Do You Know What's Happening to Your Market?
The Buying Philosophy
It’s the fall season, the leaves are starting to change, and if you judge by the headlines in the business sections of our newspapers, everything about the economy is starting to change too. Just a few months ago, all the real estate news was about the amazing boom-era market, and now it seems we’re suddenly seeing many, many more articles with headlines like “Manhattan Apartment Prices Slip,” “Stocks Stumble Out of Gate and “One Sign That Manhattan’s Super-Luxury Condo Market Is Over.”
The truth is, things in the global and local real estate economy have not changed very much at all, despite volatility in the equity markets. But I have seen a psychological shift in our marketplace. I’ve put several good, well-priced properties on the market lately and haven’t seen them sell with the speed and veracity we have come to expect over the past few years. I spoke with several colleagues and all agreed that what’s happening seems to be a result of all those negative headlines out there about the economy. For several years now, we’ve been bombarded with positive news about the real estate market going up and housing booming—which creates a level of excitement where people feel compelled to go out and make bids—and now when every headline is more negative, you also see a direct effect on how people think about the market. With equity wealth loss, consumers show hesitation.
So all of a sudden we go from a frothy market to a more cautious one. Every broker I spoke with this month said the same thing: Open houses are slow and buyers are not pulling the trigger quiet as fast as they were six months ago. They’re browsing, but taking their time and not getting into as many fierce bidding wars. In a way, the market is perhaps settling back into a more normal state, although still certainly a very strong one.
However, all of this is contrasted by the fact that we still see those other headlines—about the $90 million penthouse or $45 million duplex going in to contract. Because that is such a huge number and headliner, that trickles anticipation down to other sellers, who feel that somehow their own unit should command a higher price than it realistically can. This bizarre mix of doom and boom headlines contributes to a troubling dichotomy in the marketplace: buyers realize they can now be a bit choosier, but sellers still want otherworldly numbers.
At the end of the day, the only person whose job becomes harder in this unique market is the broker, and that makes it extremely important to have realistic conversations with clients from day one. As of just a month ago, many sellers were of the mindset that they should go for more ambitious pricing, and that was sometimes smart. My conversation with sellers right now usually involves cautioning them that apartments are selling, but we’re not going to get people knocking the door down unless you price aggressively.
I’ve talked to some brokers who say that sellers are considering holding on to listings and not putting them out there until the market turns. I think that’s unwise because we still have a very, very strong market right now. People may not be getting the ridiculous numbers we saw even a year ago and they may need to be more patient in terms of waiting for the right buyer, but the truth is that good properties are still fetching excellent prices right now. It’s still a good time to sell—but it’s important for brokers to set realistic expectation from day one.
On the other hand, for buyers, things are not as fast-paced right now as they were earlier this year, but good properties are still a hot commodity. At the end of the day, well-priced, special homes will always sell, so if you see something you like, there’s no reason to hesitate.