SALES OF EXISTING HOMES LEAP TO 2-YEAR RECORD!

As repoted by the AP on Friday, October 23rd, in September the sales of existing homes jumped to two year record. The expiration of the “First Time Homeowners” tax credit was widely attributed for the jump, although the magnitude of the increase has still defied expectations. Sales rose 9.4% to a seasonally adjusted annual rate of 5.57 million homes in the month of September. This is more than 4% above the sales expected according to a survey of economists conducted by Thomson Reuters. The median sales price of $174,900 was still down over 8% from year-ago prices, and down just over 1% from August. Unsold homes inventory dropped to 3.63 million homes, meanings that there remains less than 8 month supply of housing on the market, a low that has not been since since March of 2007. While sales are up nationally about 24%, they remain down 23% over sales from the boom period in 2005.Some housing experts and economists predict a “double dip” as unemployment remains very high and new inventory comes onto the market in the form of additional foreclosed homes. Others believe that we are in the stages of an advanced “mini-boom” that may indicate that the worst may indeed be over. It’s anybody’s guess where things will be a few months down the road, but certainly the market in New York City is showing evidence of a resurgence in healthy buying and looking activity. I've been telling my clients interested in purchasing, that over the past few weeks there has been a noteable increase in both calls from interested purchasers as well as attendance at open houses. I have even seen a couple of bidding wars, which once the norm in New York City, have not been regularly seen for many many months. It certainly feels like a housing recovery is well underway.

The Multiple-Broker Mistake...

I tend to work exclusively with most of my clients, simply because they've typically been referred by another successfully placed client and they understand that our database has a universe of nearly 97% of all available apartments within it, including those of over 400+ other REBNY-member firms. Therefore, it it's out there, my clients know that I can show it...and will show it if it's the right apartment for them.

However, we all occasionally get those clients, particularly those not familiar with the workings of the Manhattan rental market, who become so preoccupied that they will not find the "right" apartment that they begin booking appointments with other brokers and sometimes multiple brokers.

I certainly appreciate when clients tell me this, even as it creates a bit of an awkward situation. The dating analogy, would be the girl who tells her boyfriend, "As much as I like you, I really want to be sure you're the right one, so I hope you don't mind that after our date tonight, I've set up several other dates over the next few nights with other men." It's not news that anyone really wants to hear, but nontheless, I use it as an opportunity to educate my clients about the best way to use a broker in Manhattan.

All of this is premised upon the understanding that the client HAS a great broker to work with already. The client who simply knows nobody in New York and is setting out without any referral or recommendation, may gain a foothold on this task by talking to several brokers via phone and choosing the one that seems most knowledgeable, service oriented, and best able to grasp the particular apartment search requirements.

The "problem" many clients believe is created with using multiple brokers is actually not the true problem. These clients assume that one broker will be jealous of the other, or feel they're being put "head to head." The client may even feel that two or three competing brokers may work "harder" to outdo each other. But this really isn't the case...in this competitive industry we deal with that continuously and are inherently competing with the "community" of other brokers. The real problem is that the client who tries to navigate multiple brokers is unwittingly putting himself/herself at a tremendous disadvantage by destroying the two most important elements to finding the perfect apartment:

(1) building a good working relationship with your broker

and

(2) getting him/her to fully understand and appreciate all of the many nuances of your apartment preferences and needs.

What "multiple-broker" clients do not realize or understand is that I will generate a list of the "universe" of available apartments that will include virtually all of the other apartments that will be on these other brokers' lists. Do we simply run down the list and show apartments? Of course not. The only way to productively narrow down a list of several hundred apartments to the best deals and the most suitable for a given client is through the sheer experience of the agent, his ability to listen to his client and cull out the appropriate details, and the agent's ability to get knowledge and familiarity with the client's needs/tastes/preferences/etc. This "education" will often result in the broker making several immediate strong recommendations for the most suitable apartments. During the showing, the broker will get a "feel" from each reaction, comments and from followup questions, for such things as:

• Low floor or high floor
• Open layout or closed layout?
• Light over space? Space over light?
• Further downtown, or further uptown?
• Dark-stained floors? Light-stained floors?
• Buzzing neighborhoods or quieter streets?
• More living room, or more bedroom?
• More equal or less equal bedrooms.
• Front of street views? Or quiet courtyard solitude?
• Renovated apartment versus renovated building?
• Street or Avenue

and literally HUNDREDS of other comparisons/options/choices that span from the obvious to the obscure. In the span of showing several apartments and getting first-hand feedback from my client, I'm able to quickly assess which characteristics are the "must haves" and which can be sacraficed to get more of those "must have" features! In this way, over time I hone in on more and more "perfect" apartments, with often the most perfect at the end that leads to the application and the happy new tenant!

Now, what happens to the "multiple-broker" client? First of all, much as in the dating scenario, the lack of commitment isn't exactly the best way to motivate your broker to go "above and beyond" -- which is exactly what you need to score the best deal in New York City. So first and foremost, your broker knows he's just a "number," and has got a very short time to show you what he can before you're running off to the next. There's simply little motivation and no time to build a productive working relationship on that, and just as the broker may begin to be getting a great sense of that "perfect" apartment for the client's needs, that client checks his watch and must then run off to the next broker. That next broker, of course, must start completely from scratch, learning anew all of those same minute details, and very possibly planning to show those very same listings!

And then what about those "special listings," we may have...a particular new listings not yet in the system, or some incredible value that the broker is holding for a favored client...does "Miss Multi-Broker" get this recommendation? Of course not...the fear would be that the multi-broker client might communicate this special deal to the other brokers. Like in many other areas of life, trust and commitment can pay off handsomely when you're starting with an excellent broker.

Bottom line: Forget the brokers for a minute and do YOURSELF the favor...when you've been referred to a top broker, give him/her your trust and full commitment and let him/her know that! Let his/her proven success become your successful apartment find...and it will! And then you will be ready with a great recommendation when your friend asks you, "Do you happen to know of a great broker in New York City?"

May 2009: Surprise! Vacancy rates plummet! Is this a recovery?

One of the biggest factors helping clients to get the best deals in this market has been the increasing vacancy rates. By February 2009, vacancy rates had practically doubled the year before, to just over 2%. While a 2% vacancy rate in any other city is a "severe housing shortage," for New Yorkers, accustom to a very tight housing market, a 2% vacancy rate means relative bargains, with low-end prices down approx. 6% over a year ago, and higher-end properties down much more. Now a 6% drop may not sound like, much, but compared to the typical 5 - 10% increase year-over-year, the difference between a drop versus an increase is much more substantial. In short, New York City has been "On Sale!"

We've been seeing a slow but consistent strengthening in the rental market since February, but with rents beginning to increase, there has been a sudden surge in demand throughout May and June. The May 2009 rental report (below) reveals a dramatic plunge in vacancy rates from 2.28% to 1.72% towards the end of May. Essentially, as bad as the economy may appear to some, people are moving to the city and taking advantage of the lower rents en masse! The very best deals have been snagged in Feburary and March but there still remain some great deals out there. I've had some clients waiting since January for rents to drop further, and they now realize that they've "missed the boat." It's not too late to grab a great deal, however, and of course I still am able to bring my clients to the very best values in the city regardless of market environment. The following rental report can be used as a guideline for recent changes in rents...

http://www.citi-habitats.com/media/pdf/2009-5-mra.pdf

Getting Prepared - What You Need to Rent an Apartment in New York City

Many prospective renters from out of town come to New York City expecting that they'll just find a pretty apartment, sign the lease, hand over a check and get a shiny new set of keys in return. Unfortunately, the experience of renting an apartment in New York City is not nearly so simple. In fact, many have compared the experience of RENTING in New York City as more involved than actually BUYING in many other cities!

Before you pack up your bags and choose another big city, it's important to understand exactly WHY the application process is so much more demanding. It really boils down to the strong tenant laws in New York. If a tenant does not pay his or her rent, New York City does not allow simple and immediate eviction, but rather an extended process involving housing court and a host of potential complications that can make it very time consuming and expensive for a landlord to evict anybody. The end result is that a landlord can lose tens of thousands of dollars in the process of trying to evict a non-paying tenant. To prevent that, landlords in Manhattan have become very careful and selective when it comes to the finances, employment and particularly credit history of prospective tenants.

The GOOD NEWS is that you can make this process vastly simpler and easier by simply preparing for it. And here's where I can offer some immediate assistance even before you see a single apartment. By compiling the documentation and information that you need, and reviewing your credit report to ensure that there are no "surprises," you can be ahead of 99% of all other renters. And that can come in VERY handy when your broker finds you that exceptionally good deal and lands it for you by virtue of your ready-to-go paperwork!

OK, JEFF, WHAT DO I NEED TO QUALIFY FOR AN APARTMENT RENTAL IN NEW YORK CITY?

An applicant will need to earn 40x the monthly rent. So to rent a $2,000/month apartment, the landlord would want to see the applicant earning $80,000 per year. Sure, there are many stories of people getting apartments with far less income, but these situations are far less common than the stories themselves. Virtually every reputable landlord will insist on these standards. If the applicant cannot meet the income requirement, or if the applicant has weaker credit, a guarantor, or co-signer, will be necessary. The landlord generally wants to see a guarantor earning 65x to 80x the monthly rent. The landlord may or may not combine incomes of multiple applicants/guarantors...your broker can guide you to the specific policy of any particular apartment in which you have interest. Some landlords will prohibit guarantors from certain states...basically, those states with homestead exemptions (e.g. Florida, Texas).

SO, JEFF, WHAT DO I NEED TO GATHER TO RENT AN APARTMENT IN NEW YORK CITY?

Assuming that you are financially qualified, or have a financially qualified guarantor, you'll need the following in almost every instance. These are not requirements of Citi-Habitats, rather these are the requirements of virtually every reputable landlord in New York City...

• CREDIT CHECK: Either we or the landlord will run credit/tenant report. Credit check fees can range from $50 to $100 per applicant and guarantor. The report includes eviction search, court records search, lien search, and other searches intended to assure the landlord of a problem-free tenant.

• LETTER OF EMPLOYMENT: You should ask your employer for a "Letter of Employment" almost immediately, since this is the one document over which you will be dependent on someone else getting to you in a timely manner. Since this can take several days, it's therefore best to ask for this IMMEDIATELY so you'll have it when you need it. If you have an older letter of employment, such as one when you started work more than 3 months old, chances are that the landlord will want to see an UPDATED letter of employment, so keep that in mind and ask for an updated letter to be on the safe side.

• FEDERAL TAX RETURNS (Form 1040): You'll want to gather your last 2 year's worth of federal tax returns. You don't need the whole return, or the city/state portions. Just the first and signature pages, and be sure to sign the return (e.g. if you're accountant left you with an unsigned copy).

• CURRENT BANK STATEMENT: Everybody of course likes privacy, but when it comes to getting yourself accepted into a good building, you'll want to show MORE not LESS. Choose the account with the highest balance, or if your money is spread among multiple accounts, bring multiple statements. If you keep most of your liquid assets in another type of account (e.g. a brokerage account) that can be an alterative to a bank statement. The goal here is to assure the landlord that you have well more than enough money for rent, living expenses, potential emergencies, etc.

• PHOTO ID: We'll make a copy for the landlord of a driver's license or passport with your photo and name/address clearly visible.

The following are supplementary documentation required by many reputable landlords:

• 3 MOST RECENT PAY STUBS: If you have direct deposit, bring your direct deposit stubs if you have them, or alteratively print out your bank statement and circle those msot recent 3 deposits.

• LANDLORD REFERENCE LETTER: Should state your name, dates of occupancy, and note that rent was paid in a timely manner. Ideally, this letter should be positive and mention that the landlord recommends you as a tenant, although we can't always get the landlord to type anything more than a basic reference letter. If you are currently living with parents, you can actually submit a letter from your parents attesting to that fact, and also assuring the landlord that you've been a good occupant. If you are subletting, provide the recommendation letter from the sublettor.

The following are often required by Condo and Co-op sublets...

• PERSONAL AND/OR BUSINESS REFERENCE LETTERS: Depending on the building, you may be required to provide letters from references stating how long they've known you, a summary of your character, etc.

In the case of a guarantor, virtually ALL of the same documentation listed above is required as well, however the "Landlord Reference Letter" is not needed for the guarantor.

WHAT IF I OWN MY OWN BUSINESS?

No worries here. In lieu of a "Letter of Employment," you'll get a CPA or accountant's letter stating your Annual Income for the past 2 years. Ideally, the letter can also approximate net worth, and discuss the line of business, and length of employment or self-employment.

Sound like a lot, right? But this is the biggest step you can take RIGHT NOW to securing your dream apartment.

Questions about the process? Don't hesitate to email me!

Article about my client in the New York Times

For the second time over the past month, one of my client's apartments has been highlighted in the New York Times. This most recent apartment, was that of Perry Balin, whom I helped find a charming prewar studio in the West 90's just half a block to Central Park. Perry is featured prominently in the article, with the largest photo, and the humorous close to the article. Read about Perry and her cute Terrier "Tess" yourself...

http://www.nytimes.com/2009/05/10/realestate/10cov.html?_r=1&pagewanted=1&ref=realestate

Lowest Mortgage Rates in 35 Years – Is NOW the Time to Buy?

The average U.S. mortgage rates have dropped to yet another record low this week (3/26/09) reflecting the enthusiasm of government policy to purchase Treasure securities to reduce rates in an effort to spur a housing recovery.

The average 30-year fixed-rate mortgage has dropped to 4.85% (week ending 3/26/09) from 4.98% the previous week, the lowest since Freddie Mac began it’s Primary Mortgage Market Survey over 35 years ago. (Freddie Mac is the Congress-chartered mortgage finance company that purchase mortgages from banks and other lenders). The 15-year fixed-rate average dropped to 4.58% from 4.61% the week before. Adjustable-rate mortgage also fell to record lows.

Only one year ago, the average 30-year mortgage rate stood at 5.85%, and 15-year mortgage rates stood at 5.34%. Essentially, the 30-year has dropped by a full percentage point! The significant of this for the housing market is startling. And it’s particularly good news even in those housing markets, like New York City, that have fared relatively well in the current economic storm.

Take a $650,000 condominium as an example. Let’s assume you’ll put $65,000 down and finance the balance of $585,000.

Last year, to finance that loan amount of $585,000, assuming for simplicity that we’re at the average 30-year mortgage rate, would be:

$3451.15 per month

This year, that same mortgage would cost you:

$3087.00 per month

That one point drop in mortgage rates means a savings to you of over $350 per month, or more than 10% of the higher monthly mortgage payment.

We can look at this another way…

If you have $3451 per month to put into your mortgage, and assuming you have the down payment, we can see that you can roughly afford a $650,000 condominium.

But, thanks to the newer rates, that same $3451 will cover a $651,000 mortgage, leaving you an extra $66,000 to buy your condo. Combine that with the reductions in prices that we’ve seen over past year, the result is that for the same monthly payment, you can get much more apartment than you could possibly get even just a few months ago.

Another very significant point about the new interest rates…

The magnitude of the money that you save on the reduced interest may actually be larger than any potential savings you may get by waiting for further price drops…which of course, none of us can predict. That is, in the absence of these massive rate drops, you would need to see property values come down by yet another 10% to get to the same monthly payment that you are now able to take advantage of by virtue of the reduced rates!

Bottom line: the lower interest rates are most certainly going to spur a lot of individuals to reconsider whether “waiting” is the best strategy when it comes to purchasing an apartment that they need. Once we begin to see the inevitable resumption in increasing real estate prices, all of those sideliners are going to race to get in while they still can, and that's not going to be a fun time to be hunting for an apartment. Contrast that with the present situation, where you can still calmly go about and snag the best possible deal for your budget without dozens of others competing for the same property. - J. Brenner

February 2009 Rental Market Report

With the economic problems at the forefront of the news, I am frequently getting calls from people who are soaking up the constant stream of news reports about the economy and real estate and then developing certain expectations about the real estate market in Manhattan that are often inaccurate. Since unrealistic expectations almost always leads to disappointment, I wanted to nip some of the commonly expressed beliefs about the market with some of the facts (see February 2009 Rental Report in the link below this article).

Myth #1 - Rents are down by 50% or more in Manhattan
Answer #1 - Unless you're a landlord, wouldn't we all wish that to be the case. Unfortunately, while rents ARE indeed lower, for the most part, than just 6 months ago, the decreases have been modest and far less than most people -- particularly those arriving from out of state -- expect. Look at the attached "Market Report" for February 2009 and you can see that the average One Bedroom across all of Manhattan stood at $2405. If we go back 1 year ago, when the economy was seemingly working and rents were going nowhere but up, up, up...the average One Bedroom apartment stood at $2664. So over the span of a year, that represents a decrease of about 10%. Not nearly the degree of change that many people expect.

With studios, the average Studio rent across all of Manhattan stood at $1764 in February 2009. Back in the booming February 2008, it stood at $1869, representing about a 6% decrease. Again, not an earth-shattering change.

Looking at 2 BR apartments, the average across Manhattan stood at $3483 in February 2009, versus $3580 in February 2008, representing about a 3% decrease.

Looking at 3 BR apartments, the average across Manhattan stood at $4528 in February 2009, versus $4607 in February 2008, representing less than a 2% decrease!

So wait a minute...where are these massive rent drops?

There ARE some substantial rent drops happening, but they're happening in the high-end, among the most expensive properties. These are the apartments formerly rented by the hedge fund trader, or the banking executive, or other formerly high-flyer who now must downsize. In this realm, it's possible to find apartments once renting for $15,000/month being offered for less than $10,000/month, representing a more than 30% decrease.

Why haven't these high-end drops translated to larger drops in the average apartments? Quite frankly, it's the vacancy rate...there are just too many people waiting, waiting, waiting for just the right rent before they pick up and get themselves into prime Manhattan. So even a 5% decrease in an environment where the only changes seen in rent over the past several years has been consistent rent increases, is a great opportunity for someone to get the apartment that they've long wanted.

Myth #2 - I can get a much better deal by moving from my current apartment.
Answer #2 - The validity of that statement will depend largely on when you rented your apartment. If you rented only a year ago, you will indeed find that rents have dropped several percentage points over the year, and you may be able to save yourself some money every month. On the other hand, if you rented more than a year ago, and especially if you've rented many years ago with modest rent increases along the way, you may find that your current apartment remains the best value even with the current turmoil in the markets. Refer to "Myth #1" to get a better sense of the magnitude of rent decreases across each category of apartment.

Myth #3 - Landlords are desperate and it's possible to negotiate 30, 40 or 50% off the rent.
Answer #3 - Again, this takes us back to Myth #1. Rental prices are down by only a few percentage points across all apartments below $5,000 despite all that has been going on in the economy. The demand for housing remains exceptionally strong in Manhattan. It's important to keep that in mind when asking your broker to present an offer to the landlord. Your broker can always offer any amount that you ask to offer, but once you become labeled as "not serious" by making an offer the landlord may consider naive at best, or offensive at worst, it may be difficult to salvage a rental deal from that point. Your broker can often pull up recent rentals in the building in which you are interested in applying, which can give you a firmer idea of the rents that apartments are currently going in that particular building, and can help guide an offer.

CLICK HERE FOR FEBRUARY 2009 RENTAL MARKET REPORT

When should I start looking for an apartment?

Many of my out-of-town clients are not familiar with the vacancy rate in New York City, nor how quickly apartments rent. In these terrible economic conditions, Manhattan's vacancy rate has about doubled from September 2007 to January 2009, which sounds astounding for a moment until you realize that in September 2007 the vacancy rate had dropped to an astoundingly low 1% and is now around 2%. In other words, as the world seems to be falling apartment, Manhattan's vacancy rate is the still among the lowest in the world, and screams "We're totally full!" It's become a bit easier to rent in Manhattan, but the housing shortage has not disappeared.

It's very important to keep that in mind when you're beginning to plan your search for an apartment. While it seems to be common sense that the earlier you start, the better, starting too early in Manhattan can be counterproductive.

What makes Manhattan so unique is that due to the very low vacancy rate and the huge demand for housing here, great apartments do not sit empty for very long. In fact, some apartments go directly from one tenant, to a quick cleaning and painting, and to the next tenant, in a matter of days! The apartments that DO sit around for several weeks or more, are not apartments that anybody is going to be jumping up and down about...they're usually apartments with serious flaw or other problems that have kept them from renting.

So let's take the example of my out-of-town client who needs an apartment for September 2009. They call me in March 2009 to set up an appointment to view apartments because they want to plan as far ahead as possible as this would seem to be the strategy to get the best apartment possible. Right? Unfortunately, not in New York City.

So what happens? First of all, there are simply no apartments available 6 months ahead of time, and not very many even 1 month ahead of time. Most of those tenants who will be vacating in September 2009 probably have NO IDEA YET whether they may even renew or stay in their current leases. So nobody...not the landlord, not the broker, not the tenant can even know what apartments may become available so many months ahead of time.

But in some cases, the client has already traveled from overseas or another state, and didn't get a chance to call me until he arrived in New York. So he would like to see some apartments. So what happens now? I will show him some apartments, including some of my best properties, and he may well fall in love with a particular property. But unfortunately, that property will be ready to rent NOW, or in some cases we can negotiate a few weeks later start date. If he doesn't rent this beautiful apartment, of course someone else will rent it. Yet he can't possibly begin renting, say, April 1st and paying 5 months of rent just for the sake of having an apartment in September. So that's the inherent problem and frustration with trying to rent in Manhattan so far ahead of time.

But what about coming ahead of time to "get to know the market?" or to "see some example apartments?" There can be some value to that, but keep in mind that apartments in Manhattan are very much like people: each available apartment is very different and unique from any other. Manhattan housing stock is well-established, and we do not often get brand new rentals where we have a "stock" of multiple apartments where one can see a representative sample of what they may rent later down the road. Furthermore, the market can change quickly in New York City. Landlords are quick to adjust their rents downward when market conditions require, because they do not want to leave apartments sitting vacant for any extended period of time. And on the other hand, as the economy recovers, landlords will most certainly begin resuming the increases in rents, because market demand will allow them to earn a greater return on their investments. Bottom line: what the advance-planning client sees today will likely have little resemblance to what he might ultimate come to see several months down the road when it's the right time to rent.

SO, JEFF, WHEN IS THE BEST TIME TO BEGIN SEARCHING FOR AN APARTMENT?

Unless you know that you will be applying for a co-op or condominium sublet, which are more complicated types of rentals that require significant documentation, time and often a board interview, you should plan to arrive in New York City approximately 2 to 3 weeks before you intend to sign your lease. This would allow you up to a full week to view properties, another week to gather paperwork, get approved, and schedule the lease signing. But this is just a guideline. In fact, I've had clients walk into my office needing an apartment "today" and have been able to find, apply, and conduct a lease signing all in the same day. Of course, that's an extenuating circumstance but the point is that in New York City, months of advance planning is not the trick to finding a great apartment. The key is to work with a reputable, trusted and talented broker who will quickly guide you to the best values in your price range, and help get you approved for your desired apartment in the shortest time possible.