Issue 106 – Lucrative Markets Command Respect

Finally, we see news predicting that Wall Street bonuses are actually up!

In December, reports began to circulate that bonuses were expected to rise, fueled by Citi and Goldman Sachs’ earnings reports. The press suggested that bonuses could be as much as 35% higher than in 2024, although 2024 set a relatively low bar in general. Even Forbes joined the conversation, highlighting that this marks the first bonus increase since the exceptional profitability of 2021, according to a recent report by compensation consulting firm Johnson Associates.

Given that 2024 was an election year, it’s not uncommon for real estate to remain in a “holding pattern” until the election is concluded, and the results are solidified. What does this mean for real estate, specifically?

Many potential buyers held off on making major property purchases or investments, waiting to see the election outcome. This uncertainty contributed to the slower performance of the 2024 property market. However, what was fascinating was the post-election surge: As soon as the winning candidate was announced, we saw a massive uptick in the equity markets, stock market, and real estate market.

In recent months, financial institutions have experienced a resurgence in merger and acquisition activity, particularly following the Federal Reserve’s decision to lower interest rates by 50 basis points last year. This decision propelled stock markets to unprecedented highs. Wall Street experienced a significant upswing in the first half of 2024, with pre-tax profits soaring to $23.2 billion—a 79.3% increase compared to the same period the prior year.

When markets perform well, it’s like music to a broker’s ears, as a robust market rebound can revive New York across all asset classes. Real estate, in particular, draws attention as a secure, long-term investment that offers both shelter and equity-building potential. For many, renting feels wasteful and frustrating, given that homeownership is a more reliable way to build wealth over time. If interest rates are favorable, homeownership becomes a no-brainer.

The positive bonus season news naturally spills over into opportunistic purchasing, diversification, and additional income streams through investment properties. This becomes particularly lucrative after a prolonged downturn in the sales market, where momentum has been sluggish or halted altogether.

These conditions often create the best markets for seizing opportunities. Many buyers and sellers mistakenly believe the best time to buy is when everyone else is doing so, but purchasing at the market’s peak often prevents them from realizing significant equity gains. Buyers who purchase at market highs frequently discover their properties lose value, leaving them selling at a loss—especially when offloading larger, high-value properties into which they’ve invested significant capital.

In contrast, a softened sales market combined with strong bonus performance creates a dynamic, lucrative environment for both buyers and sellers. While some sellers might hesitate to bring a property to market in a softer market, fearing they’ll need to lower prices, in a market with limited inventory, well-priced, high-quality properties can attract multiple buyers, driving up value and leading to above-asking-price sales.

Not every market is favorable for buyers, namely when competition drives prices to unsustainable levels. However, the current market offers a tremendous opportunity.

One notable sweet spot is the $4 million to $5 million luxury sector, which experienced a dramatic 53% reduction in contracts from 2023 to 2024. This drop was likely due to unfavorable interest rates, which made deals in this segment less viable. Even in the luxury market, it’s evident that buyers today rely heavily on borrowed leverage.

This reality raises larger questions: Are we living beyond our means? Does this spending align with a better quality of life? Is there a plan to repay these debts when conditions improve?

Ultimately, value comes from creating assets that can generate profit after a period of use—something desirable enough to command a premium from future buyers. Bonuses and vesting schedules provide a significant opportunity to exploit such market conditions.

Historically, those who buy when others are hesitant often make the smartest, most significant decisions, capitalizing on market cycles that yield strong returns in the aftermath of downturns.

All in all, this is an exciting time to seize opportunities and generate long-term growth in the property market, especially after the stagnation of the last two years. I am optimistic and look forward to seeing growth across all price points and segments, from first-time buyers to those upgrading to larger homes or entering prime neighborhoods they’ve long aspired to join.

As we move into spring, one word will define the market: movement. Onward and upward!

Issue 127 – The Price Isn’t the Price

A new calculation is changing what a New York apartment is actually worth. For decades, NYC real estate has been obsessed with price per square foot. However, now we may be entering the era of cost per year.

Consider two apartments of the same size, price, amenities, light, view, and location. If one has $6,000 in carrying costs and the other $11,000, are they really worth the same amount?

Increasingly, I would argue they are not because buyers aren’t simply purchasing apartments anymore. They are purchasing the economics of the buildings they’re in, which are starting to matter enormously. Think: insurance, labor, utilities, repairs, taxes, assessments, energy compliance, staffing, capital improvements, and reserves. While monumentally important, none of these photograph well, but all determine whether an apartment is easy to own — and eventually sell.

We have always understood that certain characteristics affect value: a lower floor trades differently from a higher one, an awkward layout matters, a protected view commands a premium, and poor light equals a discount. However, I contend another discount is related to the aforementioned carrying costs.

The sexiest amenity in New York real estate may soon be a healthy balance sheet. That sounds less exciting than a lap pool, unless you are the one writing the checks. Operating costs in New York have been rising, putting pressure on building budgets and making previously deferred capital projects harder to ignore.

The 2026 New York City Price Index of Operating Costs — which tracks expenses for the city’s rent-stabilized building stock — illustrates the broader pressure. Over the five years through 2026, insurance costs in that index increased more than 80%. Maintenance increased 29%, utilities more than 26%, administrative costs more than 21%, and labor nearly 16%.

Those figures aren’t a direct proxy for every condominium or cooperative in Manhattan. But they illustrate something anyone involved in operating New York buildings already understands: buildings are getting more expensive to run.

One mistake buyers can make is falling in love with the apartment and treating the building as secondary. In New York, you aren’t just buying four walls; you’re buying into a small economy. You’re inheriting its management decisions, staffing structure, physical plant, reserve philosophy, insurance exposure, and capital planning.

A building that deferred maintenance may appear inexpensive today because it hasn’t yet charged owners for the work it needs. That doesn’t necessarily make it inexpensive. It may mean the bill hasn’t arrived yet. Conversely, a building that recently completed an expensive façade project, replaced major mechanical systems, or invested in energy efficiency may initially appear less attractive because owners have already absorbed those costs. We need to consider which building presents the greater risk over the next decade. The answer isn’t always obvious from the monthly maintenance number.

Buyers understandably love low carrying costs, and brokers value them because they make a property easy to market. But low monthly charges deserve as much scrutiny as high ones. A good broker asks: Why are they low? Is the building extraordinarily well managed? Does it have other income? Are the reserves substantial? Or has the board resisted increasing common charges while postponing expensive work?

An important distinction exists between efficient and underfunded. A well-run building with appropriately funded reserves may ultimately be far more economical than one with artificially low monthly charges followed by recurring assessments. It’s not just the number that is meaningful, but the story behind it.

Few words cause more anxiety in a New York transaction than “assessment.” Even here, context matters because not every assessment is a red flag. An assessment financing a necessary capital improvement can actually strengthen the building. A new roof, elevators, façade work, upgraded mechanical systems, or energy improvements may protect long-term value.

The more important questions a sales pro considers are: What is the assessment for? Why didn’t reserves cover the expense? Is it part of a thoughtful capital plan or the latest in a recurring series of emergencies? And, perhaps most importantly, what comes next? A $500 monthly assessment with a clear end date concerns me considerably less than a building with no assessment, minimal reserves, and several million dollars of foreseeable work.

New York’s environmental requirements add another layer of complexity. Local Law 97 places emissions limits on many large buildings and creates increasingly stringent requirements over time. The encouraging news is that the overwhelming majority of covered privately-owned buildings are currently meeting the applicable limits.

But buyers should still understand what their particular building is facing; Has the Board commissioned the appropriate studies? What capital improvements may eventually be required? Has money been allocated? Is compliance incorporated into long-term planning? The concern isn’t whether a building faces a penalty today; it’s whether the building has a credible plan for tomorrow. That, increasingly, is part of due diligence.

New development creates its own version of this problem. Buyers are understandably attracted to pristine buildings with spectacular amenities and, sometimes, surprisingly reasonable initial common charges, but what will the building actually cost to operate when it is fully functioning?

Pools, spas, private dining rooms, screening rooms, landscaped terraces, playrooms, fitness centers, and mechanical systems all require staff, maintenance, and money long after the sales office closes.

The glossy brochure tells you what you’re getting. The budget tells you what you’re buying — both matter.

This conversation also requires nuance when comparing co-ops and condos. A co-op’s maintenance can initially look dramatically higher because it often incorporates expenses that a condo owner pays separately, including the shareholder’s proportionate share of the building’s real estate taxes. A condo may show a lower common-charge number while property taxes sit alongside it.

So, comparing maintenance to common charges without understanding what each includes is meaningless. The correct question isn’t: Which monthly number is lower? It is: What is my total cost of ownership, and what am I receiving in return? I believe strong building economics will increasingly become an amenity in their own right.

Brokers spend an immense amount of time learning how to talk about marble, appliances, ceiling heights, views, and finishes. We should be equally capable of explaining the financial health of the building we’re selling, because that is a big part of valuation.

None of this means price per square foot is irrelevant. It’s still an important metric. But like any metric, it becomes dangerous when used without context.

I’ve spent my career watching New York buyers pay premiums for things that cannot easily be replicated, including light, views, ceiling height, architecture, location, outdoor space, great proportions. But I always add another thing to the list: financial soundness. That may not command the same emotional response when someone walks through the front door. But increasingly, it may command something just as valuable – confidence, which matters in uncertain markets.

For years, we’ve asked buyers how much apartment they can afford. Now we need to start asking them how much building they can afford.  Because in New York, you don’t just buy the apartment — you inherit the economics beneath it.

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