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Real estate prices have rebounded strongly since the bottom of the housing crisis in 2007-2008, with prices gaining over 50% in many places. However, prices cannot keep going up forever, and we have observed that the overall New York City real estate market has reached a plateau, with inventory tapering off. This may be due to a lack of willing sellers, perhaps given there are fewer options to upgrade. Additionally, many developers have adopted a more cautious stance due to the rising outlay to acquire land in New York City and the increase in associated construction costs.
We would like to introduce our more comprehensive approach for investors and homebuyers that can help sustain long-term gains for those with patience, even if the market is changing.
A changing marketplace
Buyers in the broader market are now taking their time, waiting for the right property. Granted, this should always be the case, as we counsel our clients. Nonetheless, there are times when irrational exuberance gets in the way.
The ultra-luxury market, defined as properties in the $10+ million range, has felt the pinch. For instance, billionaire’s row on 57th street has seen prices down as much as 30%. Developers of the Midtown West Supertowers have had to rethink their offerings, pricing, and marketing strategies. In this section of the market, parking garages for cash are no longer needed, at least for now. Still, the privileged will always need a larger home and there are different market dynamics that affect this market.
First-time homebuyers have become a little more tepid due to uncertainties surrounding U.S. policies. However, we recommend they stay actively involved in the market, especially in this ultra-low-interest rate environment. Rates are poised to go higher, according to the Federal Reserve.
Second home or investment property tastes change based on risk and capital preservation assessments.
A better way
Previously, markets largely moved in tandem. However, times have significantly changed. Whether a first-time homebuyer or a seasoned investor, we have come up with the Elika Micro Market Formula that we think you should apply going forward.
As an exclusive buyer’s broker for the past two decades, I have proudly represented people from all stations of life in order to find a suitable home or investment property in New York City. Through this experience, I have learned to understand the type of housing that will outperform and underperform, regardless of the price point or market sentiment.
Although I diligently read and follow both national and regional housing data trends, these are lagging indicators. I have refined my approach, and do not pay as much attention to the broader market as I previously did. Now, I apply the Elika Micro Market Formula.
I realize I might get a lot of backlashes but I am going to refine the old and simplistic real estate theory of location, location, and location to neighborhood, street, building.
What is the Elika Micro Market Formula?
- City: Desirability, economics and future potential of the city
- Neighborhood Infrastructure: Walkability, accessibility, amenities, restaurants, schools, proximity to parks.
- Streetscape: Is the street tree-lined and quiet, or is it a major thruway with a bottleneck of traffic and buses?
- Curb Appeal: Corner buildings are favorites, when possible. Otherwise, architectural detail and street presence are key.
- Buildings Unit Mix: Pay attention to the composition of the building. For instance, there is no point in buying a three bedroom in a building that is one or two bedrooms heavy.
- Lifestyle: When buying into a specific building you are buying into the lifestyle. Consider if it is the lifestyle you want.
- Quality: The building’s construction quality counts. This quality should flow through the lobby, hallways, and into the apartment.
- Maintenance: Condo/co-op boards and management companies are responsible for the cleanliness and upkeep of the building.
- Services & Staff: You will likely interact with the staff on a regular basis, particularly in a doorman building. Are they pleasant and attentive?
- Apartment: Now that you found the ideal building, consider what the apartment offers. Does it have high ceilings? Does the floor plan flow or is there a larger amount of loss factor (unusable space). Is the apartment well-lit? Are the room proportions well balanced or is the master bedroom too small? Is there enough closet space?
In the case of a new development, there are additional considerations. There is nothing worse than buying a new build that is poorly built.
Rendering Courtesy of 70 Vestry
- Developer: Do they have a good reputation? Use the web to research their history. Were their last developments notable or lemons? Do they have a history of completing projects on time, or are there consistent delays? Do they use a quality contractor? Are residents in previous buildings happy? A little more digging may be required, but you need to know if they are well-funded.
- Architect: Do you like the design of previous works? Do they have a reputation for designing buildings that have outperformed?
- Interior Designer: Do you like the aesthetic of previous works? Timeless, comfortable, elegance usually is the right mix.
- Sales Team: There are plenty of good agents, but there a select number of great agents. This can make all the difference on whether the building will sell through with pricing amendments or will underperform.
- Buildings Finish: The development can have a star-studded team, but if the finished product falls short of on quality, you have a problem.
- Building Services and projected monthly costs: Does the building have too many useless amenities, which costs you money? Nobody likes high monthly common charges unless it is worthwhile.
- % End User vs. Investor ownership (condo): There is nothing worse than buying a building that is investor heavy. In cases of distress, investors usually will fire sale their assets, and you are left holding your unit in a building full of lower comps. Also, tenants generally don’t treat buildings like owners, resulting in excess wear and tear.
- Apartment flow/ floorplan: Are there too many columns in the apartment? Is the floorplan user-friendly? Are the ceilings high enough? Is the apartment bright, dark, etc.? Does the apartment have an exposure or face a wall?
- Unique features: Look for what defines the development and its overall appeal.
Rendering Courtesy of 160 Leroy
How to think about location
Location still plays a role in any real estate decision. There are speculative neighborhoods, like Bushwick, based on gentrification. More established areas, such as the West Village or Upper East Side, are geared towards those that are more risk-averse.
For example, if you come from New York’s elite hierarchy, the Upper East Side may be the place you should call your home. However, if you like a more laid-back lifestyle with many restaurants and amenities, perhaps the West Village or Noho is the right choice.
Still, not all streets within these neighborhoods are equal, much like not all square feet are created equal. Streets are just as important as the neighborhood.
Elika can help
Without the representation of a seasoned buyer broker, the chances of purchasing the right property, even with an understanding and applying Elika Micro Market Formula is diminished.
Real estate data trends are lagging indicators and most real estate agents will not provide you with an unbiased market analysis. Remember, their job is to sell you the property at the highest price. There is no one better to have on your team than a real estate advisor that represents your interests and lives and breathes real estate 24/7, 365 days a year. Reading real estate news is backward looking or biased since the sources are often developers seller’s brokers and agents. Granted, there are quality publications such as the New York Times and Wall Street Journal, but they the writers are not brokers/agents on the frontline.
Our track record
As a buyer’s broker, my interest has always been identifying homes for risk-averse buyers and residential investment opportunities. I am focused on finding and securing unique properties for my clients with a profile and cache built to outperform.
Buildings that I have previously recommended include 25 Bond Street, 400 West 12th Street, 15 Central Park West, 500 West 21st Street, 70 Vestry, 160 Charles Street, 160 Leroy Street, and most recently the yet-to-launch 40 Bleecker, to name just a few. This has created a proven track record of representing clients, exceeding expectations in rental yields, capital appreciation, and resale value. Even 160 Leroy, which hasn’t closed yet, and 40 Bleecker have the makings of real estate greatness, fitting into the Elika Micro Market Club. I only consider properties for clients that I believe New Yorkers would want to live in.
It is also not easy to gain access to Schedule A (First –Amendment) family & friends pricing in a new construction, but a seasoned broker/agent can. Working with a seasoned broker with industry relationships will often yield the most significant return. When purchasing in the right new construction, those with the foresight in buying the right unit off the plan can potentially see upwards of a 20%+ in paper gains before the development is finished.
The attributes of the Elika Micro Market Formula is the foundation for a smart purchase, whether you are a home buyer or investor. It is not a get rich scheme, however. Patience is the key to long-term gains. It may take you weeks, months, even years, to find the right property. However, remember the market is biased upward of the long-term, even if that means eschewing short-term gains.
Granted, this may mean holding through a difficult economic period. The process will help you identify quality properties that should appreciate in the long-term. While it took tremendous courage to buy New York City real estate in the distressed days a decade ago, if you trust our process and have the finances, you can build substantial wealth. For instance, the going rate at 15 Central Park West in 2007 was $2,000 per square foot, compared to the current $7,500.