Top 7 Lessons Learned from 2010
Bears will always be bears: Many bearish voices in 2009 were calling for the NY Real Estate market to fall off a cliff … at the very least for prices to drop another 20%. In 2010, feverish discussions continued on StreetEasy and Urban Digs, making the case that the downturn seen to date was only the beginning. And yet few could argue that things have not at least stabilized, if not improved, as compared to 2009 – some may even call it having formed a bottom.
Deep discounts are so 2009: No longer could buyers negotiate 10-15% off asking prices. No longer would new development concessions include everything and the kitchen sink. Buyers felt a sense of disbelief in having to often pay full ask, sometimes even engaging in bidding wars in what they thought was a buyer’s market. This was the result of too many would-be-buyers chasing too few properties. Good inventory was hard to find in 2010.
A deal is not a deal until a signed contract’s in place: Although a very questionable strategy, to be sure, this year was the year of multiple contracts being sent out by sellers to hedge their bets after hearing of so many deals that fell apart due to financing issues.
Parallel offers help avoid attachment: Frustration rose for many buyers who had accepted offers on the table, only to then find out the seller reneged and sold the apartment to someone else. In turn, buyers began negotiating in parallel to avoid putting all of their eggs in one basket.
New developments come with their own headaches: It used to be that buying new meant buying better quality than an older building would offer, saving you money by not having to fix the apartment’s infrastructure or renovate its looks. Yet many new buildings drew a flurry of lawsuits due to shoddy construction and cut corners. It paid to do your own due diligence about the developer and the building’s reputation.
Easy money is dead: Getting qualified for a loan became the biggest obstacle to getting a deal done in 2010. Buyers had to have great credit, great debt-to-income ratios and click their heels three times while repeating “there’s no place like home” to get a mortgage. (Even then, signing a contract without a mortgage contingency was akin so Russian Roulette.) If they looked to get a Jumbo mortgage, then they had to throw in a sacrifice to the mortgage gods to make the mortgage go through.
Technology rules (to a point): So many buyers leveraged the internet and its real estate advances this year. They became expert at finding the right properties, researching them, comparing them, and using the information at their fingertips to fuel their negotiation strategies. The frustration kicked in when sellers budged no more and buyers realized that real estate is not such an efficient market, neither on the buy nor sell side of the equation.
Top 7 Lessons Learned from 2010
New York is not Miami: We’ve all heard it so many times, perhaps it’s even escaped your own lips at some point: “But New York is different!”. The country underwent the most significant downturn in our generation, middle-America is suffering, housing prices are down north of 50% in some areas of the country and unemployment hovers around the double digit barrier … and the worst that the NY Real Estate market could do was down 20-25% on average from its 2006 peak? Yes, the higher the pricepoint, the more significant the down-turn, but … one must admit, it’s still damn impressive!
Renovations sell, fixer uppers don’t: 2010 was the year of the first-time home buyer and of the turn-key purchaser. This means that newly renovated properties sold faster than ever before, particularly now that buyers no longer had access to home equity lines of credit to use towards fixing an older property. Those who chose to buy wanted to a prêt-a-vivre home, ready to live in from the start.
Proper pricing is so now: Sellers who tried to “test the market”, hoping for that one special buyer who would happen to give them their high asking price saw themselves on the market for a loooooong time. Then the enemy became time on market, with buyers neglecting price-improved properties out of the skepticism that comes along considering a stale listing.
Renting is a real option: With the rental market making a real comeback this year, many sellers on the fence of parting with their properties found it lucrative to rent. Inventory was slim and having a tenant in place for 1-2 years to ride out the storm paid off.
Cash is still king: With the turbulence felt in the credit markets, sellers had to contend with the very real tradeoff between accepting an ok all-cash offer and a higher, mortgage contingent one. Many chose cash over bearing the risk of the deal falling through after months of buyers slugging it out with their bank.
Appraisals matter: Just because you were lucky enough to get the price you wanted for your apartment, it didn’t mean the negotiations were done. Appraisals became the Achilles’ heel of the industry as they seemed to consistently come in below the contract-signed price, throwing a wrench in the whole process. Appraisals became commoditized and many began criticizing the process, now driven by volume versus quality and experience.
Your building has its own credit rating: Many sellers felt stranded by the inability of their buildings to get approved for financing, an issue that often popped up at the tail end of the entire process. After going through the motions of putting the property up for sale, negotiating the price, and moving towards a close, many owners in land-lease buildings, or those with too great a concentration of rental units or owners found themselves having to rationalize staying in their home.
Top 7 Lessons Learned from 2010
Yes, the market has rebounded: Unlike 2009, most of this past year found brokers sounding like a broken record: “no, really, it is no longer a renter’s market.” With so many stories from friends and co-workers of the phenomenal deals grabbed in the previous year, it came as quite a blow for many tenants looking to make a switch in 2010. Landlords negotiated less and concessions diminished.
Inventory talks: Inventory was quite slim throughout the year, despite talks of shadow condo inventory filling up rental demand. Good apartments flew off the shelves within a week of hitting the market, with time-sensitive renters feeling the pressure of having to quickly find other options and foregoing their dreams of negotiating to the bone.
Luxury costs, baby: Many potential buyers, looking for the quality and lifestyle that usually comes with owning, had many places from which to choose, but for a pretty penny. Luxury rental developments seemed to pop up in every which neighborhood, at price-points that made many skeptics balk. Yet, lo and behold, with a few strategic concessions here and there, they filled up quite nicely, thank you very much.
Easy shares are a thing of the past: At least the walls between roommates are, as an old law prohibiting easy-to-put-up walls became heavily enforced. Convertible two and three bedrooms lost their power of attraction to many who now would rely on bookshelves and curtains to create the iota of privacy that would insult most in other cities.
Bed bugs don’t discriminate: Those little vampires seemed to be showing their fangs just about everywhere in the city this year, from Bloomie’s to high-end apartments. Landlords, co-op boards and owners, alike, were quite hush-hush about their encounters with bed-bugs due to their potential to suck away at apartment values … until a new law kicked into effect mandating their disclosure.
You CAN avoid Craigslist scams: With apartment hunting having now become an official sport of New Yorkers far and wide, it only makes sense that scammers flooded Craigslist with faux apartments to capitalize on this interest. Savvy renters quickly learned the ways to spot them and avoid the bait and switch tactics that lead so many to give up using a broker altogether.
Count your blessings: If you happen to have signed a lease in 2008 or 2009 for an apartment you love, thank your lucky stars. Your base rent is likely lower than its equivalent for a new tenant. While this may not be rocket science, it does buck the trend we’ve seen over the last few years of rents being the same or lower year on year.
- Can international buyers purchase a co-op property?
- Can you explain the concept of condo living?
- Can you rent in NYC if you don’t meet income requirements?
- How much of the maintenance in a co-op is tax deductible?
- How much rent can I afford? How much rent can I afford?
- I live outside the US – Can I buy in NYC?
- I live outside the US. Can I get a mortgage in NYC?
- If I purchase an apartment, how much of a mortgage can I get
- Is there a fee to buy an apartment?
- What income do NYC landlords commonly require from tenants?
- What is a “flex” or “convertible” apartment?
- What is a Guarantor?
- What is a loft building?
- What is a Tax Abatement?
- What is a townhouse?
- What is the difference between a condo and a co-op?
- What paperwork do I need to rent a NYC apartment?
- What qualifies an apartment as Pre-War?
- Where are the cheapest apartments in downtown Manhattan?
- Is there a difference between RENT CONTROL and RENT STABILIZATION?
- What is the status of rent control?
- When will we see the last rent controlled apartment?
- We have continuously occupied our apartment since 1962 – how do I know if it’s rent controlled and if I have the right to stay?
- My mother passed away – can I continue to live in her controlled apartment?
- The prior tenant was rent controlled. How much can the rent be increased?
- How does the Landlord legally increase the rent to over $2,000 and thereby deregulate a formerly rent controlled apartment?