Some interesting things are happening in the residential real estate market and in the industry. Many brokers who started in the past several years can’t adjust to this market and are leaving the industry. This is a valuable shake-out. Secondly, we are seeing more people trying to negotiate down the commission. Brokers are a lot like lawyers, no one really wants them, but they, and we, are needed. Just as lawyers know how to maneuver the intricacies of the law, good brokers know how to prepare an apartment for sale and how to help buyers efficiently find what they want. For sellers, we know how to set a price that will attract interest, market it and handle the paper work to satisfy a co-op board or get ready for a condo sale. For both, we know how to structure the deal to satisfy our clients.
Yet, people want to reduce the commission and some turn to the two-percent brokers or try to sell the apartment themselves. What you might save on a commission can be lost in the details of the negotiations or not selling altogether. It’s like shopping at Bergdoff Goodman compared with buying from the street vendor out front on Fifth Avenue. You don’t bargain at Bergdorff’s, but you know you are getting style and quality. You bargain with the guy with the pushcart, but you never really know what you are getting.
Thirdly, this is a market of patience. Those who carefully plan, whether selling or buying, and those who do not panic and take a long-term view come out ahead. It’s a change from the go-go recent years.
Look at the Facts
I remain optimistic about the market. If we look at the facts, rather than the hysteria, you’ll see some positive signs. While prices were off in the third quarter compared to the second quarter, they are significantly above levels of a year ago, according to the influential Prudential Douglas Elliman Market Overview prepared by the appraisal firm of Miller Samuel Inc.
The average sales price of a Manhattan apartment was $1,288,748, down 7% from the second quarter record of $1,386,193. This, however, was 12.1% above the third quarter of 2005. The median sales price showed a similar trend, down 4% from the second quarter this year, but up 12.7% over the third quarter last year.
Many people forecasting doom in the market have been citing the inventory figures saying there is too large a surplus of apartments. In the third quarter the number of apartments for sale leveled off for the first time since the fourth quarter of 2004. Though above last year’s levels, co-op inventory fell 10.7% in the third quarter as many property owners who were looking to “cash-out” took their apartments off the market when they couldn’t sell the overpriced properties. The condo market surplus, conversely, increased 11.5% in the third quarter over the second reflecting the new condo developments sprouting up throughout the borough.
Another factor that many watch is the number of days an apartment is on the market. In the third quarter it took an average of 150 days for a sale, up six days from the second quarter and 17 days from last year’s third quarter.
Healthy Economic Factors
Other issues that provide optimism are the stability of consumer spending and the rate of inflation, forestalling, I believe, any increase in the Federal Reserve bank rate in the near future and possibly its being lowered early next year.
Mortgage rates remain at historic single-digit lows and during the period when the Federal Reserve raised interest rates 17 consecutive times, mortgage rates did not have a parallel increase and have not fluctuated much over the past several years.
Wall Street, the engine that drives the New York City economy, is having a gangbuster year with bonuses expected to increase 10-15 percent over last year’s healthy handouts. Many Wall Streeters use their bonuses to buy an apartment.
I wish all of you the best for a prosperous, healthy and successful 2007.