WE ARE OUT OF THE WOODS!
An important part of my job is identifying and forecasting trends. I am expected to know market trends of pricing, unit desirability, design appeal, buyers’ needs, and manage agents’ expectations. Our clients rely on our insight and foresight. Everybody knows what the historical data is. Nobody needs a report that shows old closed data. Our value is the interpretation of current data and how that may affect the future. Developers want to know where the market is going. Buyers want to know if the market has bottomed out. Sellers want to know if they should take the offer on the table. Agents want to know if there will be deals to be made.
To achieve this effectively, I need to stay very connected to all of the touch points that determine the market. How well I do this…effectively…defines my value. There are no secrets, just riddles. Here are a few of the pieces of the puzzle I absorb to make a determination:
I measure open house traffic.
I speak to agents everywhere to see what buyers are saying.
I speak to buyers.
I speak to sellers.
I speak with developers.
I communicate with bankers.
I track offer activity – How many and at what levels.
I speak to owners of companies.
I stay abreast of new developments on the horizon.
I read – Everything from blogs to books.
In short – I act like a sponge.
In February 2008, I stated that the market would possibly decline (in some segments) by as much as 40% off the high. I was criticized by some of my peers that I was being irresponsible to the sellers who had property on the market for sale. (We sold and closed on a $6 Million property that was previously asking $11 Million a month after). I contend that the speed and willingness of the markets acceptance of this correction stimulated the recovery we are now seeing.
Right now, I would boldly say that we are out of the woods in New York City. For this cycle. Open house traffic is robust, rates are low, contract signings are on the rise, and there seems to be a shortage of inventory of quality homes. Consumer confidence is also higher than it has been for over two years. Does this mean we can expect prices to appreciate at the alarming rate they did over the previous decade?
It seems to me that everyone wants to develop…
Until they’ve actually developed -
Because it isn’t that easy!
At the height of the last cycle, when acquisition and construction financing was easy to come by, almost anyone and everyone was buying a site, hiring an architect and building a building – Or at least trying their luck at it.
But developing is a skill set that very few have.
It is not for the faint of heart.
The risk of capital loss that’s associated with developing and the patience and hard work that it takes to execute a successful project is often underestimated.
Amazingly, becoming a developer is a career that you don’t need a college degree or a license for.
If you have the money, you can try your hand at it!
One look around Manhattan, at the foreclosed, abandoned and half-built projects, it’s easy to see how one should be cautionary.
But in this resilient city, there are always dreamers and risk takers.
Lately, there has been a swift uptick in the activity of development sites starting to trade. New and old faces are surfacing, looking to take advantage of a market that has been silent for awhile.
Let’s hope that some of these seasoned builders have learned lessons from their past mistakes and that the intentions of the younger entrepreneurs take heed.
(NOT the bike kind)
It seems that everything in life has a cycle – both natural and man-made.
The Dow Jones.
The 4 seasons.
The Four Seasons (the hotel business).
Remember the brood X cicada?
It is interesting (and understandable) to note that we are always happy when the real estate cycle goes up, but in distress when the cycle goes down.
Through the eyes of a developer, opportunist and fearless buyer…
If history repeats itself, as is almost always the case, (Albeit it’s in a different way each time) Doesn’t it make sense to be happy when the market cycles down?
And distressed when the market cycles up?
Whatever your view might be.
The market hit bottom last year!
Getting stuck in the mud is no fun -
Especially if you’re a developer.
The worst thing you can do is wait.
Because the mud will dry
And it will become much harder to get out of.
As soon as you realize you’re stuck,
You should figure out a way to get out
And move on…
Working for a company whose niche is the residential realm of Manhattan real estate, I started to feel that my understanding of the business as a whole was incomplete. In order for me to truly understand the market I was working in, and best service the needs of my clients; I increasingly felt that I needed to know what fed the residential market…and so began my commercial education.
I also increasingly saw that my residential clients and contacts could lead to commercial opportunities. I met with developers who needed sites for their new projects, as well as sales offices locations for their projects coming to market. Clients that were looking for apartments also needed office space; I met more and more retailers in my every day life who were interested in opening up new locations in Manhattan. (more…)