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Now that there are sites like streeteasy that show a property’s history of price cuts and time on market, can you use them to identify a bargain?

This came up on the streeteasy boards today, and many responders said “yes.” I say “NO” — here’s why:

As an agent, while I appreciate the fact that an apartment’s price history is now transparent to everyone, I disagree with putting too much emphasis on past price drops, time on market, etc.

When you give too much weight to that information, you are letting the seller “frame” the negotiation.

What if, for example, the seller was overly optimistic when they listed and had four price drops since? They might still only be “near” market, and it’s unfair to other listings that were more properly priced to assume that the one with a declining price history has a discount.

Let me run an example: say Apartment A and Apartment B are each “worth” $1 million.

Apartment A is listed conservatively at $1.1 million, but the market is slow, and it sits. Apartment B is listed a little later, rather aggressively at $1.6 million, but that is overpriced, so the seller corrects the price, and drops $100K each of four times, to end up at $1.2 M.

If you bid based on history, you start to assume that Apartment B “must” be a deal, because its seller has been correcting over time, and it hasn’t been on the market long. However, a thoughtful bid on Apartment A — which looks like a dog based on history alone — is more likely to snag you a “correctly priced” apartment.

I would strongly urge buyers to value an apartment by looking at comps — historical comps will show you how the market is trending, and on-market comps will show you what alternatives you can get for your money.

To do it any other way is to fall for the seller’s marketing.

Are the current Wall Street layoffs the worst ever? What do they mean for the real estate market?

Let’s take a look at some historical data from the New York State Department of Labor:

Peak Date     Peak Employment     Trough Date     Trough Employment     Job Loss

Jul ‘69         111,600                            Oct ‘70               82,900                             25.7%

Jul ‘71           90,000                            Jan ‘75               65,300                             27.4%

Dec ‘87           163,000                        Oct ‘91                127,800                            21.6%

Dec ‘00           200,300                       Apr ‘03                159,000                          20.6%

Aug ‘07            191,800                        TBD                    TBD                                 TBD

Source: New York State Department of Labor. Current Economic Statistics Survey as Printed in “Employment in New York State” newsletter, July ‘08

If the current dropoff is in line with previous slumps, we should expect a loss of around 40,000-50,000 New York City Wall Street jobs.

That will obviously impact the housing market, though by how much is going to depend on other factors. Oldsters like me tie the NYC housing downturn of the late ’80s/early ’90s  — which was anecdotally 30-50% peak-to-trough, depending on what kind of building you lived in –  to simultaneous high interest rates.

We didn’t see that magnitude of price drop in 00/03, when Wall Street was suffering roughly equally but interest rates were “relatively” good.

What does the bailout of mortgage agencies Fannie Mae and Freddie Mac mean to me?

Hi taxpayers, welcome to another government bailout. I remember being on Wall Street (DLJ) twenty years ago and hearing an analyst talk about what a unique, sweet deal mortgage agencies had — this was probably even before these two grew into giants, but at least someone saw what was coming.

However, it’s 2008. Ron Lieber did a good job of giving broad perspective about the bailout in this New York Times article.

Specifically, though, we saw mortgage rates dive 3/8s of a point yesterday. That’s a huge one-day drop, and it puts us at a pretty favorable, 6% benchmark. (If you want real mortgage specifics, talk to Dave Steinberg, a mortgage broker who publishes Ratewatch — here’s his firm’s website.

For buyers, that should provide a little reassurance through the fall. If you think New York City is going to tank, you’re not buying until 2011 anyway. But if you think NYC  is seeing just a slight recession  (I’m in this camp) then we’ll probably see flattish pricing for a couple of years, and if prices are flat you obviously want to jump in when you can get the cheapest money possible.

For sellers, it makes the question of “what price do I list at?” more relevant than ever. Buyers aren’t biting at listings that have 2007 pricing. We are, however, seeing apartments move at “proper” pricing — that means units that are in line with what’s closed in the past three or four months, and that can hold their own against the competition that’s for sale.

Obviously, a downward tick in mortgage rates makes this process a smidgen easier.

Strap on your seat belts for a long ride — in  prime Manhattan, we are looking at four to eight months between list and close — but you should be happy with the deal you get at the end of it.

How do I calculate the square footage of a listing?

This question came from streeteasy, where are a footsore buyer was protesting that seller’s brokers are overstating the square footage of a co-op listing.

Well, of course they are — we have a game that we play in our firm where we look at a floorplan, and say what we would estimate the square footage at, and then guess what competing firms would estimate the square footage at (hint: it’s always higher).

Here’s my full streeteasy post:

From a real estate agent:

shoppers use stated square footage for their “first cull” — so there’s been persistent inflation. It’s like dating, would you go on a blind date with someone who is “kind of cute?” Of course not, because in blind-dating world, everyone is “really hot.”

For years, this wasn’t a problem because brokers didn’t give out co-op square footage. Once they did, and someone moved an apartment up from 750 to 800 and started getting better traffic because of it, the floodgates were opened . ..

To correct for this inflation, you as a shopper should do two things:

1) You shouldn’t bypass listings that have lower stated square footage. It’s possible that those brokers are just less inflationary.

2) Later in the process, once you have found three or four apartments you like, walk yourself over to Staples and spend three or four bucks on a pad of graph paper.

Draw the floorplan for each apartment on a separate piece of the graph paper, using a consistent scale.

Always start in the same corner.

That way, you can hold the floorplans up to the light against each other and get a “true” comparison.

This helps you adjust for the easy psychological trick that floorplans that are simply printed larger look more compelling!

ali r.
{downtown broker}

What does the second quarter Manhattan market report mean for co-ops?

Leaving aside the “median” price — which is easily skewed by high-end inventory cycling through the market, and means nothing to you because you’re probably not buying or selling a “median” house — the Miller Samuel 2nd quarter report was very mixed.

Co-op sales are still historically high — while the number of transactions was down some 20% from the first quarter, it was still the third-highest quarter for volume in the past three years. This says something about the credit crunch, because sales that closed in April were deals that were done in, say, December or January, so it means that buyers managed to get financing even after the awful credit squeeze of last summer.

However, inventory has soared, with more than 3,000 apartments available. This reads to me like sellers fear that the market is declining, and they all want to “pile in” and sell while there’s still time.

Logically, this should produce downward pressure on prices. There is more flexibility in the numbers, with the listing discount expanding to 3.9% from 1.7% a year before. Co-ops are moving a little more slowly, too, with average days on market expanding to four and a half months, up from about four a year ago.

In a situation like this it’s going to be all about interest rates, and if rates bump up, sales will slow even more. If we continue to have decent (6 percentish) money, co-ops will keep moving, despite everyone’s doomsday predictions. Buyers should not be looking to lowball for 15% off deals, but should concentrate on arming themselves with information so they can get their pick of properties at nice single-digit discounts.

Sellers, meanwhile, should realize that they are in a very crowded field, so it is even more important to pick a good market position and stick with it.

I’m buying into a new development, and it’s running late. When can I close on my apartment?

The old rule of thumb when buying new developments was to assume that the sales office’s estimate of closing were “optimistic” and to add three months.

Now, however, it’s gotten worse for two reasons. One is that as sales slow down, sales offices want to maintain a sunny face, so they won’t even admit to realities they might have copped to a couple of years ago. I am selling a client into a new development (I’m a real estate agent) and the building was under a stop work order. Despite this, the sales office is clinging to its prior forecast of “October-November” for completion, even as the construction guys on site are saying “January-February.”

The second reason is that with the recent and deplorable crane accidents, DOB is under tremendous scrutiny, so they’re giving a lot more care to signoffs. As a result, we’re seeing a bottleneck in the issuance of C of Os.

The delays are starting to hit buyers hard, because of course interest rates are moving against them, and therefore these apartments are costing more than they’d estimated.

Also, I don’t usually bang the drum for my profession. I generally figure that people who don’t want to use agents, shouldn’t use agents, and that my clients who want good service will find me.

However, now I’m going to make noise for a minute. Two years ago, when I started working in New York, I met an entire breed of buyer who said, “hey, real estate agents are useless, why should I pay you for advice when I can see an apartment on the Internet and buy directly from the sales office?”

At the time, I had many answers to that question, but now I have one more: the current climate. A good broker will walk you through possible scenarios and their risks, just as a good lawyer will. How many of those buyers had the current scenario of spectacularly delayed closings and rising interest rates explained to them by those smiling people in the sales office?

ali r.
{downtown broker}

How does a new condo price a bathroom?

From a story Lauren Elkies did for The Real Deal. The magazine’s June 2008 issue showcases HJ Development’s 211 East 51st Street, #4D, a 505-square foot condo, and the devleoper was nice enough to price items, which don’t include labor:

Vanity (Polished chrome with a 3/4-inch Bianco Dolomiti marble slab, and custom-made wall-hung medicine cabinet): $4,000

Shower door (Frameless glass with polished chrome towel bar): $3,000

Wall tile, accent (Fireclay 3 by 5s, gray): $2,000

Wall tile, shower (White crackle ceramic tile): $1,600

Floor tile (Marble mosaic tile, Bianco Dolomiti): $1,300

Shower curb (Bianco Dolomiti marble slab, looks about 5″ high): $450

Showerhead (Kohler rain in polished chrome): $400

Sink (Kohler Kathryn undercounter): $350

Toilet (Toto): $330

Sink faucet and handles (Kohler stillness in polished chrome): $280

Robe hook (Vola in polished chrome): $200

Toilet paper holder (Vola in polished chrome): $175

How does a new condo price a kitchen?

The developer-supplied numbers for 211 East 51st Street, from a story by Lauren Elkies in this month’s Real Deal:

Cabinets (custom-made): $13,000

Refrigerator (Northland stainless steel top mount freezer): $4,200

Oven (Bosch stainless steel electric wall oven): $1,900

Floor tile (honed Limestone): $1,200

Dishwasher (Bosch Integra 800 series): $1,100

Backsplash: Stainless steel metal tile: $1,000

Sink: Franke undermount stainless steel: $950

Cooktop: Bosch stainless-steel four-burner gas cooktop: $900

What’s the average price of a studio in Chelsea?

This came in over the web and I thought it might be better with some real listings in addition to averages.

CO-OPS

Cheapest studio:18th street walkup, main room 10 by 13, but bathtub and full-size refrigerator — $332K. www.barakny.com, #185017

A larger, but small, brownstone studio with W/D on 21st street (walkup, no dogs) — $449K. www.corcoran.com, #1270326

London Terrace (doorman co-op with pool) alcove studio. Floorplan is tough to read, but call the main area 20 by 13. Big bath with double sinks, jacuzzi — $525K. www.corcoran.com, #915017

Jumbo studio in the Vermeer (doorman co-op, requires 25% down). Main room is 20 by 30 with a Murphy bed, you have a real kitchen and lots of real closets — $599K. www.halstead.com, #297820

CONDOS

Cheapest condo: West 23rd Street studio with Pullman-style (appliances against a wall, not in a separate room, in this case in the hallway) kitchen. no picture of main room, if I remember these apartments it is about 10 by 13. — $430K. www.buchbinderwarren.com, #789872

Alcove studio with patio in Chadwin house  — main room is 12 by 20 not including the alcove, and there’s a sizeable patio. This has been on the market for awhile. — $650K. www.citihabitats.com, #491695

West Chelsea studio in newish building (555 W. 23rd). Main room is 16 by 17, building has gym, full-service concierge, outdoor space for residents. You know, the kind of building where they deliver your laundry.– $660K. Abated taxes. www.citihabitats.com, #20598

Can you recommend a realtor for San Francisco? Especially one who specializes in SOMA and has experience with short sales and preforeclosures?

I had to adapt this question from LinkedIn because I think it’s very instructive. Someone in my network wrote in asking for a realtor who:

1) specializes in neighborhoods including SOMA and Mission;

2) has access to loft conversions; and

3) has experience with short sales.

Since “short sale” and “preforeclosure” are buzzwords that are circulating now, because buyers think they’re going to get bargains, I think my answer is instructive so I am reprinting it below:

You know you’re looking for two different people, right?

First, you are looking in upscale neighborhoods for a relatively sophisticated product (loft conversions) which suggests an upmarket realtor –

and second, you are bottom-fishing in terms of price. The short-sale end of the business requires its own specialization, because you’ve got to have really deep relationships with the banks.

No one Realtor is going to be well versed in both halves of the business; it’s like you’re looking for a used-car dealer who can sell you a new Prius.

I would suggest that you think which is more important to you — upmarket inventory or downmarket price — and then concentrate your search for an agent from there.

I went on to plug my book — because I figured anyone who was asking such a basic question needed the help — but I’d rather leave you, dear reader, with the basic point: Short selling has for years been a specialized business. If you want to try to buy a short-sale property, okay (even though I wouldn’t) but no upmarket realtor is going to be an expert in those kinds of connections. We spend our days meeting rich people, not the people who are processing the paper at the banks. You need a short-sale specialist for that, and the chances are, they won’t know the inventory in the fancy neighborhoods.