Market Overview
The last market crash was quite a crash indeed. While there was certainly some proverbial writing on the wall, for the most part, it caught many off guard. Then, as fast as it came upon us, we bounced pretty quickly off an easily defined bottom (January 2009, give or take). From there, the market began its epic rise, peaking in 2014 (though some peg it at 2015). While those two years were extremely difficult for buyers, sellers, on the other hand, were doing their happy dance as multiple bids stacked up like lunchtime orders at Shake Shack on a Saturday afternoon!
Currently, after an almost 9-year run-up of prices, we are in what almost everyone agrees is a buyers market. This was a slow and protracted move that seems to have started around the end of Spring. It was so subtle that, quite frankly, I didn't really notice it happening. We were very busy all year with one exception: around the last week of July through the first week of August it went very quiet. This got my attention, I even got a bit concerned. "Is it us? Do people not like us anymore?" We had just signed a contract (8/10) for a large home on RSD, listed by a well-known broker. So, I casually inquired, "Seems like things are slowing down a bit?" And without missing a beat she went on a tear about how agents in her office were "losing their minds," she herself just pulled 11 listings off the market. So we then chit-chatted a bit more about the market, various cycles over the years etc. Secretly, I was smiling a smile of relief, "it's not us!"
That said, by the second week of August we had a burst of business. Buyers were seeing the increased inventory and reading the various articles regarding the sad state of the market. And as was expected, we saw a nice little pop on the second week after Labor Day, including a contract signed on our listing at 2 Charlton Street after relisting at a reduced price.
Looking over the email I sent out in early July, I was feeling a bit more optimistic, "stable to slight bias towards buyers'. That buyer bias has certainly gained a lot of traction!
Where are We Now?
We have seen a significant increase in buyer activity, many that were in hibernation are back in the market and doing deals. We all know that it is very difficult to call a bottom or even predict short-term trends with any regularity. How many times have I heard clients say, "it's too early, I don't want to overpay," or "I missed it, prices are too high now!"
This is a testament to the fact that the market is not dead. While it has surely corrected, transactions are happening. Buyers are back, certainly in selective mode and with a lot of patience. What is really nice about the current state of things is the selection that buyers have, there are some quality deals going down! We have a few that we are currently working on that would have been madness a year or two ago! The bottom-line is that you are getting a discount today versus 2014.
I can tell you one thing, it doesn't feel like 2007. Back then I packed up my desk at a large firm and began The Burkhardt Group to offer reduced commissions to renters. It wasn't until early 2009 that I introduced our sales model and settled on representing buyers. In my opinion, the current headwinds are coming from rates, macroeconomic forces and domestic/foreign political uncertainty. 2008 was more like a tornado, it came in fast and furious with extensive devastation.
Where are We Going?
This is a much more difficult question. In Vedanta philosophy, only the present moment is real. However, in real estate, we try and use history as well as recent data to understand where things are going. So far, the data has not been great. You can have a look at the overview of the 2018 market from Urbandigs to illustrate that point. So what is the causation? I think time and uncertainty have played a role in our current situation; bull markets can't and never last forever. I also think that political uncertainty along with economic uncertainty, especially regarding interest rates, is increasing the drag.
I think we will continue moving down/sideways based on the current trends. We need to see improvements in the number of transactions happening. Also, in the charts you will see a large percentage of units removed from circulation: are these sellers that have thrown in the towel? Will investors start dumping properties to lighten their load and what percentage of the market do they own? How much influence does the foreign cash buyer have on our market? So far, the new tax implications, as well as rising rates, have certainly put a speed bump in the road, but the conversation is pretty quiet. We're definitely seeing a serious slowdown in high priced new construction, especially in some of the buildings at non-traditional locations. I am also hearing some chatter about concern regarding the L train shutting down. However, alternate public transit options are being implemented during that time and I think those that can afford it will find other ways to get around: Uber/Lyft biz should explode along the L line! Call me old-fashioned, but I have always enjoyed riding the bus!
What to do Now?
I think the best course of action is pretty simple: if you are a buyer, take your time, buy based on location and quality, in that order. If you have the proper long view of ownership and all your other ducks are in a row, don't be afraid to pull the trigger. You may not be buying the absolute bottom, however, you are certainly not buying the top. A 20%+ off sale??
Sellers- It's time to take a good hard look at the data. Forget about pricing your home based on comps that are 6 months old. You need to focus on recent trades, and if you don't have any, then you need to make adjustments based on the current data that is available.
Our Listing Service Continues to Thrive!
I applied the same philosophy to listing properties as I did with our wildly successful buy-side model; provide an outstanding full-service model, coupled with our ability to reduce our rates. In ten years we have closed over $600,000,000 in buy-side transactions. We know a few things about buyers which is certainly an advantage when representing a home for sale.
Some firms are spending millions on technology to assist their agents and build the corporate brand. Agents then give a large portion of their commission to the brokerage entity to help support their growth and overhead. We decided to simply focus on what is important, an honest and transparent opinion of your property along with the work that goes into selling your home with a substantially reduced commission. The most you will pay is 3.75% (2.5% to the buyer agent) or 2.5% on direct deals. Its just about where we choose to allocate our dollars!
The most important thing to remember is regardless of who you list with, your home listing winds up in the same place, the RLS (REBNY listing service). This is where the entire brokerage community will access it.
And of course, all of our listings automatically feed to Streeteasy, the most searched site for real estate in NYC. The two most important factors in listing your home: 1) Get the price right! 2) List with a REBNY member firm. Of course, there is more to it, and I would be happy to discuss that with you over the phone.
Have a look at what we have sold or have in contract. Because of our success with listing homes and the fact we have loved working with sellers! We have now broadened our approach and happy to discuss listing any home (above $500K).
Our model works, the proof is in the pudding as they say!
We recently celebrated 10 years of disrupting the NYC real estate model! It has been an absolute pleasure assisting all of you! I have made some real friends and met a variety of wonderful people along the way! Looking forward to the next 10 years!
Please feel free to call me to discuss the current market in more detail or find out more about what we can do for you.
Best,
Keith
917.770.4951
keith@theburkhardtgroup.com
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