A friend of mine recently quipped that he hadn’t yet benefited from the downturn in the economy. Given the current zeitgeist of gloom, I found his attitude refreshingly positive. Think of the economy as the weather and remind yourself that you can have a good day even when it’s raining outside.
Whatever the dire climactic conditions, your personal situation is unique. This dynamic market, still in transition, offers opportunities on all transactional sides. Take a minute to figure out where your potential upside is. Locate your inner shrewdness and act while others are still fearful.
BUYING
Inventory is high. There hasn’t been such a selection of properties for ages. If you’re looking for an apartment on a particular block or if it’s outdoor space you want, an eat-in kitchen, southern exposure or extra closets, you’ve got more chances than ever to hit the nail on the head.
Prices have come down. Bloomberg reports that average NYC home prices dropped 10% in the fourth quarter of 2008. If you’ve been waiting to get into the market, start shopping now!
Sellers are negotiable. According to Miller Samuel’s Manhattan Market Overview Report, the listing discount (i.e. the spread between the asking and contract price) was 7.3% in the 4th quarter of 2008, as compared with 2.7% the prior year. Some buyers are afraid of offending a seller with a low offer. Don’t be. Take the risk and find out how much wiggle-room there is in the price.
Rates are low.
If you’ve still got your job and good credit, then take advantage of exceptionally-low interest rates. As of writing, they were hovering around 5.70% for 30-year fixed. There is talk that government action will make even more attractive options available soon.
You have the luxury of time.
Goodbye bidding wars! In the market’s heady days, you had to make an offer on an apartment at the first open house just to get your foot in the door. Now, if you see a great place, chances are you can go back a week later with your contractor or your aunt’s third cousin’s ex-boyfriend to get another opinion. By looking now, you are ahead of the curve and face reduced competition from other buyers.
SELLING
Values have soared.
Ok, all of these pros for buying may make a seller depressed. But let’s get real for a moment. When I started selling real estate in 1999, you could buy a one bedroom for around $300K on the Upper East Side. At the market’s height, similar one bedroom apartments could go for as much as $800K. If values have multiplied more than two-and-a-half times in the past decade, it’s only reasonable that they come down somewhat.
Home prices relative to stocks.
In the same ten-year period, the DOW hit 10,000, went up to 14,000 and is now hovering around 8,000. You were better off investing in a Manhattan apartment at any time in this period, even (and especially) the last few months. Friends of mine sold their condo at the height of the market and then, unfortunately, put their profit into securities and watched their portfolio tumble 50%. So even if apartment prices are down 10-20%, that is still less of a loss. And, in the meantime, you’ve had a great place to live.
Total picture.
Many are predicting continued declines in home prices for 2009. This scenario makes an argument for selling now. Lock in your gains—or your losses—now. Then be poised to take advantage of the favorable market for renters. If prices slip further, you’ll be ready to jump back in.
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