Liquidity in Real Estate?

Residential Market in 2009 FAQ's

My 2009 resolution is to work harder than ever for my clients to help them make the best decisions in this adjusted market

As 2008 quickly becomes "the past," much is up in the air, such as the depth and extent of the national economic problems and potential worldwide contraction. To that end, I find I am getting more questions than ever, and the bravado and confidence of the past decade have been replaced by an unease with the outlook for real estate in New York. Therefore, I have included a list of the more common questions I am getting with some answers in hope that I may add insight.

When Will the Market Hit Bottom?

This seems to be the most asked question and the answer is unknown. The current market, however, presents great opportunities for buyers, especially first-time buyers who have felt priced out; if they have the ability to put down more cash and find housing that fits into their finances.

Should I Consider Buildings Now Coming on the Market?

Numerous projects have been halted recently or aren't getting a shovel in the ground. Those that have been completed, or soon will be, or those maintaining solid sales, have appropriate financing, sound marketing and a pricing plan. These will gain respect in the market and gain solid traction. I understand that buying during the pre-construction phase in the current economic climate requires a bit of a leap of faith that the prices will not go down as the building goes up. To gain some protection, buyers have the option of obtaining a price protection plan, so if the price on a similar unit goes down before the buyer closes and moves in, the buyer will get the same percentage decrease. Buyers can have this written into their contracts.

Is it Difficult to Get a Mortgage?

Not at all for standard buyers who have solid credit and are able to put down 20%. In fact long-term mortgage rates are incredibly attractive right now. That said, in this environment cash is king and buyers who can make larger down payments have a huge advantage. In fact, some sellers are willing to take a softer offering price if the buyer can make a large down payment and their financing is more certain.

Should I Wait or Sell Now?

That's a similar question to when will the market hit bottom. It is unclear yet if a seller will get more or less in two years. The key is to look at the overall picture and compare the current price with what was paid. Recognize that while the apartment may bring a return of $150,000-$200,000 profit, it is less than in the inflated market of last year, but in almost all cases it is significantly higher than what the apartment cost. Therefore, the decision should be based on other factors, such as what can I get with the proceeds. Since prices are so competitive, buyers are finding their dollar can go a lot further when buying up. Family needs, finances and housing requirements play a role in selling. If a couple is a recent empty-nester, it may be the appropriate time to rent or downsize. Conversely, if the family Is expanding and needs a larger apartment, this is the time to trade up.

What Should a Seller Do if the Initial Offer is "Ridiculously" Low?

The initial reaction of the seller is to say no. I'm finding that people buying are testing more in this market and buyers interested in an apartment are patient. In fact, we no longer see offers above or even at the asking price. Therefore, it is essential to evaluate all real offers and, depending on the dynamic, give strong consideration to countering them. The reason is that some buyers simply want to feel like they are getting a "deal." I have seen situations were buyers with very low initial offers are brought up significantly, and eventually settle within the seller's comfort range.

What Advice Do You Have for Both Buyers and Sellers?

Be flexible. Both parties have to adjust their thinking and their expectations in the post-Lehman era and listen to knowledgeable brokers. For example, sellers have to set a realistic initial price. Using reports of average sales or sales shown in newspapers and on the websites are an inaccurate way of pricing an apartment. Often there is a time lag of as much as six months between the contract and closing, and in that time prices have declined. Savvy brokers know recent prices.