Monthlys: $1,150/Month
Asking Price: $525,000
WHICH SEEMS THE BETTER BUY? LETS DO THE ANALYSIS ASSUMING FULL ASK OFFER, 10% DOWN, AND 30YR FIXED AT 6.675%:
Apartment A - Low Monthlys
Monthly Mortgage = $3,622.23
Total Monthly's = $850
Total Monthly Payment For Buyer = $4,472.23
Apartment B - Higher Monthlys
Monthly Mortgage = $3,042.67
Total Monthly's = $1,150
Total Monthly Payment For Buyer = $4,192.67
CONCLUSION: The apartment that first appeared better because of the lower monthly expenses actually will turn out to be more expensive since you are borrowing more money to purchase that apartment at a time when money is expensive to borrow. Turns out, the apartment with the higher monthly expenses is being discounted to the point that it makes it the better value and saves you about $280/Month when all is set and done. Buyers are scared of high monthlys which causes the seller to endure longer time on market and slow open house activity; you never know how aggressive they will get with pricing to spur activity!
While this is just a simple analysis, you can do the same calculations based on properties you see. If you find a property whose monthly charges are having a negative affect on the asking price, then take some time to do the math and see whether or not the lower price turns out be a money saver for you in the end! As always, have your attorney review all building documents BEFORE you sign the contract of sale to be sure that the higher maintenance costs of the building are not a sign of worse underlying problems; i.e. low reserve, poor management, landlease, etc..
A: Buyers now have the option of taking out a 50-YR loan, should they decide to do so, offered by banks as an incentive for buyers to remain interested in today's national housing market. The 50-YR loan product will help keep monthly payments lower but will be adjustable in nature and will lower the amount of equity the borrower builds on a monthly basis.
According to CNN Money:
Two issues to keep in mind: A borrower with the 50-year mortgage builds equity very slowly. And because rates on the loans are adjustable, a borrower's monthly payments could rise, the report said.
Mortgage experts caution that the 50-year mortgage is best-suited for those who plan to stay in their home for about five years, while the loan's interest rate remains fixed, the report said.
UrbanDigs Says: No reason to take out a 50-YR loan product unless you are absolutely sure you are buying a house that you plan to sell or refinance in under 5 years. Since this appears to be a adjustable rate type of product, it is no different than a 5YR ARM or 7YR ARM except that the life of the loan is 50 years and not 30! This is simply an attempt by the lending industry to be more creative with their product portfolios to offer their customers since the feds began scrutinizing interest only and negative amortization loan products that are NOT in buyers best interests to take. Read my post titled "Regulations on Lending, You bet ya!".
A: I was doing my weekly checks on price changes in the NYC market when this listing caught my attention. It's a walkup on 533 E 13th Street and is being marketed by Heloisa Gilbert of Corcoran. I'm passing it along to you because of the recent price change and unique features of this property; as long as you can stand the 4th floor walkup! After being taken off the market due to inactivity last year, hopefully the price change will spur some buyers back to this one.
This 4th floor walkup apartment is obviously not for everyone but is unique enough to pass along to you guys. With 1,500 sq. ft. floor through interior and private 1,500 sq. ft. private roof deck, this 3BR/2BTH co-op with reasonable monthlys is now asking $883/sq.ft.. The price has been reduced $270,000 from its original asking price of $1.595M and probably has some more room for negotiating. Details:
533 East 13th Street; Apt. 4A
Size: 1,500 sft Interior + 1,500 sft private roof terrace
# Beds: 3
# Baths: 2
maintenance: $1,788 (Aprox. $1.19/sft)
Asking: $1,325,000 (Reduced from $1.595M LAST YEAR!)
Price Per Sq. Ft.: $883
Marketed By: Heloisa Gilbert of Corcoran
- Exclusive Roof Rights
- Established Perennial Roof Garden
- 2 Skylights
- Exposed Brick
- Sun Drenched North & South Exposures
- 9 Year-old Japanese Red Maple (the deal maker)
**Open House is Wednesday 6-7PM & Sunday 1-4PM**
A: Expect Fed Chairman Bernanke & Co. to raise the fed funds rate to 5.0% on Wednesday with another 1/4 point rate increase. What we need to look for is any change in the issued statement, and certainly expect one, after the mis-communication and Bernanke's first mistake since being elected fed chief.
Ben Bernanke must be clear and concise with this next statement after going through some learning curves with just how seriously the street and other tradable markets cling to his every word. He must learn to CHOOSE HIS WORDS MORE CAREFULLY if he ever wants to continue the same environment that Alan Greenspan created.
WHAT TO EXPECT: 1/4 point rate hike
WHAT TO LOOK FOR: Change in issued statement hinting at an end to future rate hikes. My feeling is he will clearly state that future moves will be DATA-DEPENDENT and will NOT take a hard line towards raising or pausing. If he does steer towards one side, expect it to be towards the side of raising rates again in June; that way he doesn't appear to the markets as being soft during inflation-fearing times such as now.
A: Speculators across the nation should be very careful these days and consider transitioning to a different business model; or at least hedge their bets with the new tradable housing futures.
Speculative Real Estate Investing: Speculation, practice of engaging in business in order to make quick profits from fluctuations in prices, as opposed to the practice of investing in a productive enterprise in order to share in its earnings. While the investor seeks to protect his principal as it yields a moderate return, the speculator sacrifices the safety of his principal in hopes of receiving a large, rapid return. Definition from answers.com.
If I were to describe to you where the NYC housing market is RIGHT NOW, it would be filled with points such as:
1. Inventory Still Tight w/ Last Years Pricing: If you have been a buyer looking at this market for the past month or so, you probably know that you still don't have many choices in your price range; maybe a bit more than a year ago. I am noticing that inventory is still tight and that many units are still being priced at last year's levels. That's fine and doesn't bother me none. It just means that buyers are going to continue sitting on the sidelines or make low-ball offers to sellers; and sellers should know this! If you are a seller and want to sell now and not lose opportunity costs of putting your money to work then PRICE AGGRESSIVELY!
2. New Construction/Conversions Inventory High & Pricey: All those new constructions that have been built over the past 1-2 years are now starting to hit the market at prices well above $1,000/SFT. While most buyers can't afford these price points, the inventory is sure to rise with a bunch of more new developments set to hit the market soon. Some buildings, such as 170 East End Ave, are asking $1,462/sft for their lower tier apartments. All I can say is "Good Luck w/ That"! It's not that it's so overpriced (as this is a sick building with incredible amenities), it's just that the target customer is someone who enjoys the luxury of having so much money that they want the quality of life that they are used to. The question that comes to my mind is 'how many people are there like this right now looking for NYC apartments'?
3. Sellers Get Frustrated After 3 Months: If you try to test out the market by overpricing your apartment that you love so much and truly feel its worth that much because its yours, and no one else's, than add on 3 months to your expected marketing time! I'm telling you right now! Buyers are simply NOT chasing right now and you should get used to having 1-3 people, if that, at your open houses on Sunday's. After a few months you'll probably lower your asking price to more realistic market levels at which time buyers will know that you are vulnerable. Be smart & price your apartment correctly. If your broker tells you "No, I won;t be able to sell this apartment at that price and I would refuse to work with you if you force me to start at that level", they probably are right! Respect the honesty and work with that broker!
4. Incentives Being Offered: Seen this lately, "Being offered fully furnished", or "Flat Screen Included", or "Closing Costs Included in Asking Price"? One tactic used by owners/developers in a slowing housing market is to offer incentives to buyers to set their place apart from the rest of the market. It's just starting to hit NYC only recently and I would expect more of this; especially by new constructions that are having trouble selling.
5. Buyers Much More Savvy & Patient: I got to hand it to the buyers out there in today's market. They understand the value of buying over renting, building wealth, and making a good investment. In fact, my clients are going out of their way to make sure they see at least 10-15 properties or so before making a move, so that they fully understand the market they are looking to buy into. I think most buyers across NYC are this way these days and sellers need to respect and understand this. There are deals out there, you just need to be patient and willing to find them!
Add up all these items and that spells N-I-G-H-T-M-A-R-E for speculators who bought within the past 6-10 months and now are looking to flip for a quick profit. My best advice to them is to stop waiting for the market to reach their current asking prices and to reduce their prices aggressively to limit losses. Flipping is always tough in slowing housing markets because of closing costs and tax/broker costs associated with buying and selling real estate. You just won't be able to make enough to warrant the investment; unless you intend to rent out short term and sell down the road when NYC real estate picks up again.
UrbanDigs Says: NYC housing is a cyclical market and a slowdown should be looked at as VERY NORMAL & HEALTHY for longer term sustainable growth. Take the contrarian strategy, read my post, and look for the deal that pops up when housing begins to go out of favor for whatever reason. Sooner or later, and usually sooner with NYC real estate, the market will come back and you should see a healthy appreciation on your investment when you go to sell.
A: The price of oil is tumbling today below $69/Barrel with the last trade at $68.60 a barrel. Feel free to 'call me a god, not the god', if you like as I talked about the price of oil starting a quick correction late last week, with the rise in inventory #'s, hard stance on Iran, and Nigeria supply of 500,000 Barrels/Day expected to come back online in coming weeks.
KEEP FALLING BABY!! The price of oil is SO important to savvy real estate investors because of the critical markets and global conditions that play a role in its pricing and the fed policy moves that are a result. As geo-political concerns in Iran show a glimmer of hope and Nigeria getting closer to supplying the global markets with an extra 500,000 barrels/day, expect oil to correct! Read my post last Thursday, "Oil Tumbles Below $70/Barrel"; I'm still predicting a correction to low 60's for the price of oil during the next 3-4 weeks or so.
With every drop of oil prices, inflation fears are eased a bit. As inflation fears ease, fed chairman Ben Bernanke can put the brakes on the long interest rate hike campaign that began over 3 years ago. It will only help consumer confidence/wall street once interest rates are done moving up, which in turn should add confidence to the buyer market in housing as well.
Keep tuned into UrbanDigs for follow up on these fundamentals that power the NYC housing market!
~ Oil Tumbles As Iran Hopes Rise
A: I recalled doing the interview about a month ago but completely forgot about it and which publication it was going to be used for. Funniest part is my wife is reading the magazine when she stumbles upon an article titled, "Beating The Board", which discusses a bill before city council that would require a co-op board to disclose why it turned down a prospective buyer. As she gets my attention to read me the article out loud she quotes something that sounds very familiar to me! It didnt take long before she mentions the source of the tips: Yours Truly!
Passing it on to you guys. Here are the tips as mentioned in the article to help AVOID REJECTION from a co-op board:
A: If I were to rate in order the most important features of a property that will help you retain the most money in terms of ultimate re-sale value in a slower housing market, than it would be: 1. View/Sunlight, 2. Location, 3. Size, 4. Monthly's
In a slower market there is always more competition and less buyer demand. Put those together and there are a few MUST HAVE's that buyers will always look for and pay more money for. Lets go into the minds of a couple looking to buy a 1BR apartment in Gramercy with a budget of $550K. What would you look for?
View/Sunlight: If you have great sunlight and clear city views than you are in the perfect position to ask for top dollar value when pricing your property for sale. These days, I find buyers willing to sacrifice location (at least on a small scale) and consider nearby areas to live in as well. For the homeowner that makes the permanent features of your home that much more important; in this case, the VIEW and the NATURAL SUNLIGHT.
Location: I place location a very close 2nd behind view/sun. The only reason I dont rank this as #1 is because of buyers willingness to consider other areas. Simply put, buyers are tired of getting priced out of a market that is driven by prime location. The slowdown in demand is enough to cause some type of slowdown in the high end market (read my post on High End Blues).
Size: Raw Space in a good location with sun and views that is in horrible condition! Ahhh, the dream of so many wise real estate investors! Look for the wreck! Who cares if you don't have the money now to renovate. Suffer and live in a craphole until you can muster of enough money to renovate the kitchen, and then the baths, and then the floors. Size is the standard by which we calculate the purchase price and value. Damn, that is so important Im gonna say it again.
SIZE IS THE STANDARD BY WHICH WE CALCULATE PRICE & VALUE
Your broker should always tell you what the apartment you saw is asking per square foot? $800/Sq. FT? $1,200/Sq. Ft? You must know this. You also must know what the very last comparable (same unit) that sold per square foot? This is the info the appraiser will look into when calculating whether or not the apartment is really worth what the buyer has offered to pay.
Monthly's: Your monthly's are the total charge of the monthly maintenance and the monthly real estate taxes that you pay. If your monthly's are high, than you must lower your asking price to compensate. Vice Versa, except how much higher you set your asking price due to very low monthly's is still limited. In the end, the lower the monthly's are in the building you buy matter!
When you look to buy, think about when you will look to sell. Use view/sun, location, size, and monthly's as the main selling points when making your ultimate decision. These are the deal makers and breakers! Renovations can be done after and at your financial leisure and discretion. Do NOT use renovations as a deal maker if you are looking to buy; rather, try to find the wreck that is asking for less money and then renovate it yourself!
Originally Published 1/19/2006
A: Employers added 138,000 jobs in April, missing forecasts by economists surveyed by Briefing.com who expected the # to come in around 200,000. Although jobs created fell, the average hourly wage was up 9 cents, or 0.5 percent, to $16.61. This is a mixed bag for the fed to digest as the slowing growth of jobs is a sign the economy is cooling but the rise in hourly wages is another warning sign of inflation.
According to CNN Money Article:
One reason that the Fed keeps an eye on employment is concern that a tighter labor market will drive up wages and feed inflationary pressures. Average hourly wages are now up 3.8 percent over the last 12 months, which is more than the 3.4 percent increase in prices paid by consumers over the 12 months ending in March. On Wall Street, stocks rose on hopes that the weaker-than-expected labor market might mean the Federal Reserve is not as likely to raise interest rates at its June 29 meeting. Another quarter-percentage point increase is widely expected at the meeting Wednesday.
It certainly is getting interesting with oil tumbling the past few days and now this weaker than expected jobs report. If Bernanke really meant what he said about being more data dependant (although he corrected himself to Maria Bartiromo a day later saying he will fight inflation pressures accordingly) with regard to future interest rate moves, than he is starting to get some data that would suggest a pause after next week's expected 1/4 point rate hike!
I will continue to monitor this but for now I am 95% certain of next weeks 1/4 point rate hike and about 50/50 for another 1/4 rate hike at June's meeting.
A: BREAKING NEWS ON CNN MONEY: Just felt the need to report on this as from a trading standpoint you are probably going to have a lot of profit taking and a new group of shorts as oil inventory grew more than expected yesterday!
I'm going to be bold and make a prediction that Oil corrects down to the low 60's in the coming month or so; perhaps even sooner. Inventory news is pretty big news and warrants a lot of selling after the huge runup in light sweet crude experienced in past week. On previous posts I said I expected oil to bull through 70, and it did to 75 or so for a while. It may be time for a correction.
Should Nigeria start exporting again and the UN/IAEA take a hard stance on Iran causing a policy change, expect oil to retrace to mid 50's or so where it will probably hang out until the next move becomes more clear.
All you homeowners should rejoice with every day oil goes down! Thats 1 step closer to convincing Bernanke to pause on future interest rate hikes! Although we still have 6 months or so of previous fed hikes to seap into the system.
Oil Drops Below $70
A: With all the housing bubble blogs and talk I feel it would be a good idea to take the other side of the coin; at least for sake of argument. Here are just a few thoughts on what could happen in our near future that would keep housing in favor over the next few years.
1. Rents Continue To Rise: You've read it in recent headlines and in most newspapers; rents are rising in NYC! Inventory remains very tight and landlords are now requesting a 8% rent hike to be passed and the min. price of $2000/Mth for rent stabalized units to become free market, to be lowered. With higher energy costs they might get what they want! Keep an eye on this situation very closely as chances are you will be paying more money for a NYC rental than you are used to. This will only make housing more attractive for those who have the means! If you do not have the means then start saving for your first home purchase so you can build wealth.
Rents Heading Up In '06 (CNN Money)
2. IAEA Action on Iran Has an Effect: According to another CNN Money article:
The International Atomic Energy Agency has urged Iran to extend greater cooperation to U.N. inspectors to resolve questions about its intentions. U.S. Undersecretary of State Nicholas Burns predicts that if Iran does not comply with the resolution, there will be a serious attempt to impose another resolution calling for sanctions.What if the UN's future actions cause Iran to back down in their policy? A long shot I know, but it is possible. If this were to occur it would rid geo-political uncertainty and increase confidence in many global markets. This in turn would have a positive effect on stock markets and increase the chance that the Fed pauses in future monetary policy hikes.
U.S. Predicts U.N. Support for Sanctions in Iran (CNN Money)
3. Nigeria Gets That 500,000 Barrels/Day Back Online: Militant attacks in Nigeria have taken off-line about 500,000 Barrels/Day; mostly supplied by Royal Dutch Shell PLC. What happens when this supply comes back online? We already had oil drop yesterday because of the surprise increase in inventory. Market forces at work will drop oil prices even further should Nigeria start exporting again. Keep an eye out for this news story to come in the coming weeks and what effect it has on the price of oil; DOWN!
As oil prices ease they will drag along with the high prices of precious metals which will ease the Fed's worries about future inflation. This in turn will have a positive effect on lending rates as the fed will not raise the fed funds rate as much as they would if oil prices remained above $70/Barrel!
Oil Slides Lower in Asian Trading (CNN Money)
4. Dollar Remains Weak: I don't need to go into details here as I just did a post on this; The Weak Dollar & NYC Housing. As long as the US Dollar remains weak, NYC real estate will be a attractive investment from a currency standpoint for foreigners; especially in Europe!
5. Economy/Jobs Continue To Surge: Corporate Earnings and a strong Retail Sales report for April are bullying the economy! In addition US non-farm productivity rises at a faster-than-expect pace of 3.2% annual rate while hourly compensation surges. As long as the economy continues to surge and jobs are being created, people will have money to invest in buying themselves a home.
Productivity Jumps Above Forecats (CNN Money)
A: Congress is being blamed once again for the current energy crisis by the public. While I won't go into this in detail here, I will talk about how Congress (and specifically Senator Byron Dorgan of North Dakota) is considering a 'Windfall Profit Rebate' for Oil Companies to tax the incredibly high profits of the Exxon Mobil's & BP's of the world. This would be a COLOSSAL MISTAKE by law-makers should this pass as Congress should let free market forces, the cornerstone of our capitalist system, correct the current crisis in energy markets.
Windfall Profits Rebate Act of 2005: The Windfall Profits Rebate Act of 2005 (S. 1631) imposes a temporary windfall profits tax on big oil companies and uses the revenues to provide a rebate to American consumers to help offset the higher cost of oil and gasoline products.
According to Senator Dorgan's website, check out the profits per second that oil companies are making as you read this article:
Why am I talking about Congress and law makers when I host a NYC housing blog you ask quitely to yourself? Here's why!
HIGH ENERGY PRICES ---> HIGH PRECIOUS METAL PRICES ---> INFLATION CONCERNS ---> FED RAISES RATES ---> LENDING RATES RISE ---> HOUSING BECOMES LESS AFFORDABLE ---> ASKING PRICES COME DOWN TO COMPENSATE
In case you don't keep tabs on this type of stuff, I will do it for you. In the past few weeks Congress's public opinion has taken a big hit mainly due to higher energy costs and the effects they have on the American's daily lives. As oil and gas prices rise, the little guys suffer! The people want action and Congress is considering a 'Windfall Profit Rebate' to impose higher taxes on oil companies who are reporting record profits these days to the higher prices of energy. This rebate would then be handed back to consumers to help 'ease' their pain at the pump.
THIS WILL BE A HUGE MISTAKE AND GOES AGAINST OUR CAPITALIST SYSTEM. LET MARKET FORCES KICK IN NATURALLY TO CORRECT THE CURRENT HIGH PRICES OF OIL. TRUST ME IT WILL IF WE CAN JUST BARE IT A BIT LONGER!
POINTS I RAISE:
1. As ExxonMobil Profits have risen 3-fold, the CEO has declared that payments in taxes to Uncle Sam have risen 4-fold? So, just like any company the big oil guys are paying up what is due on their profits. Why impose more taxes?
2. What about shareholders of these big public companies? Our capitalist system encourages companies to try to make as much money that is legally possible. Our publicly traded marketplaces such as NYSE & NASDAQ allow investors to buy shares in these companies if they believe business is good. By imposing any type of 'Windfall Profit Tax or Rebate' aren't you taking away what is duly owed to shareholders of these companies?
3. Why not simply incentivize alternative energy and more offshore drilling research and development without the passing of new tax law and rebate system? Congress should instead work on the environmentalists that are lobbying to prevent more drilling off-shore and in vast areas that they feel need to be protected. Now I know that Senator Dorgan's tax proposal would not kick in should the oil companies use any profits over $40/Barrel for this type of development, but I think he is going about in the wrong way.
4. How can we be assured that this won't be another corruptable inflow of money to the government? How can we be assured that this huge amount of money will be honestly and fairly distributed to everyone?
UrbanDigs Says: Forget the whole idea of a 'Windfall Profit Tax/Rebate' altogether and instead focus on passing tax benefits to oil companies for revenues re-invested in alternative energy such as ethanol/hydrogen fuelcell development. In addition, Americans MUST cut off our dependence on foreign oil either by alt. energy that is homegrown or by becoming a more oil independent country. The only way to become independent is for Congress to incentivize alternative energy development and for environmentalists to concede on some issues and allow more off-shore drilling and research off the coasts of California, Florida and in Alaska. Ethanol is already becoming a hot topic these days with oil above $70/Barrel; which means the slighlty lower price of this alternative energy source is sure to rise higher anyway.
WHAT CAN I DO TO HELP: Thanks to Glenn over at NYC: The Oil Drum for providing these very helpful tips on what residents of Urban & Suburban neighborhoods can do to pitch in!
Urban Tips: Mass Transit service improvements and extensions to underserved areas to replace car trips, more biking infrastructure, more rail/ports for bulk freight deliveries, energy efficient lighting / household appliances, more local food consumption and installing energy efficient heating/cooling systems. But largely, urban areas are very efficient - small spaces, mass transit, walkable to all of life's needs (groceries, jobs, entertainment, etc)
Suburban Tips: Much of the same applies to the suburbs, but they have much greater energy consumption per capita (Like 5-10x as much!). Create centers connected by rail/ports that have high density mixed use. In fact, putting corner grocery stores and other retail that are accessible by walking would greatly reduce non-essential travel by automobile. Live in a house that fits your needs - too many empty nesters are still living in sprawling 4 bedroom houses, they should downsize into a two bed ranch. Start a vegetable garden in the backyard. Use the more efficient car (if you own two) for the majority of trips and leave the SUV for carpooling or transporting large items.
Glenn's Final Note: Ultimately I believe that higher prices will provide incentives for much of this behavior, but the sooner we start doing these things, the easier the transition will be and the more we will be able to afford investing in infrastructure assets that help provide positive alternatives instead of drastically scaling back our lifestyle.
A: When was the last time you did a condo property search on NY Times online? If it was recent than you probably noticed a plethora of "PRE-CONSTRUCTION", "NEW CONST", "NEW BUILDING", & "BRILLIANTLY DESIGNED" ads posted by brokers from Homestead, HomeQuestNYC, and others. This crapping out of a once great real estate resource should make buyers working on their own or with brokers turn to a site like Streeteasy.com instead for their real estate searches!
With so many brokerages out there these days its hard for buyers to search every one; that could take hours. The usual choice is NY Times online but recently their data seems infested with broker ads trying to get buyers for new developments. In fact, my last search for a client of mine yielded 15 of the first 18 results to be these types of 'spam ads' by brokers. I'm sure I will get some smack for this post from fellow brokers as they try to make their living, but I can't help but feel that this behavior is making a once great resource, well less great? Here is how a search for 1BR Condos in UES & UWS displays on 1st page, with a little added touch of emotion on how it makes me feel to view it:
Enter Streeteasy.com, whose easy layout and quality data makes it easy for brokers and buyers to quickly check for listings that meet your needs being offered by most of the NYC based brokerages. There are some of these 'New Construction' ads but not nearly as annoying as what the NY Times Online has become. Now take a look at how a search for 1BR Condos in UES displays on 1st page of Streeteasy:
I don't know about you but I strongly believe that quality content is the best strategic route for any website publisher looking to succeed in the dot com world. In this case its not the brokers that are to blame for this, its the NY Times! It's their system and they control what type of content makes it to their real estate search system that so many web surfers got used to browsing.
I really wish the NY Times would treat their property search system more like a 'quality database' and less like a 'revenue generator' because in the end they are going to lose traffic to sites such as Streeteasy.com that consolidate listings from many NYC brokerage firms into one place for you to find!
According to Streeteasy.com CEO Michael Smith:
We crawl and have direct feeds from more than 50 brokers. We have run into the same problem. We're currently implementing a system which will limit these types of listings.
To do this we validate the number of listings from a particular broker which do not match certain criteria. For example we will be giving priority to those brokers which provide complete information. Complete addresses, number of rooms, bedrooms, bathrooms, square footage are all information which is very relevant to buyers, and the best brokers consistently provide this information.
We are also implementing a system by which brokers who do not consistently meet minimum standards will have all of the non-conforming listings reviewed and possibly excluded.
Love it! The web at work for the people! Do yourself a favor and run a few searches on Streeteasy and see if it works better for you. If you find the site lacking in any area, at least you can suggest BETA FEEDBACK that I know for a fact will get reviewed by their development team in a timely manner. Good Luck!
This Friday will bring the Jobs Report showing how many jobs the US economy added during the month of April. Bernanke and his team will dissect this report very closely because the next Fed meeting is on Wednesday. Bonds have been trying to stabilize recently but have been on a clear downtrend in recent weeks causing home loan rates to rise. If news this week continues to be strong and positive for the economy look for home rates to continue to tick higher.
A: As the US Dollar continues its slide, foreign investors SHOULD (and I stress SHOULD) get more interested in US real estate; especially in big cities such as New York where foreigners usually live & work. When comparing a 1YR trading chart of the US Dollar vs. EURO I see that we are fast approaching a 12-month low as 1 EURO = $0.79 US Dollars.
Foreign investors whose currency is the Euro are enjoying such a strong currency these days that investing in US assets becomes a very wise investment. Before buying real estate in the US, the Euros are converted to US Dollars where they get much more bang for the buck than they did just 6 months ago. Look at this quick analysis of what 500,000 EUROS would buy you in US Dollars today vs. 6 months ago:
6 MONTHS AGO (1 EUR = 1.18350 USD)
500,000EUR = $591,750 US Dollars
TODAY (1 EUR = 1.26285 USD)
500,000EUR = $631,425 US Dollars
See what I mean! The same amount of EUROS buys you $40,000 more US Dollars today than it did 6 months ago! The US Dollar is still expected to fall which means EURO's will buy even more US Dollars down the road. By looking at the simple example above you can see how much money this actually equates to. Here is a chart so you can visually see the dropoff of the greenback vs. euro over the past 6 months:
Take a look at what investment mogul Warren Buffet said recently on his predictions of the US Dollar; so far he has been right on ("A Word From A Dollar Bear"):
Says Buffett: "The rest of the world owns $10 trillion of us, or $3 trillion net." That is, U.S. claims on foreign assets run to only $7 trillion. "If lots of people try to leave the market, we'll have chaos because they won't get through the door." In a nutshell, the trade deficit is forcing foreign central banks to ingest U.S. currency at a rate approaching $2 billion a day. Buffett continues: "If we have the same policies, the dollar will go down."What To Expect: As the US housing market continues to remain flat to down, foreign investors should be getting very interested in NYC real estate from a currency investment standpoint since the dollar is in freefall. As long as this trend continues, expect outside buyers of NYC real estate to help stabalize our housing market and provide a nice chunk of demand that most suburban markets will never see.
A: While I'm still getting back to my normal schedule after a week in California, I did my best to stay on top of things since my last post on what the Fed is keeping an eye on as they decide whether 1 or 2 more 1/4 point interest rate hikes are ahead of us. Among the most important developments I see are that Oil is still high, the Economy is still showing strength, Gold prices continue to rise, and that fed chief Bernanke made a bold and telling move in a public appearance to Congress.
Lets get right into it.
Energy Prices Remain High As Light Sweet Crude Stays Above $70/Barrel
The price of oil remains at high levels above the $70/Barrel mark which will keep Bernanke & Co. on inflation alert. According to today's CNN Money article:
Oil rose above $74 a barrel on Tuesday, pushed higher by persistent fears about supply disruption, especially from Iran, and aggressive fund-buying across the commodities sector. U.S. light, sweet crude rose 47 cents to $74.17 a barrel, while London Brent crude gained 41 cents to $74.30.Not much we can do about this other than control our consumption of oil as today's energy crisis is the result of decades of bad policy by both governing parties and the incredible growth of demand by Americans. It still appears to me that it will get worse before it gets better. I will write another post this week on what Congress can do to help; and what it might do that could be a huge mistake!
US Economy Still Strong
Another CNN Money article titled, "A Hot Time in the Old economy" describes our situation well. Although energy prices and interest rates have risen over the past few years, the GDP #'s posted its fastest pace of gains in almost two years. Some key points of the article stated:
A number of economists say much of the first-quarter strength can be explained away by saying the economy was playing catch-up from weak fourth-quarter growth of 1.7 percent annual growth following the hurricanes, coupled with a boost from the warmest January on record. But with a number of March economic numbers such as home sales and durable goods orders showing much better-than-expected strength heading into the second quarter, it's not as easy for economists - or Fed policymakers - to discount a big first-quarter gain.
Gold Prices Continue To Soar
The price of Gold continues to rise as investors and speculators pour money into this historical safe haven. It's very common for the price of precious metals to be in demand in times of political and economical uncertainty; such as today. Add in a weaker dollar from the fed recent remarks and it looks like Gold will soon be at $700 an ounce. According to the Dow Jones Newswires:
Spot gold gained $9.50 on its New York close Friday to mark its latest quarter-century high of $661.60 a troy ounce as markets continued to digest the implications of Iran's defiance of a U.N. Security Council deadline Friday on ceasing its uranium enrichment program. Another driver of gold's accelerated uptrend is U.S. dollar weakness given the metal's status as a dollar hedge, participants said.
Bernanke Sets The Tone
Laymakers prefer a vigilant and tough fed chief when it comes to inflation and the negative effects rising prices have on a nation-wide economy. Former Fed Chief Alan Greenspan had a history of being that kind of leader as he was known for 'overshooting' on interest rate policy when it came to inflationary pressures; which means he would lead the fed board of governors to raise interest rates high enough to be certain inflation remains in check. By implementing this restrictive measure, there were times that his moves eventually hurt the US Economy by slowing its growth too much.
A few days ago we saw the first big move made by new fed chief Ben Bernanke as he addressed Congress. Bernanke states:
"We're much more data-driven," Bernanke said of the Fed. "We need to continually re-evaluate our forecasts and think about the prospects for the economy and make our decisions based on what the information is that's coming into our hands...There's always the possibility that, if there's sufficient uncertainty that we may choose to pause simply to gain more information, to learn better what the true risks are and how the economy's actually evolving," Bernanke told lawmakers.
We have to get used to the fact that Greenspan's style of addressing Congress and his actions to back up his words are GONE! According to a recent CNN Money Article:
The Fed chairman also said that he planned to stay on the path of his predecessor Alan Greenspan regarding increased openness at the central bank. During the past few years, the Fed, under Greenspan, was far easier to read and did a good job of telegraphing its interest rate moves to Wall Street. "We will continue Greenspan's movements toward greater transparency to reduce uncertainty in the financial markets," Bernanke said. "We have no desire of changing the basic operating procedure for the Fed."We are about to get the first real glimpse of new fed chief Ben Bernanke's cards which will give us very useful insight into how the monetary policy king will handle difficult situations in the future. Will he be unpredictable and data dependent? Or, will he be hard-lined and 'overshoot' like Greenspan had a history of doing?
It's becoming clear that Bernanke may choose to pause AFTER 1 more 1/4 point rate hike as he sits back and watch's whether all previous interest rate hikes do their job 6-8 months down the road.
Bottom Line: We need to see whether Bernanke gets tough and continues to raise rates UNTIL the inflation red flags go away or NOT! Should Bernanke pause after 1 more 1/4 point rate hike with inflation pressures as they are today, well then that tells you something about his style; uncertainty. Personally, I expect 2 more 1/4 point rate hikes ahead of us to help combat inlfation pressures.