Buyer’s remorse: a dark, threatening cloud that hangs over your head when the forecast calls for sunny weather. But in the current Manhattan real estate market it is important to ask yourself, “Is it really going to rain?” A recent Alfred Real Estate client spent weeks deliberating whether to sign a contract to purchase a six-room condominium in the desirable Upper East Side neighborhood. As time went on, she and her husband watched prices dip, prompting them to hold off as to not feel the sting of buyer’s remorse. In the meantime, the fear of overpaying combined with gossip floating around urging them to “wait for the right time” has them still paying a five figure rent. $200,000 in rent later, she is still house-hunting and living in a building and an apartment that she doesn’t really like. The news is that there is only so much downward play left in this market.
Most buyers in Manhattan think they are overpaying. With figures constantly being thrown around like “prices are down 20%” or “the market has yet to hit bottom” it is very easy to get caught up. However, just because prices are low doesn’t mean you shouldn’t be cautious. Read the offering plan, and then read it again. Make sure you are getting exactly what you want. The truth of the matter is you and your agent need to understand the reality of the market and how that applies to the property (condo, brownstone, or apartment) you are interested in. You must consider only appropriate comps, meaning properties that have recently been sold in buildings from the same era (prewar or new developments) and with the same amenities (doorman, gym) and the same neighborhood (Upper East Side, Upper West Side). When you are looking to buy, only assess properties that are either in contract or have sold in the past two to three months. Keep in mind that at the moment prices in Manhattan are lower than they have been in years, and how much further they are going to go down or when they are going to spike back up is anyone’s guess.
This is no time to be scared off from buying a Manhattan home if your finances allow it—the market has reached a realistic point and, when factoring in the connection between interest rates and prices it may be at its best point in years. If prices come down another 10% but interest rates increase by 1 percentage point, that would mean the same monthly payment today versus waiting. So, if you buy today might you end up paying more than if you had waited a couple months? Perhaps— but show me the buyer who has ever successfully picked the exact bottom or top of a market. Third quarter 2009 reports show that the number of sales is on the rise—a reasonable sign that the market has bottomed and is stabilizing. Does this mean that soon we are going to see prices shoot back up to where they were? No. But prices will probably rise enough to find a new, higher-than-current stabilized level. Continuing to pay an expensive lease in an apartment you want to leave behind could be a senseless waste of money. You might also end up waiting too long and missing out on an opportunity that hasn’t been available to buyers in Manhattan in 20 years. Now that would be a real case of buyer’s remorse.
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