NEW YORK, NY - Faced with market adjustments, real estate brokers in New York generally may now be divided into two types: the deniers and the fear mongers.
The first are those who walk around telling clients and all who ask that the market has never been better. They cite big Manhattan closings ($70 mil at 432 Park Avenue, for example) as indicators that real estate is continuing its record breaking streak. What they omit to say is that a number of these high-end contracts that have closed were signed three or four years ago. Both the local and global economic and political climate have changed dramatically since then. Uncertainties almost always lead to a decrease in activity and, often, lowering of prices.
The fear mongers, on the other hand, seize on this period of adjustment to scare potential clients into selling. That's because lack of activity may also mean a lack of inventory. When things are uncertain, and barring a catastrophic turn of events, owners may just elect to not make a move. And that's a problem in a city where there are more brokers than Thai restaurants and bodegas combined. Everyone is fighting even more fervently to get listings.
Increasing price reductions are often used to bolster agents' claim that the bottom is about to fall. Thus, real estate brokers suggest, owners who regard their property as their most valuable investments should think about cashing in before prices go down even further.
In Williamsburg, Brooklyn, where the main subway "L-line" is scheduled to be shut down by the MTA in April 2019, some sales agents are towing an even more dangerous line. Due to much needed repairs of damage to the East River tunnel caused by Hurricane Sandy, the transit authority and the community have come together to develop alternative plans to facilitate the commute into and out of Manhattan during construction. The result is the proliferation of emails and direct mail that are meant to scare the entire neighborhood, which might very well lead to a self-fulfilling market destabilization.
Here is an excerpt of a letter sent to area residents by an agent from one of the city's most prominent firms.
"...the L Train will be shutting down for repairs and that is going to be a great inconvenience for homeowners in Williamsburg, perhaps like yourself, who rely on this train for your daily commute. The temporary shutdown this week was only a minor taste of the major inconvenience that will be part of many people's lives for a long duration of time, however, this presents you with a window of opportunity. While the MTA has provided a 15 month timeline, we all know how quickly and frequently that changes..." (emphasis added)
An owner should ask, if the near future holds so much doom as the agent suggests, who would buy now? And with such a gloomy message, why would anyone list with him/her and expect that they will deliver a good price?
Here's the same doom, told from a different angle, sent by another agent from a different firm.
"The sales market over the past 16 months has seen a 9% decline in pricing from its all-time high. Inventory has increased to approx. 5,400 available apartments up from 4,200 just 14 months ago. Mortgages are more difficult to obtain with new bank regulations and rates are rising. A percentage of prospective purchasers have taken a seat on the sideline with no rhyme or reason....The rental market over the past 18 months has almost come to a halt...see a huge correction, decrease, in rental pricing in May into June and that will last for another year." (emphasis added)
And then there is this. It has been reported recently that brokers have coined a new term, an "era of price discovery," a euphemism for "I have no clue what your property is worth or whether it's sellable, but let's put it on and find out." It's a strategy that sets such a level of unprofessionalism and chutzpah, it is difficult to believe any seller/developer in his/her right mind would hire such an agent to represent them.
How do we know things are getting tough? Real estate brokerage firms have launched a war with StreetEasy, a publicly available property listing site. They are complaining about the site's "new" feature that allow names of agents, who pay to be featured, to appear on another agent's exclusive listing. Why is this bizarre? This feature has been in place for several years in other websites like Zillow and Trulia–the company that owns StreetEasy–sites in which their same listings have been appearing in automatically, simultaneously with StreetEasy. On the basis of representation, the real estate companies have solid footing. But why did it take the large brokerage firms and the Real Estate Board of New York four years to notice it?
So what is the true state of the market? The New York real estate market has had a long roaring, formidable streak. But absent any new emerging industries that could propel higher employment and productivity, any experienced industry insider would have expected the overall market to undergo a period of adjustment. Brokers got used to pricing properties high and getting them. But buyers today are more cautious and discerning. They are well-informed and are more likely to shop around and weigh things more carefully. Still unlike conventional wisdom, it isn't always with the intent to get a great deal, but certainly a reasonable one.
Political uncertainties are also a fact of life. Fortunately, in most countries like the United States, they come in predictable cycles. Degrees of wariness or confidence vary, but it happens in every turnover of administration. And whether you like Mr. Trump or not, one thing is certain: he is very unlikely to do anything to harm an industry that holds almost all of his net worth.
Yes, there may be times when situations look bleak. That said, there are things businesses can do to manage and address consumer concerns. There are a multitude of strategies real estate developers and brokers can employ to ensure the success of any marketing project. Panic is not one of them.
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