An ebbing tide raises all (buyer’s) boats

Tomorrow’s NYT Real estate section reports that first time buyers, encouraged by low mortgage rates and huge price drops, are returning to the NYC market.

Many of these buyers have never received a fat bonus check, so they don’t miss it now. They did not suffer huge stock market losses, because they didn’t have huge stock market investments. They aren’t mourning the loss of value in their existing co-ops or condos, because they have never owned one.

They have jobs and good credit ratings, and they are looking to buy.

And now, brokers say, these mostly first-time homeowners are taking advantage of reduced apartment prices and interest rates that have fallen to the lowest levels in a generation. They’re making deals — sometimes far below asking price — on apartments marketed for under $1 million, and especially under $500,000. Still, the hard number of transactions remains depressed; in the fourth quarter of 2008, they were more than 30 percent below levels of a year earlier, according to a market report by the Corcoran Group.

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At three tenement buildings on West 107th Street last weekend, buyers shuffled past one another as they climbed the narrow staircases, often up to the fifth floor, to look at newly renovated two-bedroom apartments in otherwise unrenovated buildings.

The buyers, some of whom said they had been priced out of the market in the boom years, were drawn back by low prices and the promise of deals.

“It is price, price, price,” said Jason Haber, a broker at Prudential Douglas Elliman. 

The same phenomenon is just starting to appear in Greenwich, and I’m glad. Look: as a real estate agent, I welcome the beginning of the return of reality because prices were crazy and getting crazier each day, narrowing the pool of buyers into an ever-thinner slice of the population. Had it continued, this price spiral would have resulted in just two buyers being able to afford Greenwich houses, Warren Buffet and Bill Gates, and Mr. Buffet doesn’t seem to share the taste of most Greenwich spec builders. Something had to give.

My pal Nancy Fountain was always amused by my fascination with hurricanes, accusing me, accurately, of taking a perverse pleasure in tracking the chaos and disruption huge storms brought to land. I love blizzards, too, so I might as well admit that watching the fall of our local market is kind of cool. 

But my extended family owns houses in town to, just like the rest of you, and I know very well the sense of unease watching the value of those assets drop. There was always something comforting in knowing that, if everything hit the fan, a couple of million was available – we might have to move to Bumfruck North Dakota to take advantage of that pile of cash, but it was there. Now it isn’t, or not as much of it is. Owning a house here was sort of like taking an airplane flight: you know there is a possibility that the plane may come down unexpectedly but what are the odds? As Thursday’s U.S. Air flight into the Hudson shows, you never know. The passengers in that one escaped with a couple of broken legs and no other serious injuries. We can only hope we land as successfully. 

So things are what they are, and we’ll see how they develop. My advice remains unchanged: if you have to sell today, or within the next year or so, slash your price to the bone and hope you attract one of those buyers looking for a bargain. If you’re buying, insist on a price that will shield you from a further decline in the market. And we’ll all get along and on with our lives, I hope.

6 Comments

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6 responses to “An ebbing tide raises all (buyer’s) boats

  1. anonymous

    Sure, Greenwich will be beneficiary of many Manhattan-based renters who are buying first real family house….

    That said, many of those buyers have qualms about own job security and future pay levels

    And gotta think many don’t need a house tomorrow; know that real estate tends to be a U-shaped pricing curve…..and can easily opt to build a new house on better land w/a competent builder….all easier, cheaper, quicker stuff to do in a non-Bubble

    Never understood why used (or builder-spec) houses wouldn’t depreciate like used cars, esp when new houses are easily achievable on poss better land and w/likely better construction quality/design/engineering (and w/o stench of prior occupants)….after all, any logical buyer intends to live in whatever house for at least 10yrs…

  2. Retired IB'er

    Chris,

    You need to cheer up. Things on a relative basis aren’t all that bad. You could be selling real estate in Greenwich, England.

    From The Telegraph:

    In an attempt to restore confidence within the financial sector, the Treasury will tell the banks of its plan on Saturday. It aims to announce details of the rescue package publicly early next week. The bad bank plan has climbed the political agenda in the past couple of weeks as the Government has become aware of the extent of the lenders’ bad debts.

    Sources said that a bad bank would have to take on about £200 billion of toxic assets. That would take the Government’s total commitment to solving the banking crisis to almost £1 trillion in taxpayers’ money that has either been spent or pledged. That equates to about £33,000 per taxpayer. The total sum is equivalent to more than two-thirds of Britain’s annual GDP of £1.4 trillion.

    That is the equivalent of the US spending on the order of $10 trillion, which we haven’t (YET). Moreover, the US has the world reserve currency thing going for us (until we irreparably abuse that privilege); the UK does not.

    So cheer up. I know I am. I may finally buy a place in the Cotswolds.

  3. christopherfountain

    IB’R, I feel blessed to be working with four active buyers right now and it’s a lot more fun strategizing how low to bid than it was several years ago estimating how much higher than ask it would take to get a house. So yeah, things could be worse and who knows? If all four of my buyers get what they want, maybe I’ll go looking in the Cotswolds too.

  4. Anonymous

    The new stimulus package changes the income tax credit for first time homebuyers to a real tax credit that does not have to be paid back. (Previously it was an interest free loan). This will generate a lot of sales activity in the months to come if it passes.

  5. fred

    Cotswolds: Was that the name of a Nazi extermination camp?

  6. fred

    “The new stimulus package changes the income tax credit for first time homebuyers to a real tax credit that does not have to be paid back.”

    There arent any “first time homebuyers” left unless you include newly arrived wetbacks.