By David Rosen
Are we all really screwed? Well that depends on your outlook. Three people who are not screwed are my wonderful parents (I’m a product of divorce, it creates abnormal parent figures, but that’s something for my therapist.) My parents have zero to low debt at low interest rates on different properties. They have portfolios that perform based on moderate growth projections. They have a hard working Son with no kids. So they are chilling. And they don’t want to move.
However, you, reader, you might be somewhat invested. You may want another bedroom, or to start building equity through homeownership, or to get out of a less than optimal living situation. And the market landscape has not been murkier since 2011. Oh, yes, 2011. The good old days. (Here are the Top 100 songs from 2011 and movies ) THESE MOVIES WERE AWFUL! Yuck. 2011 really sucked.
Home owners weren’t selling because they were disgusted by their loss in equity from 2007 highs. Home buyers however were much worse. Many weren’t buying either. They were walking backwards, not wanting to “overspend.” Of course, fast forward a few years, and everyone, and I do mean everyone, wishes they bought in 2011. The ones that did were able to tune out the noise and focus on fundamentals.
Fast Forward to 2016
The Federal Open Market Committee AKA the FED released minutes on the 15th of June and the takeaway was the economy is fragile, late payments on credit cards and other revolving credit lines increased. As a result interest rates are to remain stable. Financial founding father Kai Ryssdal referred to it as the canary in coal mine.
Of course that’s a national perspective. However, locally, we have a different set of factors. Lots of new development on the one hand at a price point that makes the term ‘urban planning’ seem as pertinent as ‘jumbo shrimp.’ The other night on Million Dollar Listing I saw Ryan Serhant had taken over a luxury listing from Fredrik Eklund and they both failed to sell it! In fact, that show is a pretty interesting barometer of market sentiment.
However, I have personally sold many of my listings so far this year. And I plan to sell the rest. I have represented many buyers. Some have paid over asking price. Some have paid way under asking price. All of them did deals I feel good about. What’s the secret?
1. Real Estate Values Are Based On Wages
In general, people have certain ranges of compensation in different fields. You can, however, bet that there are a certain amount of people making certain amounts of money and they will want to live in specific places. And these places are more or less valuable based location. If you can relate all of these factors, numbers emerge (and are nakedly overpriced or underpriced.)
2. The Stock Market Matters
A client said to me, “a lot of rookie investors probably sold when the market sold off two times earlier in the year.” And I am sure he is right. An actual loss of wealth has hurt the buying power of would be NYC buyers. This is much more stated than in suburban markets. Those markets have higher leverage ratios and lower prices. As a result, Middle America remains a hot place to buy. New York seems to be in real estate recession.
3. Don’t Believe The Hype
Now, more than ever, having an advisor who has a long perspective on real estate values helps. It will help you take bold action when needed, whether that means an insultingly low offer or an incredulous full price one. However, sellers are apt to use every gimmick under the Sun, and the first one is always the list price. The list price is a suggestion. It has pertinence in that if a property is listed at a certain price it will likely sell close to that price if it sells within the first 2 weeks of its launch.
What people fail to see is the opportunity in overpriced real estate (and a broker can make a clear case for what the eventual price will be.) Also avoid other prognostications such as claims about market climate. Most sellers are trying to create a false sense of urgency. By having a broker who sees it from both buyer and seller perspective, you can know when to fold, call or raise.
Fortune Cookie – right now you will be able to achieve concessions from sellers. However, over the next 4 years we will have strong economic growth in a volatile landscape, and both the stock market, interest rates, inflation, rents, wages and real estate values will rise. Bold actors in uncertain times will reap the benefits.