January 28, 2017
Happy New Year!
Now that another 365 days are behind us, I thought I would provide you with some thoughts on where we've been, where we are, and what I think is in store for 2017.
To begin with, 2016 was a very good year for us which means it was a very good year for our clients. We managed to get about $80M in deals closed with about a dozen more contracts outstanding as we moved into 2017. If such a thing as a "normal" market exists, 2016 came pretty close to representing one. I believe it was the character Gordon Gekko (who paraphrased Ivan Boesky) proclaiming "greed is good", but with our model, normalcy is good (declining slightly with a dollop of seller anxiety even better!)
2014 to early 2015 has proven to be the toughest years for buyers. However, the good news is that although the going was tough, prices have, for the most part, actually risen since that time. So don't read this and think "Damn, great I overpaid." It is my opinion that no one who has purchased since The Burkhardt Group began representing buyers in 2009 has overpaid. I remember all of our sales and I can recall everyone operating with a cool head relative to time and circumstance.
We had a contentious election that looked to be wrapped up by Hillary until late summer. Around this time, perhaps coincidentally, we saw the market start to sputter. We talked to clients about the seasonality effect (NYC is a market of distinct seasons), but we could not ignore what I referred to as 'pre-election anxiety.' Then it happened, I fell asleep on election night at around 10pm and when I woke up and turned on my phone, there it was: "Donald J. Trump has won the election." We then saw the other side of that anxiety, the post election version. However, once equities started their move up, we saw a surge in buyers come out of the shadows and bid like there was no tomorrow. We logged in thirteen offers about a week post 'The Donald' with only three getting to contract. Bidding action was hot, all of a sudden offers we thought were a lock were being challenged by all cash, above ask non-contingent deals-- in December of all times!!! I had no rest in December.
In 2017, I see a steady market with what I think will be a slight bias towards buyers. There is no reason to think this market will 'crash'. That said, there are very few folks who can accurately predict a collapse; look at how many missed the signs pre-2008. Why fear a disruption anyway? It's always been an opportunity. The only thing I know for sure is the market goes up and down with the long term trend being up. Yes, it stinks to own any asset in a falling market, but as long as you can afford your payment, you can literally ride out the storm in the comfort of your own home.
Also, without getting political, some of the new administration's policies and people seem to be pretty pro-business (sarcasm). Will this unleash the dormant, so called 'animal spirits' of the American economy? Time will tell.
Over here in our little world, we are picking up where we left off last June (before the election anxiety/summer doldrums). We have a significant number of clients who remain committed to purchasing real estate. I am receiving a lot of emails and calls from buyers who are excited that they are seeing more listings available and are excited by the prospect of negotiating under 'normal' conditions instead of stressing about submitting a highest and best offer. Some of these buyer have been in hibernation since 2015 and are now ready to get back in the game.
I was happy to read Noah's summation of 2016 on UrbanDigs as I felt it was very much in line with what we were experiencing and communicating to our clients during this time. I have linked to his blog post here.
In summary, we saw some softening with new developments and were able to either negotiate a bit on price and/or closing costs on some units. Still this was the exception, not the rule.
I definitely felt that we made some very good deals on homes priced above $4M. Without naming names, I think all the buyers we represented did exceptionally well here.
We sold more studios homes this year than in any previous year and almost all below $500K.
We saw less softness in homes below $2M, however, it was a much improved market compared to 2014/2015. And when I say improved, I am referring to the ability to get to contract with less stress and interference from other buyers.
Overall, 2016 was a nice healthy market for our clients and we believe we will see more of the same for 2017.
I wrote the above about 2 weeks ago, and here's what we are (in short) currently experiencing: a very,very strong market. Since the initial writing of this current newsletter, the real estate market has shown improved strength and thus we have struggled to get recent offers to contract. It is very competitive out there with renewed calls for 'highest and best' offers on many properties. This is not a completely widespread trend though, the strength we are seeing is mainly confined to the higher value properties. To clarify, in 2007/2014 we saw aggressive buying across all classes of homes (including pure crap). This current hot streak is limited to best in class homes, this is where we are seeing all the hyper-action. So, let us see where this rally will take us, all things considered, this could be a very interesting year.
Dow 20K certainly was adding fuel to the fire. However President Trump is a wildcard and who knows what he'll tweet next or what executive order will be signed. When it was all about business the markets were loving what they were hearing and reacted. I think the President will learn (maybe the hard way) that running a private company and the US are very different things. One has to proceed prudently as all things are more interconnected than ever; where there is an action, there will be a reaction. Some (mainly re brokers) like to make the argument that a volatile stock market is a good reason for owning real estate. However in NYC the two are closely intertwined especially since down payments are significant, comp can be related to stock price and co-ops require large post close reserves. It is too early to know where we are going, but I think we need to pay attention to a number of things here. That said, I am hopeful for positive outcomes for the country.
Thanks for doing business with us.
The Burkhardt Group
304 Park Avenue South 11th fl.
New York, NY 10010