News Update

Freddie Mac: Mortgage interest rates fall below 5 percent for third week this year

Thirty-year mortgage interest rates fell below 5 percent for the third week this year, according to a Freddie Mac survey released yesterday. For the week that ended Feb. 11, the 30-year fixed-rate mortgage had an average 4.97 percent rate, down from 5.01 percent for the week earlier and from 5.16 percent for the same week last year. The 15-year fixed-rate mortgage was down to 4.34 percent from 4.40 percent during the week-ago period and 4.81 percent in the year-ago period. Five-year Treasury-indexed hybrid adjustable-rate mortgages averaged 4.19 percent, down from 4.27 percent last week, while their one-year counterparts were up to 4.33 percent from 4.22 percent one week ago. The drop in interest rates on fixed-rate mortgages "helps a number of homeowners to refinance their existing housing debt," said Frank Nothaft, vice president and chief economist at Freddie Mac, noting that the latest survey from the Mortgage Bankers Association found that more than two-thirds of mortgage applications have been for refinancing since the start of 2010. "In mid-June of last year, for example, 30-year fixed-mortgage rates topped nearly 5.6 percent. Currently, the monthly payments would be almost $77 per month lower on a $200,000 loan balance."

Existing home sales rise nationwide

Existing home sales rose in 48 states and the District of Columbia during the fourth quarter of 2009, according to a National Association of Realtors survey released today, with 32 states seeing increases in the double digits from the third quarter. Forty-nine states and D.C. saw sales rise year-over-year from their levels in the fourth quarter of 2009. Nationwide, total sales rose to a seasonally adjusted rate of 6.03 million single-family and condo units, thirty-two percent of which were distressed property units. The median single-family price was $172,900, a 4.1 percent drop from the fourth quarter of 2008. The nationwide number represents a 13.9 percent increase from the third-quarter 2009 figure of 5.29 million and a 27.2 percent rise from the 4.74 million sales registered for the year-ago period. "The surge in home sales was driven by buyers responding strongly to the tax credit combined with record low mortgage interest rates," said Lawrence Yun, NAR's chief economist, in a statement.

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Manhattan Market May be the First to Rebound

According to industry experts, New York City's real estate market will recover ahead of other areas of the country, and perhaps by the end of the year. Many believe that most of New York's overbuilt office space inventory will finally be absorbed in 2010. What's more, distressed properties will become available through deals or foreclosure sales. Furthermore, developers will have the opportunity to begin repositioning themselves as land, construction and renovation costs drop to more reasonable levels.

The Urban Land Institute warns that New York will see vacancy rates skyrocket into the mid teens, office rents plummet 40% and co-op prices drop 25% in its 2010 market forecast. But it also says "New York offers savvy investors opportunity and more affordable costs over the long term."

Experts bet that New York will recover before other areas of the country because in his view, the region didn't indulge as much in over-development as did places like Las Vegas and Miami. The high construction costs and the wherewithal needed to obtain all the necessary permits prevent many speculators from coming in and developing properties in Manhattan.

Those barriers give well-financed industry players an advantage during times of crisis like now. Since many companies resisted buying properties or starting new projects when the market was peaking between 2005 to 2008, they did not become loaded down with debt. Nor are they stuck owning properties that are now worth significantly less than they were just a few years ago.

When looking at investment opportunities, residential is the healthiest area of real estate because the need for housing is perpetual. Commercial, which will benefit when jobs return, is the next strongest area, followed by hotel, which is benefiting from strong tourism. As prices continue to drop in 2010, individuals should look for opportunities to buy property in Manhattan at a discount while they can.

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Co-op Boards Making (Small) Compromises

Co-op boards are starting to become slightly more flexible in light of the market. It looks like 2010 is going to be another challenging year for the real estate industry, and a growing number of brokers urging co-op boards to consider broadening their pool of acceptable buyers—and it appears to be working. Some of the boards are actually starting to bend, and this could help boost co-op sales in 2010.

With sales volume so far down from the peak of the market, sellers often have to waiting for months to find a buyer, only to see that buyer rejected. Boards are starting to believe that to enable shareholders to get the maximum price for their apartments they have to be a little more flexible with regard to the buyers. The current economic climate has made boards more wary of the financial situation of buyers, so in return some brokers have convinced boards to ease up on allowing compromises on pet policies and pied-à-terres.

Boards are, of course, still insisting that potential shareholders have steady jobs and plenty of cash. In addition, they are less likely to accept residents who are self-employed or whose incomes fluctuate from year to year. Even with more willingness to compromise, boards will only make exceptions for extremely well-qualified candidates.

Contact Alfred Real Estate today.

Buyer Competition on the Rise

Over the past year or so, buyers looking to invest in Manhattan real estate have had the upper hand over sellers. With transactions virtually frozen in the wake of last year's collapse of Lehman Brothers, sellers grew alarmed, dropping prices and offering incentives to tempt purchasers.

Now, for the first time since the collapse of the market, many market experts are speculating that this heyday for buyers may be nearing its end—or that at least their advantage is shrinking.

More buyers—especially those who hesitated to buy during the financial crisis—are now searching for bargain prices as the stock market recovers and prices drop.

“Brokers are starting to notice more competition,” says Dan Babush, founder of Alfred Real Estate. “Now that prices are at an all time low, buyers who had been patient are stepping back into the game.”

Upper West Side broker Babush has noticed a large number of buyers looking for "classic six" apartments priced under $1.5 million. The sudden interest in these properties has resulted in multiple bids for this type of property. In response, sellers of these well-priced apartments no longer have to negotiate as much.

Another sign that buyers might be losing the upper hand is home seekers have started to complain about lack of inventory. The demand for Manhattan homes is extremely high, and the inventory cannot match it. Trying to find homes in the most desirable neighborhoods has become very competitive.

There's one major stipulation to all of this: Unlike in the boom, overpriced homes simply don't sell. Appropriate pricing brings the best results, and with the market still offering some of the lowest prices in decades, apartments priced within that range generally sell in a matter of weeks.

The new development market is also starting to see inventory drop as the supply of new projects dries up. These developments have gotten a boost in sales from international buyers who are showing a renewed interest in the city, prompted by low prices.

As a result of all these factors, homeowners who had avoided putting their homes on the market are having a change of heart. Brokers are being contacted by sellers who are contemplating selling their homes sometime in the near future. With open houses being packed the past month or so, sellers are gaining confidence that there will be an interest in their home.

The Manhattan Market for Foreign Investors

This week Jonathan Miller from Miller Samuel Inc. looked at Manhattan through the eyes of European buyers who were buying property in droves a few years ago.

He charted median sales price (black line) against median sales price adjusted for the difference between the Euro and the US Dollar (red line). The gray columns show the percentage difference between the Euro and the US Dollar at the end of each quarter.

The spread remains wide compared to a few years ago, when all those foreign investors were active in the market.

The weak dollar and the spread between various currencies remains a compelling economic force for those who can afford to buy in Manhattan. With the addition of prices being at the lowest point in decades, now is the time for foreign buyers to invest in Manhattan real estate.

Other news from the Real Estate market indicates that now is the time to invest. For example, mortgage rates are at their lowest point in years. In addition, the stimulus first home buyer tax credit has been extended to April 2010, giving first time buyers more incentive to take advantage of this market.

Foreign investors: Take advantage of the market today. Contact Alfred Real Estate.

An update on the NYC housing market and what it means for you

Keep track of trends. Since 3rd Quarter 2008 real estate reports, New York City’s housing market has faced some of its toughest challenges in twenty years. Manhattan has certainly felt the effects of the global financial crisis. It took New York City nearly 9 months to feel the effects of the housing crisis that the rest of the country had been struggling with. And when it hit—it hit hard. The decline in the amount of closings happened frighteningly fast. During the 2nd quarter of 2008, total closings on home sales decreased by nearly 60 percent. However, trends in recent months have shown signs of improvement. On September 18th the government announced that housing starts have hit a 9 month high—indicating that the market is most likely turning around. During the 1st quarter of 2009, closings had increased by 10 to 15 percent and research has shown that home sales will most likely increase further. With the market starting to reshape itself, this quarter and the next will most likely define the new levels of pricing in Manhattan.

The market may be recovering, so take advantage while prices are low. This fall the market appears to be behaving much more normally than it has been over the past 12 turbulent months. Reports show that the number of listings added in Manhattan after Labor Day was similar to last year’s. This bode of confidence in the market shows that consumers are once again feeling comfortable enough to sell. This is good news for sellers—the steep decline has certainly subsided—but it does not mean that the market has returned to the way it was in its heyday. Although inventory has somewhat stabilized, sellers will not be getting the prices they received a year or two ago. New data suggests that asking prices are about 24 percent below levels last year at this time. According to 2nd Quarter 2009 real estate reports for Manhattan, the average sales price of condos is $1,598,000 and the average sales price of co-ops is $922,000—the lowest prices the city has seen in years.

Foreign investors: Listen up! The Association of Foreign Investors in Real Estate has released a survey of its members and has ranked New York City the number one city in the world for real estate investment. The real estate downturn has made New York apartments and townhouses an incredible value for those who earn money in euros, Japanese yen, British pounds, Brazilian reals and other foreign currencies.