As we head into
a new and traditionally busy time of year for the real estate market, families
are wondering, has the market recovered? Industry experts caution that
stringent underwriting rules and a lack of inventory are making it difficult
for some families to qualify for a mortgage and obtain housing in the most
desirable neighborhoods. But for those who qualify, there’s good news: low
interest rates are making 2011 a great time to buy.
The overall mood
is that the market has stabilized, according to Sofia Song, head of research at
StreetEasy.com. And while homes are selling at
prices about 10-15 percent down from their peak levels in early 2008, it allows
families to obtain housing at a discounted price. The next six months,
she predicts, will be the peak season for real estate, particularly for
families.
“No
one knows how long interest rates are going to be so low. We might not see
these record rates,” Deanna Kory, senior vice president of The Corcoran Group,
points out. Lisa Lippman,
senior vice president and director at Brown Harris Stevens, adds, “Where people
see the prices as decent…they buy, and quickly. No one is willing to ‘overpay’
or pay 2007 prices, but they are willing to pay 2005/2006 prices.”
The next six
months offer a lot of hope for sellers as well, as the demand for larger,
family-style apartments will help keep prices competitive. “Three bedrooms
accounted for nearly 25 percent of the sales in the third quarter of this year,
on both the Upper East and Upper West Sides,” says Diane Ramirez, president of
Halstead Property. “Through 2011, I anticipate that we will continue to have
low interest rates, and combined with value pricing and low inventory, it will
be a great time to sell and to buy.”
One area of the
market expected to do particularly well in 2011 is the luxury market—over $7
million. End-of-year bonuses are expected to drive purchases in the new year.
“Wall Street is very much alive with real estate and real estate is very much
alive with Wall Street; the relationship goes hand-in-hand,” Frances Katzen,
executive vice president of Prudential Douglas Elliman, explains.
Property values
on larger, multi-bedroom apartments may spike somewhat, she predicts, because
less inventory will be available. In fact, the
inventory on three bedrooms or more in 2011 will be so low and the demand so
strong that industry leaders advise families who are buying to be patient.
“We’re going to
see a bit of demand that can’t be satisfied,” Kory admits, particularly in the
prime Upper West and
East Side
neighborhoods. Lippman agrees. “I think we can expect the usual shortage of three
and four bedroom homes; especially in the $2 to $4 million range,” she says,
though she notes that they are easier to find if families can spend over $4
million.
For families who
really need the extra space, real estate brokers suggest nearby neighborhoods
like Yorkville, Kips Bay, Beekman, Columbus Circle and above West 96th Street, including Harlem from 115th-125th Streets. And
while the two-bedroom market still remains strong, Kory says that if a family
is set on a particular neighborhood and needs three bedrooms or more, they are
prepared to wait or will consider renting.
And
in this economy, renting can be an attractive option for families, especially
for those who are worried about job stability and don’t plan on living in the
city that long. “It only makes sense to buy if you envision staying in
your home for a minimum of five years. Otherwise, you will not have stayed long
enough to cover the closing costs of purchasing your home,” says Song.
Rentals in the
city will remain stronger in the next few years, according to Gary Jacob,
executive vice president of Glenwood. “The only advantage of buying is long-term
appreciation. And in the last three to four years, there was no appreciation,”
he points out.
One of the main
factors influencing the decision to rent or buy is the current economy
and state of credit. “It’s still difficult to get
financing right now,” says Song. “While
it’s not impossible, families whose finances and background are less than
perfect should expect to pay a higher interest rate or more points. Right now,
lenders are not just looking at your credit worthiness.” There are factors that
a family can’t control, she says, such as the building’s risk or whether or not
the purchase is a primary or secondary home.
“The two issues in defining the housing market
are employment and the state of credit. What’s missing from the equation is
underwriting, and it’s as tight as can be,” says Jonathan Miller, president and
Estate Appraisals & Consultant. “Lenders are looking at a housing market
that has gone through tremendous gyration. There are future layoffs, very high
unemployment, probably more increases in real estate taxes, and NYC budget shortfalls.”
As
a result, fewer people are qualifying under new guidelines, and it is affecting
sales, says Katzen.
“Buyers are penalized now if they are not buying a primary residence, or if
their tax returns are showing very strong earnings, but their month-to-month
earnings are not as much as their bonuses….it’s not in the best interest of
[people living] in New York City.”
But Peter
Grabel, private mortgage banker with Luxury Mortgage Corporation, notes that
banks are now counting bonuses as income and credit score requirements are
becoming a bit looser. “The pendulum swung on the conservative side, but it has
loosened,” he says. And the good news is that financing is readily available.
“For those who
can afford it, they will find that prices are discounted a bit. That $4 million
place would now be $3 million. There is certainly a 20 percent softening that I
am hearing,” he says.
Other industry
leaders are also optimistic about buyers. “If you are well-qualified and
putting down at least 60 to 70 percent and the building in which you are buying
has no issues, you have lots of good options,” Lippman says.
On the sales
side, “the best case scenario is moving sideways,” according to Miller. “If we
don’t see unemployment and credit ease, it’s hard to imagine price raises.” But
Katzen says that there is always about a 5-10 year bounce back. “I think
that [property values] will hold,” she says.
And Kory
believes that people feel that
“It’s proven to be relatively stable if you think about where the prices are
versus before,” she says. “The market is not down as much as the stock market.
For many people, it’s proven to be a better investment. In general terms,
people are feeling optimistic about real estate.”
Pictured: 1280 Fifth Avenue (top left), The Ashley (above right).
