Renters vs Landlords...Who's really running this town tonight?

This is a question that came into my mind when listening to people all over talk about the real estate bubble and the economy. I have lived here my whole life and see things a bit differently than most other people living here. In other parts of the country and even the world, there is very little, if anything, that can compare to the rental market here. China, Japan, London, San Fransisco are other areas that are tight markets overall, where the demand far outweighs the supply. None have the draw and lure of this city. So who really runs this town? Renters or landlords?

The rental market here is somewhat insulated from what happens elsewhere. Even in the midst of the recession periods dating back over 100 years, the vacancy rate here in Manhattan is never in double digits. Actually, for it to hit 1% or greater is actually viewed as the market having a surplus here. This means that there is always fierce competition for affordable (if you can call it that) housing in Manhattan. The higher end market sometimes seems to go faster when priced properly and in a sound location.

Honestly, the pricing is actually irrelevant as this city is all about location. For a solid location, the price can be what the market will bear. For example, a new building on the corner of West 72nd and Broadway, directly across from the 1/2/3 train station aptly named, "The Corner" has rented at least 75% of it's units with studios STARTING at $2975, 1BR's at $4600, 2BR's at 7950 and 3BR's at $16,000 per month. They began leasing earlier this year. I still can't figure out why you take a train if you pay $18,000 per month for a three bedroom. I would think sitting in traffic in a towncar with a/c is better than having Louie from the Bronx eat his bagel, Henry the Hipster from Harlem (used to be Larry Homeboy from the hood, not as much anymore) blasting gansta rap from his ipod and various shady individuals rub you up on your way downtown in 20 minutes on those sardine cans we call the subway, but what do I know?

This shows that while the rest of the country and even this city and state, are in a crunch financially, New York is still the most affluent city around. The landlords have always been in control historically. With the "crash" which was really more like an altitude adjustment of rents and sales prices here since the fourth quarter of 2008, the renters gained some ground as rent prices dropped 4% and sales prices became more negotiable through the last two years. The sales market is still a buyers market. We are still seeing some of the lowest mortgage rates ever, and the owners are having a hardtime finding buyers as mortgages are not getting approved as much for sub 700 credit scores. Rentals, is another story altogether.

There is a shortage of rental apartments as the vacancy rate has dipped below .90% again for the first time since the second quarter of 2008. The landlords can always rent directly and the renters can always rent directly. It's kind of like finding a needle in a haystack in this city though. That's a part of why broker's earn our fees. It's not just about turning a key or opening a door and being a bit of a tour guide. We screen, guide, advise, prepare and even serve as therapists more often than not.

Landlords have been offering a month of rent either free or towards the broker's fee. A standard broker's fee is 15% of the first year's rent (a little less than 2 months rent). Many broker's will settle for this concession from landlords when it's offered, as it helps everyone. The landlord gets a tenant that has been pre-screened by a broker rather than a random street-walker, the renter gets a decent apartment and saves almost two months rent and the broker gets a piece of a commission rather than no commission at all. As the market tightens, those concessions from landlords dry up. For a landlord, a person being able to pay the fee is more likely to be a model tenant. It speaks volumes to a landlord that someone is financially solvent enough and willing to pay an expert two months rent to find the best possible space, quality, location and price for the dollar.

I have seen those concessions vanish in high demand areas that they were never really offered in before. There usually is a catch when a landlord offers this. Either it's a large managment and the apartment has been vacant for a while, the monthly rent is the same as if you paid a fee yourself to a broker, the area is a fringe area (further from a subway or "developing" area) or the landlord is desperate to get it rented fast. Either way, you get what you pay for. Do the math and you'll see that finding a below market rent with a broker's fee involved, usually balances out better in the long run over two years or more versus a market rate apartment with yearly increases in the rent of 7-10%. If you don't have the money for a fee, than begin to expect five, six or even ten hour days, at least five or six days a week, of pounding the pavement looking for your next place.

The concessions have vanished a bit, but with the traditionally slower winter rental season approacing, I sense more will begin to pop up again in a month or so. This is the time where the renters will be able to negotiate lower monthly rents, perhaps get a fee paid from a landlord if they are going through a broker. Do realize that the landlord may ask you to sign a 16 month lease so that they get the apartment back vacant during the peak rental season and can get top dollar.

I guess the renters are in control in fringe areas. Those are hard to rent apartments and so when a landlord has someone interested, they can be a bit more agreeable. The owner has to offer free rent and or pay a month to the broker to ensure the units get rented and not sit vacant for months at a time. In high demand areas, there's no question about it. Let's be honest though, overall, the landlords have what we want as prospective tenants. Even when things can seem otherwise, they are always in control!

The Recession has been over?

There is much talk about the economy and where things stand. Here is an interesting article that was posted today that may alter your outlook.

http://www.ritholtz.com/blog/2010/09/its-official-recession-ended-june-2009/

The Fall of the Wall?

Here in NYC, we live in a housing market that already has low supply and high demand. Thereforre the rents are above average when compared to the rest of the country. To offset this and find a way to reap the benefits of living in Manhattan, many renters when looking for doorman buildings, have resorted to putting up temporary pressurized walls to create second or third bedrooms. This makes a $3500 one bedroom now affordable for two young professionals who can really only afford $1700 per month in rent.

This will soon be a thing of the past. This year, many landlords are no longer allowing walls to be erected and many are even going so far as to having existing walls removed. What many are being told, which is in compliance with a Department of Buildings code, is that they can only put up a partition or shelving unit which results in obviously, less privacy. The effect of this is massive, as many new tenants in the city rely on doorman buildings for the obvious benefits of security, as well as the convenience of on site staff for everything from repairs to package/dry cleaning reception. Few are the new hires who can come right out of college and afford a $3500 one bedroom at 40 times the monthly rent on thier own.

Many renters are now being forced to consider other areas of the city such as Washington Heights, Harlem, Long Island City and Brooklyn in order to get the same luxury at a more affordable price. The old "boundaries" of what was once deemed a safe area to live are being pushed further and further outwards and upwards with each week.

Rents are rising in Manhattan again!

I have watched the markets around the country plummet and not yet recover over the past six years. Here in Manhattan, that is just simply not the case. There is such an unbalanced set of supply and demand here that you can not imagine until you have lived here.

There are more people than there are apartments to rent. I got a client this weekend who called me on a three bedroom uptown. Upon talking to her I realized that she was actually trying to find enough space for FIVE people to share for under $3000! There are serious gaps in peoples perceptions of the market here.

Take a look at these statistics.
http://www.cityrealty.com/new-york-city-real-estate/carters-view/

The link above is great if you are thinking of moving into an apartment in Manhattan. I am quite sure many people feel that they can try to do it on their own without a broker. Do realize that it is possible, but you will have a long winding road. Even with a broker it is tough if he or she has no relationships or even worse, a bad one with the managing agents or landlords. There is very little time for the good apartments to be viewed and secured in this current market state. You must be pro-active and not reactive when trying to find a place during this time of year. There is only going to be less to choose from with each day and many young agents don't realize the cycle of turnaround.

I hope that these facts are helpful in your securing a new home. If you need any help, I am here to guide you home!

RENTAL ALERT!!! Vacancy rates below 1% again!

After a much needed respite, I am back!

This is a busy season as within seconds of posting an ad, I proceed to get calls for twelve hours straight from 11:30AM-11:30PM yesterday. There are tons of people looking and not much selection. There is also very little time to deliberate as I have been showing in groups. If you don't want it, there are four more people lined up outside who will take it.

The rents are rising and the landlords are not offering concessions as much as they were in the past years. This is the time to find a good broker and go out looking during the week. You will maximize your chance of viewing the right place and securing it. Viewing on the weekend can leave you applying for an apartment only to find out that someoone else is signing leases on it that Monday.

Many of my clients can attest, that you will be glad to pay the fee for a lower monthly rent. Anything that is offered as a "no fee" during this time of year, is something that you are really just paying the fee back to the landlord in the form of a higher monthly rent.

The NYC Real Estate Market's Financial 101

Wow! Contrary to media reports, I have been busy as usual this year. My lack of posts each month is testament to that. We all have seen what has happened in the financial sector this year. While nationwide it may seem bleak, allow me to give you some insight into what it means here in NYC.

New York is primarily a city of renters. There are many people who own and sublease the unit for various reasons. The vacancy rate for rentals is above 1% for the first time in years. I expect this to plummet below 1% again with the changes in the financial sector. While this is still the best place to invest in over a 5 year period, the outlook by many is that there is only so much that the market can bear and that prices will plummet soon. I have lived here for over thirty years. I have witnessed firsthand the Bronx burning in the 70's, fire in the sky with towers falling at the start of this century and I can testify that is not going to happen. Sure, there will be more room to negotiate a price on a property that is a resale or in an older building. Places that are priced too high to begin with will sit on the market longer.

The last major change in our country was 9/11. Even after those attacks, the market here rebounded to levels never before reached. In studying the history of real estate in this city over the past 100 years, I have noticed that there is always a slight dip
for one or two out of every twenty years. After that, things continue to rise steady. Look at the link for sales figures of the last quarter sales2quarter2008.pdf . Now compare that with figures from the rental market 8-2008-mra.pdf and lastly, look at the market reports for 2002, just after 2001 may2002-oct2002.pdf also for 2006 bw2006.pdf . What you will notice is that there is one constant, rents continue to rise.

With more people than ever before assuming that the market will crash, do you really think rents will drop if the vacancy rate drops again due to more people renewing leases and renting as opposed to buying? For the first time since 2001, I noticed several landlords of high end rental buildings offering concessions to offset the cost of a broker's fee. They are looking to keep the building full. This is in order to keep the buildings at the lowest possible vacancy rate so that they can charge the highest possible market rent!

While not an option for everyone, if you have between a 10-40% down payment saved up, this is the perfect time to buy as many owners are fearing a drop in the market and thus a bit more negotiable than ever. Also, mortgage rates are at an all time low. This city is fast paced and not for the weak of heart. If you are even thinking about what to do in terms of renting or buying, call or write me for expert advice!

Don't believe the hype!

There is a little known saying inside media circles. "If it doesn't bleed, it doesn't read!" This is more true than most of us realize. As humans, we often have a fascination with the morbid. Why do you think that most of what's in the papers and on the news is dark and depressing? We all hate hearing awful things, but it gives us conversation material around the water coolers at work. "Wasn't that awful what happened on the news last night?" or "Did you hear about Brittney/Pam and Tommy/Paris/INSERT ANY CELEBRITY NAME HERE?"

In the interest of bringing you fact, not fiction, this year's market report is now out and viewable simply by clicking on the title of this post. It gives you hard facts about the state of the market in this city right now amidst all of the "bubble" speculation and with other housing markets in the country suffering.

I figured after a month off from writing, I'd give you a double whammy of data today. I hope that you all enjoy these posts today as they are extremely resourceful.

Bear Stearns Fallout

The most talked about topic in this city these days is Real Estate. Come to think of it, that is always a hot topic in this city. There has been much talk in the past two weeks about the effects that this fire sale in particular could have on the NYC real estate market.

First off, we must understand one major dynamic. The job of the press is to sell papers. There is an industry saying in the press, "If it bleeds, it reads!" This is something that we readers, may never notice until reading things with that thought in mind. Ninety percent of what we read in the news has a negative spin on it.

Secondly, I'll point out the obvious point. I am a licensed real estate professional. Of course, if the press is pointing out the negative aspects of the NYC sales market, I will point out the positives. In all honesty, I tend to look for positives in everything, but especially my business.

So in the interest of being a reporter, I will attempt to strike the middle ground between the two with this post. As when I am working with a client, I will simply make a list of the pros and cons of each side of the discussion. This way, we can all draw our own conclusions based upon our unique situations. To quote my godfather, "There's only one way to do things, the right way!"

The Bear Stearns situation has put everyone on red alert in the country. Stateside, gas prices have risen, we are five years into a war, this is an election year, then there was the Spitzer scandal here in NYC this month and as a result a major change in Government, so there is reason for conern for those with a cynical outlook. The Euro is still strong and so there are no worries there as Europeans make up roughly 30% of the market here. Historically, NYC runs insulated from the rest of the country in terms of it's real estate market. The numbers show that even when the rest of the country is suffering, the market here steadily rises over ten to twenty year perids. For every 5% dip in pricing over two to three years, there will be a rise of 5-15% directly behind that. This all begs the question, what makes the market in this city crash or rise?

To answer the question from above, the real estate market in this city does not crash. It may experience periodic corrections over a ten or twenty year period, but it just does not bottom out. Allow me to explain why this is the case. New York City is actually five boroughs, but most people think only of Manhattan when thinking of "the city". With this important fact in mind, realize that Manhattan is the smallest amount of acreage to develop out of all of the five boroughs, the most in demand and where most of the good paying jobs are. This makes it a cheetah in a land of camels. There is no doubt that there will always be an endless amount of interest, as Manhattan has that "wow" factor that no other area has. For decades, people have been drawn in by the skyline, the relative ease of getting around to all you can wish for, the endless supply of things to do, the simple ability to say "I live in the city!" There is only one city that comes to mind when this is said, so there is a certain aura that it has that can not be matched. This causes the market here to rise while the rest of the country will falter. There is always more demand than available supply. There is truth in the fact that with all of the new condominium development and the US economy in a recession (yes, a broker just said the dreaded "r" word!), the sales market may soften a bit due to a larger amount of inventory, but that will only make the rental market tighter and sellers smart enough to price somewhat lower than market in order to draw more interest the winners.

To present the flip side, 30,000 people are going to loose thier jobs in a job market which fuels the real estate market how can it not crash? This is simple. There will always be people with money, be it old or new, looking for a place in the city with the most to do. If we do get to a point where asking prices are 10% below the prior year's, which still has not happened even with all of the "when will the bubble burst?" talk, that would be offset in the following two to three years when enough people have snatched up the available inventory, so that there is a renewal of the lack of supply to offset the major demand model. This city has and always will be about that in every facet imaginable. Why do you think we spend $1000 more per month more to rent in Manhattan versus an outter borough and as a result, spend $1.00 minimum per item more on groceries or even just a cup of coffee. It's the mindset of "I want all of it now, even if I don't need it, just knowing that it's there and readily accessible, that makes me feel better!" that a lot of Americans have.

Our country is a consumer based economy and so people have an inherent nature to over spend. We are only now, with the Bear Stearns fallout, beginning to see the repurcussions of this after over eighty years of spending in America since the Great Depression. The federal government has been taking steps to stimulate the economy, though they are a bit too late to offset the Bear Stearns type situation. The bottom line is that this city has always been and will always be a sound investment for real estate for those looking for a gain over a five to ten year period. The days of the 15% increase in value over one year, are definitely behind us for a while. If you are a person who will make this city your home for that period of time, make sure that your current living situation is stable enough so that you can take your time with making a purchase. If you are a person looking for an investment with a fast turnaround, that requires more homework and also a keen eye for the most important factor in real estate in NYC. Location, location, location!

At the end of the day, this situation overall is not good for the real estate market here, no matter what any one says. It has caused a negative perception in the consumer's mind coupled with all of the spin the media puts on the housing market here. There will inevitably be more squeezing of the Charmin, or kicking of the tires so to speak. More people will take the rent and wait approach, which will cause a tighter vacancy rate than the historically low rates we have seen in the last three years. The only winners in that situation are the landlords who will be able to command higher rents as a direct result. People who take that approach are likely to hold out and miss the small window of opportunity that will come this year before the economy rebounds in 2009. They are the proverbial, "If it came that down that much, let's wait and see how much more it'll come down!" thinkers who don't know when it's time to crap or get off of the pot. This city is not going to bottom out, so any drops in pricing are likely to be minimal and short lived because of the unique nature of the market here.

Feel free to ad on with your thoughts.