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.