The Psychology of your Home

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Every day, all day, we help people buy and sell real estate. So naturally it’s easy to get hypnotized into commoditizing properties and to think of them as nothing more than square footage or a bedroom count. We could all use a reminder that the space we live in is so much more than just space.

After members of our team sat with Interior Designer Benjamin Noriega Ortiz, we had a long, in-depth conversation about the impact that our living space has on our personal well-being. Jeff was only half-joking when he said an apartment could adequately function as a therapist. But, is it really a stretch to assume that science might actually support that hypothesis? We seriously doubt you could find any mental health professional who’d argue that someone’s environment has no impact on their emotional state.

After extensive research, we found dozens, if not hundreds, of articles, books, and scientific studies that draw a line between our living space and our mental well-being. We found studies that were conducted here in the United States, in Europe, China, India, Australia, and just about every corner of the globe. Some of the studies focused specifically on architecture, size of space and quality of construction, while others put an emphasis more on comfort, colors and other aesthetically pleasing elements.

With almost no exception, whether it was a blogger, an interior designer, a real estate agent, a doctor or a scientist, there is a consensus: Where we live affects the way we feel.

The conversation we had after Benjamin left our office was pretty amazing, and it made sense to think about real estate in such a personal way. Our homes are our physical and emotional fortresses. They should always be our safe place, but they also have the potential to be our happy place.

Our Homes are a lot like Yours

We love it when our conversations offer clear and obvious perspective. We can only do our job exceptionally when real conversations and real-life experiences provide that type of outlook and it becomes a part of our team’s collective mindset.

The talk we had about our living space provided the most amazing perspective. We thought about how important our own personal living space is to us; We thought about all the time and energy we’ve spent on the smallest details that transformed our own houses into our homes, and we thought about the way we feel when we’re at home.

Just a few weeks ago, Jeff was over-the-top excited about a new dining room table he ordered. On his computer screen, he showed it to the team from every possible angle. While he knew exactly how it would look in his apartment, it could have been the way it felt or the way it looked. But more likely, Jeff was envisioning the conversations and laughs he would share with friends that will gather around it for years to come.

We all have things that do nothing more than occupy our precious living space – things that serve no real purpose and offer nothing to connect with on an emotional level. But everyone in the office could tell by the look on Jeff’s face, that this table was going to make his happy place even happier.

This week Marie described chasing her new beagle puppies for several laps like a NASCAR car driver on a track that started in her kitchen and looped through her dining room and living room before zipping past the starting line somewhere near the dishwasher. When Marie suddenly reversed her course, she caught the puppies off-guard and their momentum made them slide across the kitchen floor and caused a doggy pileup at Marie’s feet that was gentler and happier than a wreck at Daytona. Marie was genuinely, laugh-out-loud happy in her home. And that’s how it should be for everyone.

Our homes play host to so many of our memories, and our friends and family members, and our alone time, and Sunday morning breakfasts, and birthdays and holidays, and children and pets, and home offices and inspiring views. Our homes are where we rest and recover and relax. It’s where we think quietly, away from the distractions of the outside world.

We have so much control over what our living space is, how it looks, and what it ultimately becomes. We control the way we arrange it, the colors we paint it, and the way we accessorize it. We even control the sounds and the smells that glide through and blend into the unseen air that we share the space with.

So much goes into turning your house into a home. But the very first step in making the perfect home is finding the perfect home. At every property showing, and during every phone conversation and every email exchange, it’s all about maintaining the proper perspective. We can never forget just how unique and personal your home will become to you. Finding your home is a huge responsibility; one that we’re honored you’ve entrusted us with.

At the Core: Espinal Adler Team Takes “Full-Service” to a Whole New Level

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After eclipsing $100 Million in sales last year, the Douglas Elliman team led by Marie Espinal and Jeff Adler announced their relaunch as the Espinal Adler Team in January 2019.

The veteran duo credits the team’s success to its holistic and hands-on approach with its clients, resulting in consecutive year-over-year growth for a decade by toppling the impressive $100 Million annual sales benchmark.

“I think it’s a testament to the things that we’re doing right, and all the while without compromising the way we service our clients or how we want to run our business,” Espinal said. “We want to advise our clients the way that patients are advised by their doctors.”

That consistent, high-level of service allowed the team to stay focused and thrive in a year that volume was down for a lot of NYC realtors, according to Adler, who prioritized cultivating long-term relationships over chasing the immediate sale.

“Even with all the volatility in this industry and this market, we have consistently grown since we’ve partnered,” he said. “Last year, everybody was down and freaking out. But we were optimistic. Because the way we do business is what the market is shifting to.”

The Espinal Adler team is being built specifically with the client experience in mind. It already had its own Marketing Director, a powerhouse of multi-lingual agents and expert market analysts. But this month, the team took an unprecedented step in adding 15-year mortgage-industry veteran Matthew Jablonski to their roster. Jablonski will serve the team’s clients in an advisory role, completely independent from any bank or mortgage lender.

Jablonski will be tasked with having his finger on the pulse of a constantly evolving mortgage industry, identifying lenders who offer the most competitive rates with the most efficient process, all in an effort to spare the team’s clients from the time-consuming information gathering process. “Our clients should rest assured that we’re in constant pursuit of information that will help them secure the best available mortgage terms,” Adler said.

Jablonski will prepare clients for the mortgage application process and be available to conference with a buyer’s loan officer or mortgage broker to ensure all the right questions are asked and answered. He’s also a trained solutions expert, or as Espinal phrased it, “a thought partner” in the event there are any roadblocks during someone’s mortgage application process. “We want our buyers to get the best possible loan for their needs, and this will help them achieve that,” Adler said.

For sellers, Jablonski will carefully vet pre-approvals when offers are made. He’ll review appraisal reports if a listing property under-appraises and offer alternatives to unnecessarily lowering a sales price.

Espinal said she and her team have worked with Jablonski for over a decade during stops he had at Chase, Mortgage Master and most recently Citizens Bank. His addition to the team will change the homebuying process for clients working through the Espinal Adler Team. A real estate broker is there for their client at every step of the negotiation, both Espinal and Adler pointed out. But, for the most part, a buyer is on their own when it comes to securing funds for the transaction.

“This was the one missing component,” Espinal said. “With the inclusion of a mortgage advocator, it really does become a full suite of services. We think it’s going to make a monumental difference in how a client experiences real estate through us.”

“It’s unparalleled,” Adler said. “How many other real estate teams have their own mortgage specialist?”

Many real estate agents have a decent understanding of mortgage finance, especially in New York City, Jablonski said, but getting to the closing table can be like navigating through a minefield of potential pitfalls. With 15 years and more than 1,500 mortgage transactions under his belt, Jablonski said his familiarity with the process, his understanding of mortgage guidelines and his ability to think like a mortgage underwriter will undoubtedly enhance the customer experience, and just as importantly, Espinal Adler clients will ultimately save money.

“I was in the mortgage business for a long time, but I never crossed paths with anyone that performed the role that I’m taking with this team,” Jablonski said. “It’s new and it’s exciting and it makes all the sense in the world.”

In addition to Espinal and Adler, and now Jablonski, the team includes Marketing Director Cortnie Schultz, and salespeople Joseph Chaplin, Ya (Amy) Wang, Jessica Escobar and Jennings Lee Culver.

 

At the Core: The Tech Effect

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Once upon a time, the best agent was the one who had access to the most information. Gathering data in the dog-eat-dog world of real estate was like herding cats. Information that is taken for granted today did exist in the world we used to live in, but back then it drifted aimlessly in the wind like an autumn leaf in the park.

Buyers waited for the Sunday Times to see new listings. Hero realtors walked around town with rolls of quarters, ready to jump into a phone booth the moment they had a lead on a new property. Mortgage brokers mailed good faith estimates to clients with numbers that were stale before they even arrived.

Fast-forward to 2019.

Gathering information is a problem of the past. Technology solved that riddle. Everyone has access to everything. In less than a minute, using only a cell phone, anyone, anywhere, can conjure up a list of every NYC apartment trading in any price range, and they can choose from dozens of apps and websites to see them.

But make no mistake, technology has not killed the real estate agent. In fact, their job is more important than ever. The free-flow of information only changed a realtor’s objective and changed the way we measure their effectiveness. It’s no longer about who can access information, it’s about what to do with the information once you have it – and some agents are better at interpreting data than others.

Some agents are so adept at interpreting data, they incorporate it into every aspect of their job, and it comes through in the conversations they have with their clients. But data is manipulatable. One agent can look at a chart and easily identify a trend and another might be completely overwhelmed. The data is so rich and so specific, it offers the capability to drill-down on numbers in specific neighborhoods or even specific units in a building.

An experienced analytical agent, with the vast tools at their disposal, can quickly become a market expert and share that expertise with their client. Understanding data can provide the clarity and confidence needed to appropriately bid on a property, ultimately resulting in a sound investment.

Thorough analysis can also help to properly manage expectations. For example, we can now separate (or bundle) properties of like-kind size, ownership (condo or coop) and neighborhood to determine patterns. How long is your block or area taking to sell? How far from the last asking price are properties closing at in Chelsea or Lennox Hill? What inventory is more available in Noho, condos or coops. We can now cross section the data and dive so deeply that the possibilities are endless.

It’s important to point out that some information exists that technology hasn’t quite figured out how to corral. For example, It’s widely known that automated valuation models (AVMs) used to estimate property values often supply inaccurate results because they tend to leave out important factors like the specific condition of a property, the motivation of a particular seller, potential roadblocks with a building’s finances or its board, or if a comparable unit was sold through bankruptcy or foreclosure.

Beyond the numbers

Technology is moving fast. Maybe a little too fast. But who wants to imagine a world in which you buy a property without any human interaction at all; A world in which all of your advice comes from a robot; With no conversations, just numbers and letters on a screen; Where no connections are made, and no long-term relationships are formed.

There’s still something very comforting and very human about having a conversation and getting advice from a person you know, and you trust.

Marie & Jeff

At the Core – Navigating the New Normal

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This month, we discuss the essentials of buying, selling, and negotiating in the new real estate market.

Which way is the NYC economy heading?

By any account, the New York market is thriving. The economy is booming, with 76,000 new jobs added to the city in the last 10 years, and more increases to come. Because of the exceptional concentration of talent, companies from across the globe continue to flock here—promising durability for our thriving times.

And that’s true across all five boroughs. Amazon’s choice to move to Queens/Long Island City stands as clear evidence to what is unfolding in technology and medicine: the move is typical of what we might expect in the years to come: more well-paying jobs, more spending, and growth.

The signs of NYC’s healthy economy are exciting, and they’ve created anticipation about where our market is headed. While we don’t have a crystal ball, we feel it’s safe to say that New York will continue to be a highly desirable global capital in which to invest.

Transitioning to the new normal

Buyers and sellers alike are still adjusting to the current housing market. Over the last couple of years, that market has been re-calibrating: settling gently into its natural valuation. And across NYC, property owners and investors are still transitioning to the “new normal.”

The new normal involves a return to traditional values in terms of real estate. When our parents bought property, they knew they were making at least a 30-year investment. While most buyers today may not stay in the same place for as long, they should plan for an investment cycle of about five to 10 years.

As buyers and sellers adjust to the current market at different rates, there are bound to be some differences in approach. A buyer and seller who aren’t on the same plane regarding the current market will inevitably clash on pricing. But a broker who’s in tune with the current market can bridge that gap and help both parties reach a meeting of the minds and land on an accurate market trade.

Negotiating in the new market

Buyers often ask us what percentage of a discount, on average, they can expect for each potential purchase (for example, can they take a two to four percent discount across the board?). They assume that we can bring them the exact same discount on any property out there. While it’s an understandable question, it’s ultimately unanswerable. Because each property is different, especially in NYC, negotiation won’t work the same way in every situation — there’s no “one size fits all” approach. Even in a single building, individual units often sell for vastly different prices. Variations in pricing necessitate variations in negotiation approach. That means adapting your negotiation strategy for each individual property is crucial.

Savvy sellers who have transitioned to the new market will price their properties accordingly. Understandably when this is the case, it is logical that we would not apply the same negotiation strategy as in the case of a property in another building, which is overpriced and has been sitting on the market for a number of months. A seller who has priced aggressively in order to sell knows it—and is doing so to get a deal done. This is a very different stance than a seller who doesn’t have a firm grasp on where the market is and chooses to enter the market highly overpriced. Therefore, sellers who have already adapted to the new normal will tighten their expectations, allowing for less variance between asking and closing prices. Inevitably this will affect the approach in one kind of bid vs. the other.

With that in mind, a negotiator must be firm in their market knowledge and confident in their ability to pin down pricing. Negotiation is an art, especially in our current environment, that requires both creativity and the ability to intelligently structure and think out-of-the-box. Each phase of the process must be carefully considered and strategized—with the understanding that timeframes are flexible and everything is open for discussion.

Our New Year’s advice to you

As 2018 draws to a close and 2019 approaches, our guidance is three-fold:

First, don’t procrastinate buying or selling a property. If you’re thinking about taking that step, you’re in the perfect place to do so now.

Second, work with a solid negotiator. You’re not likely to get a better deal in the near future than you are now, but you are likely to get the best deal possible if you partner with a trusted real estate professional. (And by that, we mean us!)

Third, embrace the new normal.

Marie & Jeff

ASK THE EXPERTS | HOW HAS THE NEW TAX LAW EFFECTED NYC REAL ESTATE?

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Trump’s Tax Reform and New York City Real Estate

 The Tax Cuts and Jobs Act signed by President Trump on December 22, 2017, has initiated numerous changes to how residential property owners can write off their local taxes and mortgage interest payments on their federal tax returns. It caps state and municipal property tax deductions on federal tax returns at $10,000, reduces mortgage interest deduction caps from $1.1 million to $500,000, and prohibits such deductions on second homes.

But what does this really mean for the Manhattan and Brooklyn real estate markets? Well, we’re here to ask the experts just that: does this new tax law have any effect on the real estate market here in NYC? Initial views on this were mixed, and current market trends reflect those prognostications.

The fourth quarter of 2017, when New York buzzed with a mix of suspicion and sanguinity about its native President’s impending tax overhaul, saw Manhattan housing sales activity at its lowest fourth-quarter total in six years, Douglas Elliman and Miller Samuel reported. This included a 12.3% sales volume softening from Q4-2016 to 2,514 closed sales from 2,868 in Manhattan real estate, an average sale price drop to $1,897,503—the first below-$2M figure in two years—and a 13.2% increase in luxury listing inventory to 1,439, the first increase in nine consecutive fourth quarters. To circumvent the lack of tax-write-off incentives for homeownership the Act would create, cash buyers purchased 51.2% of all co-op and condo units sold.

But why? These trends were due largely to the market cautiousness the Act’s reduction of tax benefits provoked in the minds of many buyers, Miller Samuel’s CEO Jonathan Miller told The New York Times in January. Our very own Steven James echoed this sentiment to Bloomberg and Newsweek: “The buyer is very worried about overpaying.”

The Brooklyn market fared a bit better, perhaps due to its up-and-coming status in New York’s higher-end real estate market compared to Manhattan’s long-established one. Brooklyn’s Q4-2017 closed with 2,627 sales, a 1.7% increase from 2,582 in Q4-2016, causing a 23.1% reduction in inventory over the past year. Brooklyn’s $948,706 average sales price was up 0.1% from Q4-2016’s $947,553, and its median sales price rose 2.7% from $750K to $770K over that period. Its luxury median sales price, however, went down 1.9% to $2.4M over that time frame.

Now let’s dive into the 2018 numbers. Elliman and Samuel’s Q1-2018 reports generally indicated continuation of these cautious trends. Manhattan’s home sales dropped 24.6% from 2,892 sales in Q1-2017 to 2,180, which included a 24% fall in luxury home sales. The average sales price dropped from $2,104,350 in Q1-2017 to $1,933,198 (slightly better than the Q4-2017 showing, however). Brooklyn’s market growth slowed its pace but remained strong: the average sale price reduced from $993,955 to $982,093. Then we have the luxury sales, where the median sales price fell 4.7% to $2.425M.

These reports painted quite a different picture from Dezeen’s rosy reportage that Manhattan’s high-end residential real estate market was “booming, thanks to President Donald Trump’s economic policies and tax cuts for the wealthy,” with a reported overall 27% sales volume increase by the beginning of March. Whatever truth those findings hold may be partly attributable to the downward pressure the market’s highest end was already under, pricing-wise.

Prices in the over-$8M+ market have dropped significantly over the past 18 months, possibly to move inventory faster in light of the Act’s diminution of homeowner tax benefits, even though many of these sales involve cash purchases that make the lowered interest expense write-off irrelevant. (In fact, 90% of Q4-2017’s over-$5M sales were cash transactions, Elliman reported.) To boot, some buyers are actually using Trump’s tax reforms to bargain down home prices so they hopefully won’t get socked with higher taxes once the sales are closed, The New York Times reported in June.

Manhattan’s individual neighborhoods varied in RE market sales percentages over the first half of 2018, most showing incremental increases. Downtown consistently held the largest share of the borough’s market, 36% in January and 40% by May. The East Side carried 19% in January and 20% in May. The West Side went up from 18% to 20%, Midtown increased from 16% to 20%, and Upper Manhattan dropped from 7% to 4%.

Brooklyn’s market softened slightly as well. Q2-2018 sales were 5.7% down from last year’s second quarter, from 2,845 to 2,683, the first such decline after ten consecutive year-over-year gains, though sales increased 11.3% from Q1. Inventory rose 18.5% from Q2-2017’s 2,257 to this second quarter’s 2,675, which was up 30.9% from Q1. This significant inventory expansion followed 11 consecutive quarters of year-over-year depletions. Median and average sales prices both dropped from Q2-2017—$997,654 to $984,047 and $795K to $780K, respectively—with very minimal differences from Q1.

With all of this data being enough to make your head spin, what does this mean to our buyers and sellers who are uncertain about the effects of Trump’s new tax law on the NYC real estate market? The answer is, of course, nuanced, like any complex market. Because of the multiple up-and-down pressures the real estate market must weather consistently, assigning responsibility to any individual cause, trend or force wouldn’t be fair and/or accurate.

“External influences outside of the vibrant city economy such as rising mortgage rates, the potential impact of the new federal tax law, and an unclear direction of the national economy have continued to remain a concern of market participants,” Miller reported in the Q2-2018 Elliman Report on Manhattan sales. Another external influence could be a predicted mass exodus from New York to lower-tax states like Florida, where “you can save a million [dollars] a year,” our own Richard Steinberg told The Real Deal.

So there you go. No omens of a recession or bubble-burst are on the horizon, but cards are being played cautiously in NYC real estate investment, yet with hopeful signs that Brooklyn could be a worthy “Trump” card for the homebuyer or investor. Looks like we’ll have to stick around and see what happens in Q3 and Q4.

Sources

At The Core | Q2 Market Report Summary

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Q2 is now behind us and it’s time to take a look at what it’s telling us.  There’s nothing like diving into the data, itself, to complement anecdotal evidence and get a clear picture of the market.

So, here are some of the take-away sound bites from Elliman’s own 2nd Quarter Report:

  • The average NYC sale hit yet another all-time record of $2.19 M – that’s a healthy margin over the $2 million mark that defines the average price for a NYC apartment … no small feat
  • Strong sale prices were driven by two primary factors: more realistic sellers who have been adjusting to the new norm in the market, and the pent-up demand that we’ve seen from buyers either sitting on the sidelines or trying to buy to no avail during the past year
  • The sheer volume of sales was the strongest in 7 quarters, driven by increased inventory and the fear of rising interest rates looming right around the corner
  • Condos continued to fuel the rise of price-points, overall, and the entry-level market (as defined by the combination of size and price – studios and the sub $1 M price-point) continued to be strong and the arena for the greatest number of bidding wars. To that end, make no mistake about it, the sub $1 million market has been hot, hot, hot!
  • The outlook for the upper end of the market has improved and will be stronger than we think this year, as resale inventory has dropped sharply
  • Interestingly, the share of all-cash sales fell by 4% to 42%, the lowest since this metric began tracking 3 years ago. (Still, we’re always in awe that close to half of all sales are cash – keep this in mind when it comes to making an offer on a place you love.)
  • New development prices nudged up over the past year, as did sales volumes, despite their lower share of overall sales volume, and despite the increase in both time on market and listing discount.

 The bottom line for the last quarter is that buyers and sellers continue finding common ground. Sellers have adjusted to the new market reality, and prices have followed suit.  We are in a far more sustainable phase of this market’s growth now.  Buyers and sellers, both, can expect that focusing on the fundamentals will serve them well.

At The Core | Now Is The Time To Engage Your Broker

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Last month in this section, we strongly advised against betting on NYC, articulating the transition we see occurring in the markets.  Based on the many conversations we’ve had since, this month we’re urging you to engage us if you are in any way considering entering the market as a buyer or seller over the coming months, especially as a seller.  With no further ado, our official headline is “Now is the time to engage your broker!”  There, we’ve said it quite explicitly.

“Why now?” you might ask. “I have plenty of time before the fall.”  It’s very funny for us to talk with clients as they tell us in a relaxed, sit-by-the-pool kind of voice, “we are more than 10 weeks away from Labor Day”, and have us respond in a pot-is-boiling-over voice “you are a mere 10 weeks away from Labor Day!”.  Same facts, different perspectives.

You see, our team believes in being prepared; we believe in doing our homework, being strategic, and doing everything in our power to hit the ground running successfully, selling your property of the highest price we can get you in the shortest period of time.  Doing so doesn’t happen in one week; being prepared takes time, research and planning.

The markets start significantly picking up with the pitter-patter (more often stampede) of buyer feet pounding the pavement, en masse.  We want to capitalize on that increased volume of demand to your advantage starting late-summer, early-fall, when prime listing season beings.  This means:

  • We need to begin talking to you about valuations and real-time trends and metrics we’re seeing.
  • We want to start creating tailored marketing plans that speak to your specific property, in your specific building, in your specific neighborhood.
  • We want an effective narrative that speaks to your target buyers, that’s relevant and impactful.
  • We need ample time to assess any repairs or requisite work that will, in turn, optimally position your property to achieve our objectives.

If you’re even considering upgrading a kitchen or updating flooring, this takes time.  You want to be in the market come fall, not working with contractors and running into the holiday season.

Luck is when preparation meets opportunity, and we like to think that we help our clients maximize their luck of finding “that all-cash buyer” who is looking to pull the trigger next week; or “that quirky family” who wanted that exact ratio of outdoor and indoor living space; or “those empty nesters” who really want that large living area for entertaining in their golden years and don’t care about the small bedroom size.  Real estate is made up of stories that seem anomalous, that seem like the stars all aligned in just the right way to make a deal happen; those lucky sellers!  We like to believe that we create our sellers’ “luck”, and are ghost-writers of such stories …  so long as we have the time and trust to do our jobs the best way that we know how – through hard work, research and preparation.

So let us help all of your stars be aligned and let’s have a conversation sooner than later about how to hit the fall listing season with a magical story of your own!

At The Core | Don’t Bet Against NYC

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Times of transition are always tricky: for families, organizations, politicians and real estate market participants, alike. This time is no different: the NYC real estate market is undergoing a transition and is still settling into a new norm of sustainability. The linear upward trajectory we experienced a few years ago is behind us, as we predicted, and the market is finding its new norm, a steadier norm.

That doesn’t mean that the process of transitioning itself is clear, immediate or readily visible while in its midst. This injects a level of uncertainty on behalf of buyers and sellers who don’t see the broader market trends that real estate professionals do, day in and day out. In the land of imperfect or incomplete information, worries abound, often unnecessarily. And this is where we find ourselves today. People are worried that the market shock of a decade ago may rear its ugly head again, but we’re here to tell you: don’t bet against NYC.

This is not just because NYC is always in the top two destination markets for world-wide investors and high-net-worth individuals. This is also not just because NYC’s employer landscape is more diversified than ever, less embedded in the Wall Street reality than ever before. This is also not just because the number of businesses starting up and migrating to the city is on the rise. If you put all that aside and look purely at the supply and demand dynamics behind the NYC market… they are healthy.

We are not seeing an oversupply of property, nor a lax lending environment, nor a lack of demand from property buyers nor a dramatically escalating interest rate environment. None of the fundamentals appear at risk, as we debrief with Jonathan Miller and follow the numbers.

Indeed, transactions in the $1-$5M range, along with studios and 1 bedrooms, remain robust. We are seeing movements across the full price spectrum, fueled by sellers who recognize the market transition.   What this means is that the market is flattening out in the immediate short-term as it looks to build a new foundation from which to grow. This is the stage for “the new up”. Not broker babble, just asset pricing 101.   Headlines get eyeballs and sell ads, but this doesn’t mean that they’re true. Each developer and seller has his own opinion of where the market is going, and may have motivations beyond market timing (think expiring loans, personal cash needs, etc.). That’s the beauty of a fluid and liquid market, after all. But rest assured: the sky is not falling, the markets aren’t crashing and deals are getting done, with happy buyers and sellers, alike. So if you’re in the market, stay in the market, and if you’re not – it may be a good time to jump in during this new foundation-settling environment.

At The Core | A Second-Half Year

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The Q1 2017 sales market reports are in and it’s time to dive in and get a sense of the NYC real estate market. Overall, the market is in a rebuilding phase based on the pricing readjustment we’ve written about over the past few months. While median sales prices have dipped slightly, sales volume managed to inch up, as sellers finally adjusted to market realities and priced accordingly. Further, much evidence points to a release of pent-up demand in the resale market, which accumulated before the U.S. election last November as uncertainty loomed.   That’s what accounts for some of the transaction pop we’re seeing, the impact of which actually overpowered the rise in inventory.

In terms of prices, as we look to a year on year comparison, last year’s numbers were excessively weighted in favor of new development closings, which skewed prices upward based on their ultra-luxury bias. The fact that prices have not dropped more significantly bodes well for what’s to come. The average sales price continues to sit above the $3M mark in condominiums and above the $1.2M mark for co-ops.

New developments are especially good at skewing data, as contracts are signed a good 1-2 years prior to close, meaning the timing attribution of those numbers is way off. As an example, new development legacy contracts cased median luxury prices to hit a record high at $6.95M this quarter. This same data shows roughly 2/3 of new development sales closing at list price. However, these are lagging sales … way lagging. The reality on the ground now is different, with marketing time and inventory both rising sharply as developers are looking to offload their goods before they become stale.

Indeed, and as we predicted last year, we believe that 2017 will be a “second-half year”. We are seeing significant pick-up across the board and are gearing up for a very strong Q3 and Q4. Of note, reports are always lagging indicators by 6-9 months. We mention this because we don’t anticipate seeing the full evidence of this market strength until the end of this year or the beginning of next year. This makes for a very dynamic market in which it’s easy to anchor to current (old) data. Make sure you talk to people on-the-ground to position yourself effectively, whether as buyer or seller.

At The Core | Data vs. Wisdom

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Data and information are all around us. Big data, data analytics, now AI … information, especially with respect to real estate is more transparent than ever, with the likes of Streeteasy, Trulia and Curbed, and even more data-laden competitors coming online seemingly every month…it would make sense to assume, then, that such overflowing information would make buyers and sellers more savvy and wise about the market.  And yet this assumption would be flawed.  Repeat after us: data is only data. And more data does not necessarily equate into more wisdom; often the opposite is true. Without the context and experience to make it sing, it’s one piece of the puzzle at best and unconstructive noise at worst.  But boy is it addictive; and boy can it lead many down the wrong path.

Data does not equal strategy.  Data does not equal wisdom. 

Think about it this way:  the real estate market has become incredibly transparent over the last decade, with a growing number of sites and services all providing more information and data. If the premise that data = wisdom holds, then we should have seen a precipitous drop in broker-led transactions, along with an exponential spike in FSBOs and private transactions. But we haven’t. Why? Because having and owning the information is no longer the broker’s value add; it’s wisdom and its application to serve you. Even leveraging pricing algorithms or savvy market trends falls short of being able to know how and when to apply this information in a way that moves the deal forward.

It all gets down to People.

We can’t tell you how many people become attached to their numbers, the comps, and the research they perform. And the more research they do, the more attached they become (it makes sense, considering how much time was invested).  But this neglects the broader reality that:

  1. Real estate is still not hyper efficient.  Emotions and beliefs continue to play a significant role due to the personal nature of a home versus orange juice futures, as an example.
  2. Each property is unique in some capacity.  Whether the quality, exposure, or floor, no two properties are exactly alike. Which means that, technically, every property is unique; this is not a commodity product.
  3. The market is incredibly fluid.  One particularly positive economic outlook or one material stock market crash can impact mindsets, both on the buying and selling end – and things move fast, faster than ever, in fact.  Further, data points from a mere 6 months ago can already be stale and irrelevant. By the time the data is captured and analyzed, it’s often a lagging indicator of the market, not a leading one.

At the end of the day, the wonderful world of real estate goes ‘round based on one individual’s desire to sell matching one individual’s willingness to buy.  Our advice to our loyal readers: try to look at the bigger picture and the longer time horizon; make sure to balance a potential obsession with the dollars and cents with the 5+ year horizon ahead.  (We’ve seen buyers and sellers walk away from the table over a $10k difference price on a $2 million+ apartment more times than we can recall; that’s just silly.) All of this is to say that the data and numbers are important, but they are only one piece of the bigger picture.