I had the recent privilege to be interviewed by Westchester Magazine and wanted to share the conversation with you.

We touch on my thoughts about current market conditions, how buyers and sellers are navigating the market, as well as my predictions for the future of residential real estate in NYC’s best suburb.

Enjoy and I hope you find some useful insights!

Craig

Craig DeCecchis

cde@corcoran.com

914-882-5011

PS — be sure to check out my new featured listings after the interview, including a record setting sale and a one-of-a-kind two bedroom for sale in Tribeca.

Share

As Interviewed by: Gale Ritterhoff for Westchester Magazine

The current housing market in our country has many economic experts scratching their heads. Multiple factors are at play — interest rates, pandemic aftermath, economic uncertainty — creating a unique set of circumstances. In Westchester County, a very particular market, the picture is less confusing, even if the data defies conventional wisdom.

The main driver has not changed. Buyers are still highly motivated to move here. The question is, can they find something to buy? We asked a group of top Westchester realtors to share their insights into the current housing market. Their opinions form a basic consensus, with some slight variation; it seems one person’s frozen market is another’s golden handcuffs.

Let’s start by talking about the Westchester County housing market overall. What’s happening out there?

Craig DeCecchis, The Corcoran Group: As long as New York City prices are high, in terms of for-sale product and rental product, the population is going to push into the city’s best suburb, which is Westchester. There is going to be constant demand here. The real estate market may be softening in other parts of the country, but we haven’t seen that here. Anything under a million or $1.25 million is really competitive. Properties are selling after a day on the market and there are a dozen bids.

Let’s focus a bit more on inventory. What’s behind the lack thereof?

DeCecchis: The pandemic sped up life changes for people in terms of real estate. What might have happened over the course of 10 to 15 years probably happened over the course of two. People who wanted to leave the state or those in the city who wanted to come to the suburbs — that just sped it all up.

There is really very little available land in Westchester for building single-family houses, and that’s been going on for the last 15 to 20 years. And higher interest rates have, in effect, frozen the market, which is [happening] across the country. Potential sellers with mortgages don’t want to give up the low mortgage rates.

Within the climate of high demand, has there been a shift in what people are looking for, what’s hot?

DeCecchis: Right now, we’re in the process of helping clients from Brooklyn move to Cortlandt Manor. They have to be in the city two days a week. The tradeoff is acceptable — they are happier with a lower relative purchase price, more land, more fresh air. Yes, some people do need to commute every day, and those people are going to stick to southern Westchester, which will probably always be competitive because of that. But the market is a bit more balanced now.

Any additional advice to buyers in a tight market?

DeCecchis: Buyers who are winning good houses today really understand the market. They understand relative value. They understand comps. They understand that the asking price might not really represent the value of a home, the price might be worth more.

Seller’s taking advantage of the seller’s market need a place to live. Where are they going?

DeCecchis: Clients are maximizing the value of their homes, getting great sale prices. Then they are getting creative with what they are buying: Maybe they are moving into an apartment or a townhome or buying an older home and renovating it, and even after doing all that work, [they] still have a nice pile of cash from their home’s sale. But it takes creativity. Those sellers are really being rewarded right now.

So, what’s to be done about the inventory shortage, if anything?

DeCecchis: A lot of the “new” inventory is coming from smaller homes that are older; home builders are going in and fixing them up or they are expanding them. These rebuilt houses are bigger, “newer,” and more appealing to buyers. Of course, you must wait for these houses to become available. There’s development of new apartment buildings, particularly in the cities — White Plains, New Rochelle, Port Chester, Yonkers. That’s been going on for the last 10 to 15 years, but the pace of that has picked up. It solves a problem for those who don’t require a house but want an alternative to New York City. They are comfortable in an apartment, they like the amenities, the conveniences. But it’s not solving the single-family home crunch.

Predictions for the future?

DeCecchis: My prediction is that we are going to continue to see the underutilized areas of Westchester continue to be improved, from Yonkers to Peekskill, the Rivertowns. The older industrial areas will get rezoned, more housing will be added there, older communities will continue to be fixed up, and, in the longer term, more vertical housing, more condos to add to inventory.

New Featured Listings

Just Listed

450 Washington Street, #1107, NYC

Two Beds, Two Baths 1,103sf

Asking $3,495,000

This is an incredible opportunity to own the highest floor two-bedroom in the most popular line in NYC’s best selling new development!

This is 450 Washington’s first resale and only two bedroom for sale in the building. Now sold out, this was the best selling two-bedroom line in the building and 1107 is the top floor.

Just Sold

3 Greenmeadow Road, Eastchester, NY

Three Beds, Three Baths, 2,495sf

Record Setting Sale of $1,566,000 = 25% over the asking price!

This was another record setting sale of mine, shattering the neighborhood’s previous highest sale price and is the most expensive PPSF ever sold in the zip code!

Reach out and I’ll tell you how I got 12 offers in 24 hours!

Share Inside the Market

With the end of the 2024’s first quarter fast approaching, and much like the first 12 minutes of a basketball game, the strategy for how the next 36 should be played is beginning to unfold.

So let’s call a quick timeout, draw up some plays and dictate the action for the rest of the game… year!

Look, sometimes we can all feel like Hickory from the movie Hoosiers, outmanned, shorter, slower… and in real estate these feelings have many of us thinking how expensive everything is, how there aren’t enough choices, and why the $*?! what I have to sell isn’t getting bid up like others are???

I’ve felt it, you’ve felt it, we all have.

But here’s the thing, getting discouraged and letting the other team (in this case, the market) dictate how you play is not a winning plan. And just because someone is more financially qualified or has a more prime property to sell doesn’t mean that a better strategy or outworking others won’t win out.

So looking ahead, with three quarters left to play, I wanted to share some trends and perspectives for the rest of the year and beyond to offer you ideas, tips and opportunities to outmaneuver the competition.

It’s madness out there, position yourself wisely!

Craig

Craig DeCecchis

cde@corcoran.com

914-882-5011

Share

The Spring Market Playbook

Below are my notes from the field: anecdotes from conversations with buyers and sellers, development teams, mortgage brokers and other fortune tellers.

Plus my thoughts on how positioning yourself in real estate matters now more than ever because low inventory and a meek pipeline of new construction won’t make the game any easier in the future.

Market Brief

The spring market sounds cliché, but it’s a thing. Houses show better in warmer weather and historically buyers and sellers make their moves around the end of the school year. But you knew that already, so let’s move on…

This year’s spring market is seasonally no different, with the best of what’s newly listed being snatched up above the asking price. Cash is king, there is plenty of it, and those financing have accepted today’s higher rates with dreams of a refi in the next 12-24 months.

Regarding inventory, yes, it’s ticked higher versus this time last year, but is still historically low. As a result, we are seeing buyers who have been sidelined and need to make a move settle for last year’s inventory that’s been on the market for a while. They are buying at a lower price and in many cases, exhausted by the search, are accepting there might not be a better choice in the future.

Fools Gold

But don’t let the story of tight inventory fool you because it’s not the same everywhere you look. There are pockets hiding within the city and suburbs where inventory is rising and prices are flat or even falling.

And if you’re struggling to find what you’re looking for in the market, to find Waldo so to speak, don’t worry I’m here to help! Because to many, the market looks like the picture below. A cluster of action, making it hard to focus and find what’s hiding in plain sight. Madness!

Here’s one example:

Not All Suburban Markets Are Trending Equally

I’m not here to predict price tops in markets, but it’s worth raising a brow at certain suburban markets that are heading in the opposite direction (inventory up / prices down) versus most of the rest.

Buyer beware of towns with extended commutes where Covid transplants are selling to head back into the city. Telltale signs are towns with long train rides, rising inventory and flat to lower prices. Another leading indicator of the same trend is the nearby office market, where one of the top commercial brokers in the area recently told me that firms who relocated from NYC in 2021 are trading in the keys to move back into Manhattan.

Don’t bail out someone else’s problem.

—

Here’s the latest market data from one well known town and as you can see year-over-year inventory is rising since June 2023 while median prices are heading lower. Trust me, both of these trends are red-alert exceptions to the broader market!

Hint, it’s not in Westchester, but close… Call me and we’ll talk specifics about where and why.

Real Estate Plays

So if you’re like Hickory and feel like the real estate underdog here are some actionable tips to best position yourself for tomorrow and thereafter.

#1 Trade Out of What’s Lagging and Into What’s Leading

Here’s a really simple example, but an important one. Apply it to your situation accordingly.

The average 10-year price growth rate in Gramercy is about -1% per year, yes, it’s negative!

All else equal, that $1,000,000 apartment in 2014 is worth $900,000 today. And if you factor in price growth elsewhere, neighborhoods like Gramercy performed 20% to 30% worse than the average Manhattan apartment over that span. And if you were in a high-growth neighborhood, it’s like 100% worse.

Talk about opportunity cost, yikes!

So consider almost any other neighborhood… but perhaps take a look at the Upper East Side along the 2nd Avenue corridor, where for a similar price per square foot, real estate prices will continue to benefit from the Q train’s extension.

#2 Trade Up in Size

In today’s market, discounts increase as bedroom count goes up, which isn’t always the case. So trade in your 2 for a 3, sell into the stronger market and buy into the weaker one. And when prices turn higher the 3 will outperform the 2, the 2 will outperform the 1, and so on.

#2 Trade Something Old for Something New

NYC new development inventory was down 70% in 2023 vs 2022. And the pipeline is 50% lower looking out into the next few years versus the past few. So what’s new today will be new for longer than before, meaning the premium for today’s new developments will be more valuable for longer.

#4 Trade Down in Monthly Costs

Monthly costs are going up everywhere and who seriously sees that trend slowing? So in addition to all the other features a piece of real estate might have, lower carrying costs and taxes are luxury that will support higher prices more meaningfully over time.

Noteworthy Opportunities

With all the recent buyer’s agent commission headlines casting a shadow on real estate agents value proposition, it’s more important now than ever for someone like me to demonstrate my value to potential clients like you.

So here are three timely opportunities. Reach out to discuss these and more.

—

One Domino Square

Not often do long awaited and transformative new developments hit the market in NYC, but here’s one! And having sold new developments for 20 years I know there are two great times to be a buyer: at the very beginning and at the very end.

So here’s your opportunity to own a piece of prime Williamsburg waterfront at the very beginning!

And when I mean it’s the very beginning, I mean, now is the time to buy before others even know they can.

The Residences at Mandarin Oriental, Miami

Yes, I do a lot of real estate work outside of the NYC area. I haven’t talked about it much here in the past, but will now.

Knowing the development team of The Residences at Mandarin Oriental, Miami very well, I was just able to help a client secure a premium residence at MO’s new US flagship hotel and residences before others even knew it was possible.

450 Washington Street, #217

Even though this has been one of NYC’s top selling buildings for the last 18 months, and just celebrated 100 closings by the way, there are many gems left to discover!

This one bedroom for instance, with a large terrace and charming views, would make for a quintessential Tribeca home or investment property where I’ve rented others in the building for north of $150 per square foot!

#217 is asking $1,465,000 and is a one-of-a-kind offering in the building.

Share Inside the Market

As the number of subscribers who read Inside the Market grew 10x last year, I wanted to use this note to briefly reintroduce myself and what to expect from these monthly letters.

Last year was my twentieth in real estate where I’ve spent the majority of my career consulting for leading residential developers and financial institutions, providing thought leadership on the macro of real estate economics, to the granularity of specific buildings and apartment layouts, to implementing marketing and sales campaigns for new developments in Manhattan, Brooklyn and beyond.

And four years ago, I began representing individual clients like you. My goal was simple, to share market knowledge and insider access honed alongside the city’s top developers, with my private clients in order to provide a competitive edge when you’re buying, selling or investing in real estate.

I strive to offer unbiased perspectives, found in data (and sometimes not publicly available data), that look ahead of the market… because it’s hard to be confident making significant purchase or sale decisions if all you can rely on is yesterday’s information.

Since starting these letters 18 months ago, each time I send one I receive some type of unexpected, thoughtful feedback.… and this excerpt from one of you has always stood out as it exemplifies the purpose of my work.

Many thanks to all who read and support my business as clients and referral partners. 2024 is full of opportunities in real estate and I’m excited for what lies ahead!

Craig

Craig DeCecchis

cde@corcoran.com

914-882-5011

Share

Tips from 2023’s Success Stories

There were many great achievements last year from wrapping up the most successful new development international sales campaign ever in NYC, to a few record setting sales and rentals, plus the pleasure of representing savvy buyers who took advantage of lower prices and hidden discounts.

To give you a better sense of my business and how you can benefit, here are some stats and tips from 2023.

As you can see there are 90+ stories to tell, so how about I share five to describe what I do best…

#1 New Development Buyer Representation

Successfully negotiated with the Sponsor to achieve the lowest price paid in the line.

Representing the purchasers of this beautiful residence at 180 East 88th Street, a new development on the Upper East Side, I was able to help my clients secure this property from the Sponsor at a price that is the lowest paid in the line of the same apartments (and this is not on the lowest floor).

Leveraging my understanding of how new developments are priced based on floor premiums, we were able to identify a pricing anomaly and used that to our advantage while negotiating.

Tip

Having been on the selling side of so many new development sales, I know that Sponsors are numbers oriented and fact based. So when negotiating with developers on behalf of buyer clients, I present indisputable data that more often than not wins the negotiation for my buyers.

#2 Resale Buyer Representation

The closest comparable sale closed at a 10% higher price just one month following my client’s purchase.

I talked about this sale in greater detail last year and at the time I called it, ‘Buyer’s Delight’.

But it’s worth highlighting the reason my client was so successful in her purchase was not because she aggressively negotiated, it was because she believed in the comps I shared with her and understood the valuation to be correct… the asking price was dare I say, undervalued!

Tip

Be like this buyer… do your homework, see a lot of real estate to understand relative value, and so when the opportunity presents itself you are prepared to act fast and take advantage for yourself! And remember, in real estate, money is made on the purchase, not the sale — effort in / effort out.

#3 Landlord Representation

Achieved the highest rental price per square foot in the building, 450 Washington Street.

This river facing two bedroom rented for close to $160 per square foot. The Manhattan luxury average is about $90 psf and other two bedrooms in this building are renting between $130-$140 psf.

My client, the landlord, had lofty expectations and in order to meet them I laid out a plan to elevate the value of an empty apartment.

1. We produced a video to sell the vision, you can watch it here

2. We highlighted the apartment’s best attributes, the views

3. We virtually staged the photography to show the scale and how to furnish the floor plans

It worked, we get a record price and even more impressively had the apartment occupied within two weeks of listing it for rent. Virtually no vacancy for the owner after he closed on his purchase. An investor’s dream!

Tip

When selling or renting a home, setting the tone and expectation through marketing and branding is worth the financial investment. It has a hidden effect on buyers and tenants, just like how we are all willing to pay premiums for luxury goods.

#4 Seller Representation

Set a new record for the highest home price ever sold in this Toll Brothers built neighborhood.

Representing the sellers of this beautifully designed and immaculately kept home I was able to set a price record in the neighborhood for my client’s house, even when the same model home had just closed for 6% less.

The sale wasn’t without challenges. We received four offers after the first weekend of showings, had a bidding process, an accepted offer and then the deal fell apart... The backup offers subsequently got spooked as interest rates were spiking towards 8%, their brokers reduced bids and told me I’d never get our price.

They made a mistake saying that to me and I thanked them for their motivation!

I doubled down, leveraged my marketing reach into NYC as well as personal outreach into the community, which lead to finding the new buyers who were referred to me through a local shared connection.

Voila!

Tip

Selling real estate is all about creating momentum. And sometimes, like a sports team who stages a great 2nd half comeback, it takes a few tries to tilt the momentum to your side of the deal. Find representation who is willing to turn roadblocks into motivation, the results will follow.

#5 Sponsor Representation

Sold and closed more than $100M in new development sales in 2023.

I have so many new development stories to tell… but let’s focus on one.

One Wall Street. The largest office to residential conversion in the history of NYC, over 1 million square feet. And given the global recognition of the address, it warranted a worldwide marketing and sales campaign.

Long story short, with a year of advanced planning, I orchestrated a multinational sales roadshow, and together with my team sold just shy of $100 million in just two weeks. This had never been done and hasn’t been since!

Tip

As the remaining buyers from this campaign closed on their purchases in 2023 it reminded me of the strength in Manhattan real estate. Yes, it can go up, down or stay flat for periods of time, but the global appeal of its ability to preserve wealth is unmatched by any other city. And with new development supply forecasted to be meaningfully down for years to come, those purchasing now should be handsomely rewarded in the not too distant future.

Share Inside the Market

I’d like to wish everyone who reads and shares these monthly letters a very Happy Holidays!

And I’d like to thank my clients and referral partners for a successful year finding great real estate opportunities together and even setting a few sales price records on listings I represented during what was supposed to be a ‘soft’ year ;)

But before we break for the holidays I want to share some quick thoughts on what to expect in 2024, so let’s jump in and have a look through New York’s crystal ball.

Happy New Year and cheers to a prosperous 2024!

Craig

Craig DeCecchis

Manhattan | Brooklyn | Westchester

cde@corcoran.com

914-882-5011

Share

What I said in 2022 about 2023…

Remember, my goal is to give you an edge in the market so I hope some of what I talked about helped you as I called for a market stronger than many thought it would be and for prices higher than many thought they should be. I made these forecasts in the face of recession headlines, higher interest rates and low consumer sentiment. Why? Simply because I followed the supply / demand dynamics and knew that strength would outweigh headwinds.

I also predicted 450 Washington and Tribeca Green would be the best selling and most in demand new developments before they launched sales. They were and continue to be as 450 was the best selling new development in November to ice the cake on it’s record year. I also rented a 450 owner’s apartment for over $150 per foot, which is highest in the building and twice Manhattan’s average! You can’t bluff demand.

So what‘s next?

Last month, I labeled 2023’s market an Ice Age, as conditions were frozen by low inventory and also hinted at a few leading indicators for thawing conditions:

1. Lower interest rates. What happened next? Powell just said the Fed is forecasting multiple cuts in 2024. Interest rates are already down over 1% and when the extra premium lenders are charging on top of the 10-year goes away, rates will drop an additional point even if the 10-year stays flat, so the likelihood we see rates back in the 4s and 5%s in 2024 is higher than you think.

2. Home prices corrected in areas they needed to, in pandemic boomtowns, primarily in the West Coast. This is what the Fed wanted to see and with looser financial conditions going forward, markets that held up strongest in 2023 are positioned to outperform going forward. Reminder, the NYC area is towards the top of that list.

What else?

1. Other leading indicators, like single family housing starts, are trending higher as builders are beginning to add supply even with buyer sentiment still low. So we need to ask ourselves Q: why are they adding supply now? A: because they anticipate lower rates and buyers to become more active as sentiment improves.

   Here’s the data. Single family starts soared 18% month over month. And yes, it’s also showing single family housing permits are up 11 months in a row.

   

2. Multifamily housing starts are down. Rents have cooled recently (a bit), but with an anemic multifamily pipeline forecast Q: how will lower future multifamily supply impact the for-sale market? A: lower supply with make rents creep back higher, which will drive investors back into the single family rental market. This means investors will again take supply away from primary users and drive home prices higher.

   

What’s the data not showing yet?

Perhaps this is antidotal, but the data is starting to back it up too… since Thanksgiving / the last Fed meeting, the top end of the market in Westchester and NYC has noticeably picked up. Contract activity in Westchester and Brooklyn over $3mm and in Manhattan over $10mm have all increased in the last few weeks during what is supposed to be the slowest time of the year.

Plus, my recent conversations with buyers of luxury properties now involve them telling me that rates are headed down and they are getting a jump on the market. Lol, or maybe they’ve been reading my letters all along :)

What’s it all mean for 2024?

1. Lower mortgage rates.

2. Increased housing supply.

3. A busy spring market with higher prices.

4. An apprehensive fall market as is typical in an election year.

5. Prices in Brooklyn will remain incredibly strong as demand remains healthy.

6. Westchester‘s luxury market will bounce back as entry-level and mid-market homes remain fiercely competitive.

7. Manhattan will be trickier: some over supplied segments will be buyers’ markets while other more in demand areas will remain sellers’ markets. Reach out and I’ll tell you which is which.

8. 570 Washington Street will be the most anticipated Manhattan new development sales launch in quite some time. It’s two towers are next to Google’s new HQ in the West Village and will enjoy direct Hudson River views. Don’t worry, I’ve got you covered and can get my buyer clients in for first pick.

9. Foreign buyers started coming back in 2023 and that trend should strengthen in 2024.

10. South Florida’s market will remain incredibly strong. Notably, two great new hotel branded condos launching sales in Miami: The Raleigh (Rosewood hotel) and Mandarin Oriental Residences. Plus continued strength in what just might be the hottest market, the Palm Beaches. And yes, I help clients in other markets too!

Share Inside the Market

As we wind down 2023 and look towards 2024 sometimes it helps to remember where you’ve come from to understand where you’re going as we prepare to turn a page on the calendar year.

Now, even though prices are up year over year in New York and the 20 year chart goes up and to the right, it doesn’t mean parts of the market aren’t soft or haven’t shifted into a buyer’s market… they have. And if you’re wondering what, where and why, call me :)

In the meantime, with one more month to go, I wanted to share a few year end home buying tips and offer a refresher on what’s driving the relative market strength in our area.

Let’s jump right in.

Craig

Craig DeCecchis

Manhattan | Brooklyn | Westchester

cde@corcoran.com

914-882-5011

Share

Hidden Discounts

Can you find the hidden for sale sign? Sometimes it’s hiding in the real world too, so keep reading…

As the year winds down, the real estate market enters a sweet spot for potential homebuyers and I’ve put together a few compelling reasons for browsers to become buyers into the year’s end.

#1 Some sellers are on a mission to wrap up the year on a high note, especially developers. Whether it's hitting sales targets, securing year-end tax benefits, or to hit goals that trigger their own personal bonuses… their motivation can work in your favor. This often translates into more flexible negotiations and potentially better deals on the table.

#2 With the holiday season in full swing, the market tends to take a breather and this means less competition. Fewer buyers vying for the same properties creates more favorable conditions for you as the buyer.

#3 Interest rates. Towards the end of the year and into early next, there's a good chance more favorable rates will be floating around. They are already down close to 1% in the last 30-45 days and taking advantage now with the opportunity to refi in the future can equate to compelling savings on both price and carry.

Retail has Black Friday, online has Cyber Monday and having been in many developer meetings over the years, they have sales too. They just won’t advertise it!

2022 Headlines vs 2023 Reality

This time last year real estate pundits and headline makers painted a bleak picture for real estate in our area:

• NYC population mass exodus

• Permanent work from home

• High mortgage rates

• Imminent recession

• Housing bubble, price crash

But if you’re a regular reader of my monthly letters, you know I painted a different picture for our area’s outlook.

Here are some forecasts I wrote about in January 2023:

1.    As supply stays low, prices will stay higher than you might expect even as affordability drops.

2.    As supply stays low, there will be less mint condition, well located, move-in quality real estate so don’t be surprised by continued bidding wars when buyers come across these better than the rest listings.

3.    As supply stays low, areas that have been underdeveloped or previously ignored, but with good access to transportation are the opportunities investors should be scouting out.  

4.    Demand factors are things sellers can control even in a buyer’s market. Maximizing value for a seller is not about telling them how great what they own is or over-inflating a valuation to win their business, they already believe that more than anyone, it’s about turning their weaknesses into strengths so their property can connect to a buyer on an emotional level.

5.     NYC and Westchester are not in a housing bubble. Housing bubbles are fueled by falling prices, falling borrowing costs and builders adding supply. We haven’t seen this, we weren’t there last year and aren’t there today.

And here’s a of summary data points I presented to you during the fall and winter of last year to back up my forecasts:

1. In 2022, NYC returned as the #1 most visited tourist destination.

2. NYC’s population actually increased the year ending July 2022. (even though the headline says NYC lost 5% of it’s population since 2020)

3. More workers returned the to office, I wrote about this over a year ago.

4. Foreign buyers returned to purchase in NYC for two reasons: 1) many couldn’t travel here until last year and 2) NYC real estate is a landbank hedge against foreign currency deflation.

5. We all saw higher interest rates at the end of 2022. But the reality was buyers would learn to live with it. What’s their alternative, to pay high rent?

6. I pointed out over and over the majority of purchases in Manhattan are all cash (over 60%) and this has only grown. Plus, in our area, parents buying for children proved have more meaningful an impact to the market than high rates.

7. Renovations and expansions would pick up as would be sellers stay put, keeping inventory down. I know the Home Depot is biased, but even they presented their case with data.

8. Recession fear? I talked about how real estate prices are perhaps most closely tied to unemployment rates and mortgage delinquencies. We haven’t seen either materially rise.

Ok, hopefully you get the point!

But the one forecast I didn’t explicitly make and wish I did, was to predict a frozen market. So in hindsight let’s label 2023 a real estate ‘Ice Age’ as buyers and sellers have largely been frozen in place.

With that said, Ice Age’s eventually thaw so here are a few early tells I’m keeping my eye on:

1. The Fed appears finished with interest rate hikes and the lid can only be kept on the market for so long. If and when rates drop (they are down 1% in the last 30 days) there might just be a buying and selling stampede from all those who haven’t been able to get what they want in the past year.

2. The US median new home price has now fallen 17.6% y/y to $409,300. This is notable because from the 2009 market peak, prices of new homes fell about 22%. And as history tends to rhyme, perhaps the price softening we’ve been seeing is closer to the end than the beginning. After all, softer prices has been the Fed’s goal, right?

3. While prices in NYC have been resetting for the past year, remember, prices here didn’t run up to screaming new highs during the pandemic as they did on the West Coast. So for those continuing to wait for more discounts should know it’s difficult to bottom tick price. Instead, focus on the fundamentals of finding worthwhile real estate and price will do it’s thing for you over time.

Real Estate Commissions

I won’t opine much on the topic other than to refute some headlines / misconceptions:

1. Headline: Real estate commissions are 6% everywhere. I work in 3 markets and rates vary from 4% to 6%, and in every sale, it’s the seller’s choice what rate to offer.

2. Headline: Real estate commissions aren’t negotiable. So not only aren’t they not uniform, commissions are 100% negotiable by both buyers and sellers. It happens all of the time!

3. Headline: Real estate agents will disappear like travel agents and stock brokers. Well, they didn’t, so…

In travel, Online Travel Agencies charge airlines, hotels and car rental companies upwards of 30% booking fees for what I’ll call commoditized travel; a DIY flight, hotel, car rental. So the commissions went no where. More importantly, for complex and high-budget travel, travel agents haven’t gone anywhere either. Why? Because how comfortable are any of us spending $10…, $20…, $50,000 on a big long trip using Trip Advisor reviews? Not many, which is why travel ‘advisors’ haven’t gone out of business. In fact, Virtuoso, the leading luxury travel agency reported record sales volume in 2023.

Similarly, stock brokers, who used to charge commissions for trades were replaced by online brokers (who still charge commissions by the way as they profit off the spread between the bid and the ask). But like travel advisors, financial planners and portfolio managers, are equally as necessary to orchestrate their client’s finances.

Think about it this way. The less complicated a transaction, with less money on the line, the more that can be done online. Like an apartment rental. But as the complexity, access to information and the budget increases, the more trusted advisors are needed to help clients filter the noise and make informed decisions.

Share Inside the Market

The most haunted real estate headlines over the last quarter, and really all of 2023, are those of surging mortgage rates.

On the surface, when you read the news you’re told the horrors of how the same house’s mortgage payment is now 2X what it would’ve been 24 months ago. As a result, buyers feel like all they can afford is something no one else wants…

And while sentiment would lead to you believe the market is in the dumps, with many saying, “I’m going to wait for lower rates”, the ironic thing is deal volume is actually normalizing in Manhattan. It’s always the case, sentiment says one thing, but just look at the latest Q3 2023 data and it says something different.

There’s no denying the higher payment world we’re living in, but many fail to dig deeper and instead sink into personal finance fright. And I’m not here to sell you on lower rates in the future either because who knows, they could be higher.

Instead, I’m here to suggest you not be paralyzed by headlines, to do your own math and to take the time to understand what the supply / demand dynamics are and how they’ll likely impact price appreciation in the future.  Then ask yourself — can I afford to do nothing, wait for rates to drop and in the meantime cover my eyes and hope for the best?

To me, the analogy that comes to mind is the classic horror movie scene — when it’s obvious to everyone watching… the victim should just go the other way.

So in the spirit of offering a balanced approach to haunted headlines and to shed light on the other side that’s not always told, I interviewed one of the top mortgage executives in NYC to get his perspectives on the market.

I encourage you to watch as it’s filled with gems of advice. Read below for my notes with key takeaways and most importantly, I hope you learn something new. I did and I’ve been doing this for 20 years!

Happy Halloween!

Craig

Craig DeCecchis

cde@corcoran.com

914-882-5011

Linkedin

Learn More

PS- Make sure you read all the way to the bottom as there is a Bonus that didn’t make the video, but is perhaps the most insightful takeaway! And as always, reach out to discuss your real estate needs for the rest of this year and to prepare for 2024.

Key Takeaways from My Interview with a Mortgage Guru

I recently had the opportunity to sit down with Scott Bonora from Cross Country Mortgage, who runs a team of 150 professionals servicing the NYC metro area and beyond. I’ve known Scott for years, we’ve worked on development projects together and he’s helped me personally as well as friends and many clients too.

I’d also like to thank Tribeca Green, Related and Corcoran Sunshine for hosting us in one of their beautiful model apartments. If you’ve read my letters for any length of time you know how much I like the opportunity Tribeca Green offers. Plus, others agree as it’s been one of the fastest selling new developments in NYC for the past year and served as the perfect backdrop to discuss first-time homebuyers and those looking to finance a new development purchase.

Here are my notes:

Misconception #1

Interest rates ARE going to go down. We don’t know that they are!

First-time homebuyers

Many just do the rent vs own math and will overlook the full financial analysis and neglect things like:

1. Interest and tax deduction

2. Home office deduction

3. Price appreciation

Competing vs all-cash offers, how to increase your chance of winning the bid

TBD Underwrites

If you’re competing for a home and you’re not taking advantage of this, you are at a disadvantage!

A TBD Underwrite is a form of a full loan commitment that buyers can submit with their offers, meaning the underwriting has already happened. This removes the uncertainty sellers feel and truly puts a mortgage offer on par with cash.

Traditionally, buyers only submit a pre-approval letter with their offers. This shows a seller the buyer is approved for the loan, but the loan has yet to be underwritten leaving a common ask for a financing contingency on the table.

A TBD Underwrite is as close to an all-cash offer that you can get and is the most compelling way to level the playing field I’ve come across. Most banks don’t offer this product because it’s expensive for them to process the loan commitment up front, which is another reason to make sure you’re partnering with the right team in your home buying process.

Financing in a new development

Presales are very important and lenders typically have a magic number of needing 50% of the building in-contract before lending. So if you’re financing in a new development it’s essential to ensure the sponsor is not going to require you to be one of the first to close.

Did you know? Mortgage lenders will do even more due diligence on the building than your attorney will. Lenders want to ensure the building will be in good shape financially and that your risk is mitigated as much as possible.

Strength in today’s market

Over the last 12 months there has been a shift to a first-time homebuyer market. Loan sizes have gone from averaging $1.5m to now sub $1m are reflective of first-time homebuyer demand.

Just look at this chart, it tells the whole story of younger age groups taking out more new loans in the face of higher rates.

NYC has more inventory than suburban areas and with rents sky high, first-time buyers are using the opportunity to stay in the city, purchase property, eliminate their monthly rent payment and set themselves up to enjoy the fruits of homeownership.

Cash vs leverage in today’s market

Use other people’s money, it’s one of the keys to diversifying and building wealth.

Keep a cushion in the bank for a rainy day.

A refinance opportunity will come down the road, it’s just a matter of when.

Bonus

In our post interview chat I asked Scott a question I wish we caught on camera —

Craig: Why are mortgage rates today priced so much higher than the 10-year?

Scott: Great question, it’s because lenders are pricing in more risk premium due to the pace of The Fed’s hikes and market volatility. Normally, there are about 200bps added to the 10-year, but today there are about a 300bps added by lenders.

This means with the 10-year at 4.9%, mortgage rates are around 7.9% today vs where they would typically be at 6.9%. A full point higher just so lenders can cushion themselves!

My thoughts: What I think this means is once hikes stop with certainty, the risk premium will drop as lenders compete more aggressively for business again. So even if the 10-year is flat, mortgage rates have the chance to soften as the 300 eases back to 200. And if the 10-year drops materially, mortgage rates could potentially drop even further if and when the premium normalizes.

Share Inside the Market

The post Labor Day real estate market is very active — the sparse newly listed inventory is being snapped up quickly as the competition for desirable, well-priced real estate remains fierce.

The best way I can describe real estate today is, we are in a Sprinter’s Market.

It’s when the few great properties on the market sell fast and furious, others are clouded by fluctuating economic conditions causing many starts and stops, and searches that can have long pauses as house hunters wait for the next opportunity. And as the sprint starts again, it doesn’t end until you’re the buyer who saw the great house yesterday.

The last time we experienced anything close to the sprinter’s market of today was in 2011, when the market was waking up from the 08/09 financial crisis. Inventory was low and buyers, while cautious, were flush. So the market quickly became competitive and as supply was finally added over the next few years, buyers thought that all real estate was created equal and anyone plunking down money would make money.

During this time I implored clients to purchase early in the cycle, to buy A+ locations, to purchase from the top developers or in established buildings, to invest in up and coming neighborhoods like West Chelsea prior to the Highline, and to not chase subpar offerings or be enticed by ‘discounts’ for the sake of a sale.

While today is not exactly the same as a decade ago, the effects of low inventory continues to confound many, so be sure to keep reading below for some fresh, helpful perspectives.

Good luck out there!

Craig

Craig DeCecchis

cde@corcoran.com

914-882-5011

Linkedin

Learn More

PS- In the past few weeks I’ve helped two separate buyers come out on top of two very competitive highest and best bids. One property had 13 offers and the other 10! We didn’t win with the highest prices or all-cash offers, we won because my clients were the most prepared and listened to how to gain leverage over the process. Reach out and I’ll tell you more.

Real Estate Econ 101 (don’t skip this one!)

School’s back in session, so get out your highlighters and follow along…

Today’s residential real estate market conditions are driven by two main factors that you probably haven’t considered or heard talked about:

1. Record low unemployment

2. Historically low mortgage delinquencies

Put it all together and this is why high mortgage rates are not driving prices down and in fact in many areas, resale prices are actually higher than new construction; which is real estate’s equivalent to an inverted yield curve.

So what will send prices lower?

The only undefeated destroyer of real estate value = high unemployment, which leads to mortgage delinquencies, which leads to more available inventory.

Markets tend to top when unemployment is low and bottom when it’s high. And if you missed July’s Inside the Market I’d like to point out the bottoms of NYC’s real estate market over the past 30 years (1995, 2002, 2009, 2021), which you can see line up perfectly with the below chart’s spikes in defaults and unemployment.

Meanwhile, if you thought higher interest rates will lower prices and you’ve been waiting, well, in many cases prices have passed you by.

It all kinda make sense as the Fed pushes the economy to extremes, things like interest rates are lagging, so job losses have historically driven mortgage delinquencies higher, inventory higher and prices eventually lower.

BUT, with such a high percentage of cash owners (over 60% in Manhattan and like 99% of $5mm plus properties) and with borrowers’ long-term effective outstanding mortgage rates around 3.5% (over 90% of all mortgages are below 5%), it remains to be seen if delinquencies will move materially higher even if unemployment spikes as owning homes with locked in low rates, the lowest rates in 40+ years by the way, remains cheaper than renting.

The chart below shows today’s mortgage rates (green) vs the effective rate (blue) and tells you all you need to know, that homeowners are sitting on their low long-term rates.

And as just released from Fannie Mae (below) you can see the divergence in the recent increase in home sales vs decrease in mortgage applications = more cash buyers.

As a result, it’s why with each momentary tick down in interest rates we continue see a flurry of contract activity as sidelined buyers rush to lock in what they can find to buy. It’s why contractors are still very busy as home renovations and expansions fill homeowners’ growing needs. And is why, once the Fed starts to cut rates, many expect real estate prices to charge higher as borrowing costs soften.

Get all that?

The Mar’K’et for Dummies

Here’s what all you buyers and sellers really need to know.

You’ve heard about K-shaped economic recoveries, well, residential real estate is currently in a K-shaped environment.

What it all means:

#1 there’s very little ‘Great, well priced real estate’ on the market, so expect a very competitive experience and higher prices with properties that fall in this bucket.

#2 there’s more ‘So so, overpriced real estate’ on the market, so expect much less competition and flat to lower prices with properties that fall in this bucket.

#3 Great properties (and the so, so ones) will pop in value when mortgage rates drop. Instead of waiting for lower rates, take advantage of lower prices today as the increase in equity over time will return multiples more than an extra 1% in interest expense will cost in the meantime.

Take action: there is opportunity on both parts of the K, you just need to know what you’re looking at or help from someone who does ;)

How to be a Sprinter in Today’s Market

Buyers: Training

See as much real estate as you can to become an expert.  So when you get to the starting line, you’ve trained for the 100 yard dash and not the marathon because when your target property hits the market, being fast and decisive is what it takes to win.

Most buyers who fail or get discouraged is because they are late to the race, come unprepared and are left dizzy by the speed and pace of the competition._

Sellers: Preparation

Think about your property like the track and field host.  To attract top talent you need to make the best facilities, offer the sweetest pot, and make the experience as first class as possible.  This will bring more buyers, the most spectators and increase the visibility, desirability and value of your property.

And it works across price points and budgets, so…

Don’t be this:

Instead, even with a little TLC, you can be this:

Most sellers fail or get seller’s remorse (not accepting the early offer) because when they fire the starting gun, they aren’t prepared to do business with the fastest runners out of the gate.  Remember, those sprinters are well trained and are trying to cross the finish line first for a reason.

Share Inside the Market

I hope you’re having an awesome summer!

While some say it’s the dog days, I say it’s been the perfect time to hunt for off-market opportunities for my clients. When the market is slower and inventory is tight, being creative and aggressive is as fun as treasure hunting as a kid.

It’s paid off the last few months as I’ve found buyers and sellers for unlisted real estate in NYC, Westchester, South Florida and have just added a few Hamptons and NJ beachfront searches to the hunt. I never know where the path will lead, but don’t underestimate what enthusiasm and curiosity can yield.

At the same time, my summer has been full of conversations with clients and real estate enthusiasts amazed by the current state of the market. I’ve been asked a few questions over and over lately so I figured more must have the same… below is a recap of my answers plus some helpful tips.

And after reading the rest of this month’s letter, I think you’ll get a sense for how competitive acquiring great real estate will continue to be and how treasure hunting is an essential part of the process to help find what you’re looking for.

Enjoy the last few weeks of August and for those of you at the real estate ready, the ‘list it after Labor Day’ market is just around the corner.

Craig

Craig DeCecchis

cde@corcoran.com

914-882-5011

Linkedin

Learn More

PS- I’m always looking at real estate for clients. This time, tear downs and re-builds in Long Beach Island, NJ.

Who is buying real estate today?

Answer: Generational Buyers

When reflecting on my diverse group of clients who are most active today, I realized while having different needs they all share similar motivations.

And maybe sharing how they view things will get you thinking too.

From first-time homebuyers, to down-sizers, parents buying for children, foreign buyers and to legacy / trophy hunters they all have two traits in common:

1. They focus on present needs while remaining steadfastly committed to long-term goals of capital preservation, appreciation and security of ownership.

2. They are not hesitating to purchase in today’s market nor worried or influenced by near term market conditions or economic headlines as their purchases are in high-demand / liquid markets and are for the future with the next generation in mind.

First-time Homebuyers

Every piece of real estate has at least one reason to say, No. Your job is to find the reasons to say, Yes. Otherwise, you will continue to talk yourself out of opportunities versus taking the time to understand what you’re willing to sacrifice. Sorry, but this is the hard truth.

Down-sizers

Most down-sizers go from a lifetime of owning a home to thinking they need to own their next one. And when they can’t find what they’re looking for, they delay selling, let their home age further and potentially lose out on a high sales price.

I’ve helped a number of empty nesters sell recently and have opened their eyes to renting as their next move while putting their home’s proceeds into income producing real estate. The advantages: 1) maintenance free 2) their rental income pays for their housing expense and then some 3) is structured more favorably for heirs to inherit an investment property (think future 1031 exchange vs capital gains) and 4) is not permanent and they can buy again if and when they chose.

Parents Buying for Kids

This advice is for the kids. Appreciate the advantage your parents are providing, be grateful and enjoy the process as a family!

Foreign Buyers

One of the most common mistakes I see foreign buyers make is they tend to buy in legacy neighborhoods just because they are familiar with the ‘brand name’, like Gramercy Park (I’m picking on Gramercy Park because it was the worst performing neighborhood in Manhattan over the past decade). Many buy, sell, lose money and then permanently exit the market.

So my advice is to think about and consider your purchase like a local.

Legacy / Trophy Hunters

You’ll be surprised at what can be accomplished off-market.

What is driving prices higher?

Answer: Higher interest rates

Huh?

Here’s a chart of mortgage rates illustrating the rapid rise to fresh 20 year highs, which is reducing supply and driving prices higher than most expect.

The effects, some I’ve written about before, have staggering and unintended consequences:

1. Low resale inventory: existing homeowners don’t sell, keep their low mortgage and opt to renovate if they need more space.

2. Less new developments: it’s more expensive to finance new builds, which is actually causing housing inflation.

3. A wealth divide: first-time buyers are effectively getting cut off from the property ladder.

4. An investment opportunity: (not financial advice) homebuilder stocks continue to perform well as hungry buyers have no choice but to turn to whatever new inventory is being built. And as I’ve shared before, Warren Buffett agrees, and he just doubled down on his homebuilder bet. And on the flip side, watch out for multifamily firms who will struggle recapitalizing their buildings with rates much higher than their underwriting accounted for even though rents are at all time highs.

I think what most people have been surprised by in the last few years is how low supply in our area outweighs higher borrowing costs. I’ve been preaching the supply / demand dynamic for a while now and if you understand how little the new pipeline of inventory in our area forecasts to be over the next few years then you understand why we’ll remain in a tightly supplied market for longer.

How many all cash buyers are there?

Answer: Over 65% in NYC

Thanks to Curbed and Crain’s, they just quantified the latest Manhattan %s.

65%+ of all closings are all cash.

52% of apartments under $1mm are all cash.

99%+ of apartments $5mm and over are all cash.

Other markets I cover, like Brooklyn and Westchester, are just about as cash heavy too. So when you add this up with low supply… well, now you might finally get what’s happening. And dare I say another reason why treasure hunting to get ahead of the competition can help.

When will more residential inventory hit the market?

Answer: Today’s odds predict by Q2 2024

This is the most common question my clients ask me today.

While I can’t predict the future, I do know what will free up resale inventory = lower mortgage rates.

But to answer ‘when’, one way to predict that is perhaps more accurate than any other is to monitor the odds makers from the CME Group (the world’s largest derivates market) who predict probabilities for future Fed funds rates. Think Vegas Sportsbook, but for financial markets.

I’ve flipped through their calendar and the odds of cuts really start to increase in Q2 2024 (May / June 2024). This is obviously not full proof because if economic conditions change so will the Fed’s actions and timing of everything. But, as of today the derivates market is projecting higher for longer rates with cutting sometime next year.

So while we’ll certainly see seasonal inventory pick up after Labor Day and then again in the spring market, I expect conditions in our area to remain tight and in favor of sellers of great real estate through this year and into next.

Share Inside the Market

Did the headline catch your attention? I hope so because what I want to show you in this month’s letter has got me more excited to be a real estate advisor, owner and investor than ever before. And you gotta read it to believe it!

So as investors, which you are if you’re reading this or have any interest in real estate (even if it’s just for your primary home), what we look for are repeatable patterns we can profit from. Once we find that edge — things like headlines, politics and current events are really just noise and should give us confidence to go against the herd and increase our odds of outsized returns.

And just like my favorite pattern of summer, beautiful ocean waves, one set always comes after the next —> you can bank on it.

Look, there are so many analogies here and I’ll spare you from all but one; to be successful in real estate is much like being a good surfer.

You know the right locations, understand the tides, consider the weather, sometimes wait for the perfect storm and most importantly, pick the right wave to catch. If it’s too small it won’t last, if it’s too big you might crash, but when it’s just right…

I hope you’re having a great summer, enjoy the movie recommendation on the next rainy day and study up on what I share below so you can shred the market with the best of ‘em!

Craig

Craig DeCecchis

cde@corcoran.com

914-882-5011

Linkedin

Learn More

PS- I have a number of one-of-a-kind off-market properties in Manhattan, Brooklyn and Westchester: from a prime riverfront estate in Irvington, to a two bedroom with the best views in the East Village, to a waterfront condo in Greenpoint with the kind of terrace you look up and say to yourself, ‘wouldn’t it be nice to have that’. Reach out to learn more.

Market Cycle Tops

I recently watched an interview with Bob Knakal and he offered a simple explanation of how Manhattan land prices perform from the top of one cycle to the next. I encourage you to watch it too as Bob makes a clear case for the cyclical nature of NYC real estate and the duration of his experience should give us confidence as he’s seen the market go through its share of cycles and outperform from peak to peak every time.

But, I’m not here to plug him… I’m here to apply what I know to give you an edge.

So, with his inspiration in mind, I took a look at the cycle of Manhattan’s for-sale residential prices to study performance from trough to peak. And just like land sales, residential prices tell a very similar story.

Is it really as obvious and repeated as this?

Take a look at 30 year Manhattan price per square foot history, I’ve highlighted the peaks (green), troughs (red) and current price (grey).

Summary:

1992 peak | bounce back after 1987 stock market crash

1995 trough | down 19% from 1992: driven by late 1980’s boom and bust PTSD

2001 peak | up 112% from 1995: dot-com euphoria

2002 trough | up 1% from 2001: post 9/11

2008 peak | up 94% from 2002: sub-prime boom

2009 trough | down 9% from 2008: sub-prime bust

2016 peak | up 65% from 2009: supply shock, demand driven

2021 trough | down 8% from 2016: pandemic

Here’s what this all means:

1. Over time, each cycle top sees higher prices than the last.

2. The average duration of trough to peak is roughly 6 years, so we can assume the next peak to be 2027-2028.

3. Over the last 30 years, the average trough to peak gain is 90%! With leverage, that’s 4.5 times return on a 20% down payment! And if you buy the bottom and sell the top during the 6 year trough to peak cycle that’s a 75% annualized return on equity. Shred it!

4. Buyers generally have a short window to buy the bottom of the market as prices tend to recover very very quickly. 2001 - 2002, prices bottomed so quickly that they actually ticked up by 2002. And those who bottom ticked Covid prices in 2020 - 2021 are already up about 7%.

5. The reason why the maximum return outcome is so rare is I don’t think anyone in a red year has an easy time believing how much higher prices will be in a green year. I know first hand having plead with investors to scoop up real estate in 2020 and was met with fierce resistance. It’s uncomfortable to be alone in the water.

6. The drivers of the next peak are uncertain to most today, but there are two things we know to be true. #1 inventory is down and adding new supply will take years and #2 we are nearing the end of the Fed rate hike cycle. Maybe these factors will be the catalyst over the next few years or maybe it’ll be something else that drives prices higher.

7. While we scratch our heads debating to buy over an extra 0.5% discount here or there, I offer these green and red zones as a way to simplify your decision making process and to get you to focus on the bigger picture of #1 buying the best real estate you can find whenever you’re ready to buy and #2 better understanding how market cycles fit into your buying and selling decisions.

8. Exponential equity gains are made buying with leverage when the market is down or trending sideways and selling or refinancing when everyone is looking to buy. If the timing of the next cycle repeats, you still have time, plus now you have answers to the test that has repeated for decades.

9. These are market averages and there are ways to outperform (or underperform), so be sure to understand the nuances of apartment, building, block and neighborhood. Just like a surfer picks what, where and when to ride. It’s really important!

10. The future is uncertain and I’m willing to listen to why the next cycle will play out differently in NYC, so let me know your thoughts!

10 Year Neighborhood Performance

The latest comparative neighborhood data is in and I’m sharing it based on annual condominium PPSF growth rates.

Remember, the trend is your friend… meaning, unless there is a fundamental change we can expect these trends to continue.

The big takeaways:

1. Legacy Manhattan neighborhoods have struggled, there is more excitement elsewhere.

2. Brooklyn has wind at it sails as the price gap with Manhattan continues to close.

3. Like I said: know the right locations, understand the tides, consider the weather, sometimes wait for the perfect storm and most importantly, pick the right wave to catch. Then shred it!

   

Manhattan:

Top 5 Best Performing Neighborhoods

+8.6% Lower East Side

+7.6% Morningside Heights

+6.7% Harlem

+4.2% NoMad

+4.0% Financial District

Top 5 Worst Performing Neighborhoods

-1.6% Gramercy

-1.0% Lenox Hill

-0.4% Carnegie Hill

+1.6% Beekman / Sutton

+1.7% Hells Kitchen

Brooklyn:

go back and read May 2023 Inside the Market: Delta Delta Delta - Brooklyn?)

Top 5 Best Performing Neighborhoods

+10.4% Crown Heights

+9.8% Bushwick

+8.8 Bed-Stuy

+7.6% Greenpoint

+7.3% Clinton Hill

Top 5 Worst Performing Neighborhoods (worst seems like the wrong word here)

+3.5% S Williamsburg

+4.4% Fort Greene

+4.6% N Williamsburg

+5.3% Windsor Terrace

+6.2% E Williamsburg

Hudson Yards’ Ripple Effect

This WSJ article has had the real estate community buzzing last week, with most reacting like this…

But what all the backseat driving second guessers fail to acknowledge is how hard it is, as a product (real estate) developer, to forecast demand years in advance and get it right 100% of the time. And yes, even the most prolific developers can swing and miss on the unit mix —> which is the problem here. If these were mostly pied-a-terre sized apartments, no problems. Alas, they are not and prices will get cut until what’s been built sells. And for current owners, these are the risks the earliest adopters take buying into an idea that isn’t finished.

To master the opportunity a development like Hudson Yards (HY) provides requires vision beyond the development itself. One should look to the streets and blocks just beyond who’s real estate value has and will continue to benefit by all that has been added.

And like another type of wave, enjoy the ripple effect while avoiding the big splash.

Here are the trends that’ll help the outer rings of Manhattan’s West Side:

1. Hudson Yards is open, the office space is fully leased, back to work is happening and after much delay, the office workers are looking for housing in the area.

2. Manhattan West (rubs elbows with HY) is open, the office space is leasing and after much delay, the office workers are looking for housing in the area.

3. The area to the south of HY is just to the north of other major new corporate HQs, think Google (the new St. John’s Terminal), Disney, Goldman, plus the new Terminal Building… the list is extensive.

4. The western yards will get developed, into either the highest-end casino possible or some other magnet that’ll boost surrounding property values.

So while the salacious debate about HY continues, consider these alternatives in today’s market:

1. All the new condo developments on 29th Street between 10th and 11th that came to market too soon, cut prices, and now enjoy the perks of beautiful neighboring buildings and the closest proximity to HY.

   

2. The Cortland, Related + RAMSA’s latest waterfront development, now over 60% sold and selling so well it’s not discounting prices at all.

   

3. Lantern House, they got the unit mix right and is over 90% sold out. Keep an eye on resales.

   

4. One Highline, after a bumpy start to pre-construction sales, prices are lower and sales have now picked up as buyers can tour the almost finished development.

   

5. The list is expansive as buyers should also consider legacy condos along the Highline, which will continue to ride the wave and like a longboard — offer a longer, smoother and steady ride.

   

Share Inside the Market

I remember this time last year I introduced my kids to the song School’s Out for Summer by Alice Cooper. They hated it, were offended by the lyrics, and after a good laugh, I found myself grateful to have two young daughters who love school so much they refused to find the humor.

It kinda went like this…

I think these were the lyrics that really put them over the edge :)

No more pencils, no more books
No more teachers, dirty looks
Out for summer, out 'til fall
We might not come back at all

As I consider playing the song again for them today, it got me thinking that real estate in many places will be out ‘til fall as buyers and sellers feel like the market won’t come back to them at all.

So like I told my daughters— enjoy each phase of what you go through, have fun and make memories over the summer, and get yourself ready for your new adventure that will start again in the fall.

If you’re in the market for real estate I bet you can relate. Low inventory, high prices, and high mortgage rates have given buyers and sellers alike reasons to pause. And while activity might slow down a bit as school’s out, in the meantime, it’s the perfect time to sharpen your pencils.

With that in mind, and as we are halfway through the year, this month’s letter offers you a mid-year respite as I share an interview I conducted high up in the clouds above Central Park plus make a bold prediction that’ll likely surprise you.

Enjoy!

Craig

Craig DeCecchis

cde@corcoran.com

914-882-5011

Learn More

PS- There are two new developments I’ve talked about multiple times in my letters to you, 450 Washington and Tribeca Green. I mentioned them before they launched sales and forecasted the strong demand. Six months later, both are still NYC’s best selling new condos, and I’m grateful to my clients who listened and had the opportunity to purchase as one of the first buyers through the doors.

An Interview Above Central Park

I recently had the opportunity to interview friend and global real estate executive, Gavin Morgan, to get his take on how the NYC market compares to other major gateway cities like London and Hong Kong. The international buyer has always been an important part of demand in our area and with Covid behind us plus some economic uncertainty ahead of us, I wanted to check in on the health of NYC’s place as a global land bank.

Gavin most recently operated JLL’s China and Hong Kong business as well as served on JLLs APAC’s board of directors and I can’t think of a better international expert to weigh in on NYC’s position among other top tier markets.

We were welcomed into 111 West 57th Street by JDS, Property Markets Group and Corcoran Sunshine to record our conversation and despite the smoky haze, enjoyed a spectacular setting and view.

Our chat is wide ranging — touching on global markets, luxury and suburban real estate, commercial / office trends to look out for, and where we see future strength in real estate.

You can listen to past episodes of Gavin’s podcast, PropNX here, as well as connect with him on Linkedin.

—

And in case you missed it, you can watch the video at the top of this note. I promise it’s worth the 15 minutes of your time.

—

Lastly, here’s a screenshot from November 2022’s Inside the Market, where I highlighted one-of-a-kind new developments in NYC, 111 West 57th was of course included.

A Bold Prediction

Prices have the potential to race higher in the second half of this year.

If you’ve read my letters for any length of time I’ve presented data and facts month after month foreshadowing this potential outcome.

A summary:

1. Low current inventory

2. Low future new housing supply

3. Buyers and sellers are eagerly waiting on the sidelines

4. Today’s homeowners have the largest % of fixed, low rate mortgages, with little motivation to trade out of them

5. Rents are still extremely high causing even more pent up buyer demand

So as the Fed’s rate hiking cycle winds down and if mortgage rates drop, even from 7% to 6% or 6% to 5%, buyers and sellers will feel monthly affordability relief and the race to buy and sell could be on in full force.

And as I’ve repeatedly rhetorically asked, “what will happen to prices in a low inventory environment?”, well, in our area where demand is strong they’ve been higher than many think they should be and if mortgage rates dip, have the potential to be fueled even higher.

—

It’s not just me who sees this set up. Here’s the latest from Barbara Corcoran, who knows a thing or two about real estate.

In answer to a Good Morning America viewer trying to balance the desire to own a home with fears of an impending recession, Corcoran encouraged viewers to buy now, saying that it's all about interest rates and good timing. 

"I've been in the business my whole life and I've never been able to sharpshoot this market. But what I can tell you, it's a good time to buy," Corcoran said. "Because the minute interest rates go down -- everybody's waiting for them to go down, even by a point. And when they do, they're going to come rushing back in the market, prices are going to explode and you're going to be paying more for the same house."

—

So while school’s out for summer, use your time wisely to find property that could very well be less expensive today vs when rates drop. And if the scenario does play out, you’ll likely own for a better price ahead of the herd and can then refinance when the time is right.

Share Inside the Market

Since the end of last year my goal has been to offer you a window into residential real estate trends that I expected to play out into 2023.

Here’s a reminder of some things we’ve talked about or in case you missed, you can go back and check them out…

We Saw the Tree Through the Forest, talked about A Flight to Quality, a Tail of Two Markets and the Fundamentals, we invented a word = OMOF, rapped to 90’s Hip Hop, found The Golden Egg and even pointed out a Real Estate Short Squeeze. Wow, we’ve covered a lot!

The good news, I’m not stopping and have more to share!

I ended last month’s letter with the word nuance. It’s such an important concept to understand when evaluating residential real estate that I wanted to carry the theme throughout this edition.

So without further ado, I offer you fresh thoughts and actionable insights in today’s market on the importance of actively planning your real estate, how to take advantage of inefficiencies that are in plain sight, what current real estate events mean for you, and lastly, a new development launching sales right now that you should know about.

Please enjoy this month’s letter, there’s some great alpha below and I look forward to hearing from you!

Craig

Craig DeCecchis

cde@corcoran.com

914-882-5011

About Me

Market Reports

PS- Last week, 4/30 to 5/6, had the most weekly signed contracts in Manhattan and Brooklyn in 2023.

Real Estate Planning

What’s common practice in the active management of our financial portfolios tends not to carry over to real estate owned by individuals. Yes, if you own an investment property or two you likely think about what to do with it, but if it’s your primary home most tend not to and instead wait for life events to dictate decisions. And it’s understandable, swapping in an out of a house or apartment isn’t quick and easy and there are transaction costs… plus it’s your home after all.

But as the saying goes, buying your house is the single most expensive purchase of your life… so why wouldn’t more owners actively manage their biggest investment? Especially in a place like New York City where space is at a premium and most are always looking for that extra room.

Relax, I am not pitching everyone trade out of and into a new house, but I am going to show you a trend that is most everyone’s friend and shouldn’t be ignored if you’re thinking about adding that extra room or interested in better positioning yourself for future gains.

If you can’t spot it in the data above, the market is revealing a clear trend with inventory increasing as bedroom count and price go up.

So how can you take advantage of this? Well, by trading up.

In today’s market— price favors sellers of smaller, less expensive real estate and favors buyers of larger, more expensive properties.

So all else being equal, like you can afford the larger home, the opportunity in today’s market is to sell into the stronger market and buy into the weaker one —> sell a studio and buy a one, sell a one and buy a two, and so on.

But you might ask, “If the trend continues, wouldn’t it be better to wait?” Yeah maybe, but consider this:

1. You’ll miss the time in the space you need and want.

2. The top of the funnel (new development inventory) will be down 70% this year, will be down next year and what’s your best guess for the next few years as credit markets tighten, lead times to plan and build grow and NY State gets in it’s own way to make developing easier? So as less new inventory is added to the market and existing inventory is absorbed, I’ll ask again, what happens to price?

3. And if you are shopping towards the top of the funnel and have the means to trade out of an older apartment or co-op and into a new condo development, it offers a way to further boost potential gains as you’ll end up owning something newer with less wear and tear and as I pointed out above forecasts to be in less supply as we look into the future. It’s like buying a Chanel bag right before the factory cuts production by 70%.

4. You also might find yourself in a blueblood neighborhood and are asking yourself why is my real estate value flat to down? Well, times change and emerging pockets within the city present more upside and excitement that’s why. Remember, past performance is no guarantee of future gains, so as an owner, it’s essential to actively manage your real estate to stay with and ahead of the trend. So in addition to trading up, this is also a market to consider trading out, from a neighborhood with a flat to down outlook to one with more upside and demand.

Delta Delta Delta - Brooklyn?

No, Delta Delta Delta is not the name of a new fraternity I’m starting. It’s a sorority that’s doing just fine. Although it’d be kinda fun huh? Like, the Brooklyn version of this…

Sorry to disappoint, but not accepting applications!

What I mean is certainly more boring, but definitely more financially rewarding.

Delta = the change in price of an asset. And in this case, the delta between residential real estate prices of Manhattan vs Brooklyn and the trend that shouldn’t be ignored.

Take a look.

In case you don’t spot what I’m sharing, this chart shows the median price of Brooklyn residential real estate gained 22% on Manhattan’s price over the last 10 years at an average clip of 2% per year.

That means if Manhattan prices were flat over the last decade, Brooklyn’s would have gone up 22% anyway.

A good analogy is to say Brooklyn real estate is like inflation and Manhattan real estate is like holding cash. This is not a dig on Manhattan because compared to most of the rest of the country NYC real estate is an outperformer.

But for my clients, like you, I like to find trends and back them up with data and this is certainly one that shouldn’t be ignored. Brooklyn is no longer a discount choice, it’s a lifestyle decision and price clearly reflects that distinction.

And the good news is, Brooklyn still trades at a 34% discount to Manhattan, leaving significant upside as the boroughs consolidate parity.

Now let’s take it a step further and look out into the future to a neighborhood within Brooklyn that is ripe to accelerate the trend and potentially offer even more delta delta delta.

Downtown Brooklyn.

Home to three new condo towers and countless new rental buildings it’s a neighborhood that has changed yet offers a runway to get even better with more amenities, shopping, restaurants and lifestyle offerings and as it does, real estate prices and demand will follow.

Count me in the camp that was skeptical until I recently revisited the best selling new condo in Brooklyn, 11 Hoyt. And if the project hasn’t sold the most apartments of any project in all of NYC over the past three years then it’s easily number two or three.

I could go on and on about what I like about 11 Hoyt, but what the developers got so right here and why it’s been so successful is product / market fit. It offers great sized apartments, views and amenities at attainable prices, which leaves buyers believing (correctly so) they are not buying the top in a market, but are paying a fair price today in a location that has plenty of room to appreciate in value over time.

And in case you haven’t been to Downtown Brooklyn recently, here are some snaps from the area.

Current Event Updates

I thought it was important to update you on two topics I’ve been covering for a while now, so here we go—

The first

…and it’s almost comical if it wasn’t sad, is that Governor Hochul’s plan to increasing housing has already failed during the state’s recent budget approval process.

And because there was no resolution to extend the 421a timeline, making rezoning of office to resi conversions easier and the now failed mandate for suburban towns to add density, construction activity is expected to slow further and take new inventory down with it.

As I’ve been saying every month, these sequences of events are leading to real estate prices in our area higher than many expect them to be… mortgage rates be damned, housing inflation is here for now.

The second

…and it’s pretty much the outcome a low inventory environment will yield — homebuilder stocks are up 13% over the last 12 months and up 35% off the June 2022 lows.

Also, in March I wrote about Warren Buffet adding to a position in LPX, the homebuilding solutions company. The stock at the time was trading at $55 / share and today is $64 / share. Not that Buffet is trading the short term as he was mostly betting on a bottomed out housing market and the need to add inventory.

I make no predictions about the future, merely point out low inventory in our high demand area and how one famous investor is playing the market. You can draw your own conclusions.

A Latest + Greatest

As you know, I’m passionate about new developments and made a career selling them, so here’s a new one I believe those looking for a trophy address in Manhattan should consider.

The Keller at 150 Barrow offers a limited collection of 24 residences, designed by BKSK, along the most desirable waterfront stretch in the West Village.

Amenities include:

• Full Service with 24-hour attended lobby

• Residents’ lounge

• Landscaped courtyard terrace adjacent to lounge with BBQ and kitchen area

• Fitness center

• Children’s playroom

• Bicycle storage

• Package room with cold storage adjacent to lobby

• Private storage units available for purchase

Listings are not yet live, but pre-sales have begun and I’ve been invited to bring my clients interested in acquiring one of these sought after properties before they are released to the open market (or all sold).

Share Inside the Market

Well, Q1 2023 is in the books and like everyone’s brackets that busted after the first round last month, anyone who predicted how 2023 would play out missed calling for a bank run.  Although some people saw it, but dropped the ball anyway.

Pause, history lesson…

Did you know President Taft created the US Postal Savings System in 1910 in response to the bank runs in 1907?

Deposits came out of small banks and were secured via the postal banking system in an effort to curb exactly what just happened to regional banks today.  Those deposits were then turned around and redeposited at the banks from where the money came.  Say what?  Sounds a lot like deposits flooding too big to fail banks and those banks redepositing right back into the regionals, right?  This all pre-dated the Fed and FDIC and is the exact framework the backstop the Fed and Treasury just implemented.  I can go on and on about the moral hazards of all of this, but I’ll stop right here.

Unpause…

As with any uncertainty, those of us who own real estate or who are in the process of buying and selling must ask the questions, what do this most recent banking crisis, tremors in the commercial real estate (CRE) markets and a cloudy economic forecast mean for me?

A fortune teller I’m not, but I do try to be balanced and fact based on how I look at residential real estate.  So my clients (and your inbox) might even grow tired of me pointing to the sustained period of low inventory we’re in today and will be for the foreseeable future as well as reminding you to make buying and investing decisions with at least 3 to 5 years’ time in mind.  Sellers have it easier because they generally weigh their opportunity cost based on want / need / profit target / tax reasons or because they’ve found an alternative they believe will perform better going forward.  Or they don’t sell, and hold instead.

With all of this in mind and after doing some self reflecting on my own real estate portfolio I dug into charts, data, economic trends and some good old fashion head scratching to try to find the golden egg, the driver of all price appreciation.  I can’t guarantee I found it or that a single one exists, but did uncover a correlation too compelling to ignore.  Yep, you’ll have to read on to find out more.

Before signing off, the spring real estate season is here and there are a lot of great properties on the market despite low inventory (ah, I said it again), so get out there and take advantage of good real estate at better prices.  And if you find yourself in need of a change but are worried about all the what-ifs, remember that time is preciously better spent in a home you want and need.

Please enjoy, share your thoughts, reach out to chat about any and all, and thanks so much for reading.

Craig

Craig DeCecchis

cde@corcoran.com

914-882-5011

About Me

Market Reports

PS- click the link above for the most recent market reports, but remember, you can’t drive forward by looking in the rearview mirror.

The Golden Egg

Maybe this correlation was obvious to some, but if it is, it couldn’t have been many because it’s not regularly (if ever) talked about. But man, these two lines (avg home price and Fed balance sheet) are really in lock-step. In simplest of terms, the driver of real estate price appreciation is, you guessed it, monetary policy and an expanding / rarely contracting money supply. So let’s call it The Golden Egg, because it’s Easter Bunny season of course, it sounds rare and it sounds like what winners should win, and I want you to win in real estate.

However, if it was this easy to follow the ebb and flow, you’d never lose money on a real estate deal right? While the macro trend clearly favors a growing balance sheet, even with the Fed’s best efforts to shrink it while fighting inflation, the key to winning in real estate therefore is not only the macro trends, but a whole lot of nuance. Like time, asset type, location, block, building, apartment, house, condition, view, neighbors, comps, services + amenities, finishes, build quality, brand recognition, price paid, financing terms, competition… I could go on for a while. And truth be told is why you should work with a real estate advisor, but you knew that already ;)

It’s also why I said in my opening note to give your purchase 3 to 5 years, now you see the data backing up why that’s historically true. And it’s why I keep pounding the table saying low inventory in our area, because that’s true too, and should continue to prop prices up (not necessarily higher, but higher than you think they should be) even as markets soften. Here’s the thing, if you’re a buyer, maybe you’ll get a better deal in 3, 6 or 12 months or maybe you won’t, but you’ll certainly miss time spent in your new home. And if the economy does enter a recession, for better or worse, what’s also true is the direction the green line will go.

For this not to be true, the Fed will need to react differently than it has historically.

If you need a reminder:

2002 | Post 9/11 | Federal Disaster Relief

2008 | Financial Crisis | TARP

2020 | Covid | Pandemic Relief Programs

2023 | Regional Bank Runs | Bank Term Funding Program

I’m not advocating for a bigger balance sheet, probably the opposite because of the debt load this carries, but what I am trying to show are the rules of the game in the simplest way possible to give you confidence in the real estate decisions you are making. And most importantly, even if the green trend line is your friend, to play the game, you need to be an expert in nuance to win.

To Be or Not to Be Detroit

That is the question.

Intro

The demise of Detroit was decades in the making and a result of repeated bad decisions, kicking the can down the road and a failure to reimagine its economy after the auto industry expanded outside the Motor City. Click here to read all about it.

What was left were vacant buildings, deteriorating infrastructure, abandoned neighborhoods, crime, poverty, deeper racial divides and eventually about half the city’s population.  Only in the last 15 years or so, after bankruptcy, has Detroit started to turn the corner by modernizing and diversifying its economy and as a result, its real estate.

Here’s a quick look at some of the great things the city recently accomplished and has planned.

However, at the peak of its troubles, the state and federal government failed to step in. Redevelopment took longer plus a bankruptcy to get there, but I can’t think of a better case study of present day issues some cities are facing today and probably will be in the near future from the tremors that CRE’s demand destruction is rattling here, there and everywhere.

Indirect Effects

You don’t need me to repeat why CRE is suffering, but the effects are something we are all dealing with or will be one way or another in our cities and suburban office markets.

1. Vacant and under utilized office buildings

2. A compounding drag on local small businesses and retail

3. Rise in crime, violent crime and personal safety issues

4. Lower tax revenues

5. CRE portfolio valuations being written down

6. Debt servicing struggles, difficulty refinancing and tighter credit markets

Read More About the Underlying Issues

Morgan Stanley says a CRE crisis worse than 2008.

CRE Market Overview from Moody’s.

Signature Bank Loan Sale, let’s watch these trade as they’ll start to be among the first assets with adjusted valuations.

Impact on Residential Real Estate

Notably, I chose to discuss this topic as it applies to residential real estate for a few reasons:

1. Tighter credit markets and less construction financing from regional banks will make building new housing more difficult, drawn out and pinch supply.  So yes, I’ll say it again, lower inventory for longer.

2. Because many of my subscribers are professionals with the ability to create public / private partnerships that can come together to not just bail out troubled CRE, but to reimagine and repurpose the real estate.  Office to residential being one of the derivatives.

Where it’s the Worst

A glimpse into not yet doing anything about the problem is what we are watching unravel in present day San Francisco (ground zero for CRE’s issues) with recent, horrendous headlines about ongoing violent crime.

Even Whole Foods just closed… “the city has been plagued by a lack of foot traffic as many residents are no longer going into offices…”

I’m not directly blaming vacant office space for violent crime, but you can’t talk about one without the other when SF’s vacancy rate spiked from 5.4% in Q4 2019 to 24% at the end of 2022 according to a Business Times analysis. This should reinforce the need to proactively solve CRE’s demand destruction in cities, neighborhoods and business districts because leaving these areas to wilt will continue to wreck havoc in costly ways. And while SF churns through its problems, thankfully, there are early signs of exploring office to residential conversions as viable solutions.

An Inspiration for Better Outcomes

On the bright side, if there is inspiration for what the future could and should look like that didn’t take generations to resolve, look no further than downtown Manhattan post 9/11.  There are fewer total office buildings, but what remains are modern A+ spaces that workers enjoy going to, 24/7 shopping, retail and dining destinations, more residential options than ever before and access to parks and a reimagined waterfront… have you been to the Seaport lately?

Without picking on specific areas and buildings in NYC and Westchester with underutilized office space, I encourage change to be embraced to allow real estate to reinvent itself based on what demand is calling for today and will be in the future because the alternative of leaving these areas to underperform for extended lengths of time begs the question, To Be or Not to Be Detroit?

Where the Smart Money is Placing its Bets

“Blackstone Announces $30.4B Final Close for Largest Real Estate Drawdown Ever”. The fine print, “Anticipating changing macrotrends, Blackstone Real Estate shifted its portfolio away from assets facing headwinds such as traditional office and malls and is approximately 80% concentrated in logistics, rental housing, hospitality, lab office and data centers.”

So what do you think some of the repositioned assets facing headwinds will become?

You have the answer now.

Suburban Pushback

Let’s check in on a Westchester County topic I introduced a few months ago, NYS’ plan to increase housing and affordable housing in and around transit hubs via the plan, ‘Making New York Work for Everyone’. At that time, I mentioned likely pushback suburban towns would apply to Governor Hochul.

Well, voilà:

All Westchester towns, except for the cities of White Plains, New Rochelle and Mt. Vernon, participated in a letter campaign to oppose.

I’m not going to express a political opinion one way or another about this, but if you’ve followed along with where I’ve forecasted the greatest opportunities going forward in Westchester will be, it’s in and around transit hubs and train stations. Go back and listen to an interview I gave last summer before this topic was even in the headlines.

I don’t know exactly how this gets resolved because small, wealthy Westchester towns do carry political weight and contribute large tax dollars so they’ll do what they can to stop, pause or shrink the mandate. However, where there is demand, the housing will find its way.

So once again, for the developers reading and the individual investors looking for opportunities in Westchester, I believe we’ll see an inevitable future with more transit oriented developments and single family renovations within walking distance to suburban train stations (and yes, it’s already begun).

I’ll continue to monitor and will share any meaningful updates. In the meantime, I’ve spoken to some of you about opportunities like this and encourage others who are interested to reach out as well.

A Real Estate Short Squeeze

What happens when a new development launches sales to add supply to the most under supplied segment of the market?

It becomes the fastest selling building in Manhattan, real estate’s equivalent of a short squeeze, that’s what!

Meet 300 West 30th Street, a new 69 unit condo, which launched sales only 4 months ago and is already over 60% sold. That’s 10 sales per month vs market average in new developments of +/- 3, impressive.

Targeting sub $1M and sub $2M price points (the only segment of Manhattan’s market with year over year inventory declines), the apartments are efficient, most with outdoor space and come with all the luxurious essentials that are hard to find at this price point.

You then might ask, if I’m in the market for something like this is it too late to buy? My answer = no. What sells this fast today will continue to stay in demand… because it’s rare and rare is a good place to be in real estate. And, in this location, you’d be buying at the intersection of three major neighborhoods that will mature and blend into one seamless destination over time.

Nuance.

Share Inside the Market

— intro —

Yeah, this letter is dedicated to all the buyers that told me I’d never find them somethin’

To all the sellers that lived above the building that I was trying to get a listing in

Called another agent on me while I was just tryin’ to make some money to feed my daughters (it’s all good)

And all the brokers in the struggle

You know what I’m sayin’?  It’s all good, baby baby

—

Lol, thanks Biggie, and yes I do have a draft of the whole song, but this is a professional real estate newsletter so I need to stay serious, right?  Who knows. But without a great intro hook I wouldn’t want you to miss the verses, chorus and outro of this month’s letter.

Speaking of the struggle, the struggle in NYC (Westchester too) real estate’s first quarter is definitely being felt most by all the buyers out there. Inventory is tight, many searches come up empty, rates are up / down / up, rent is high and buyers just want that new place already. They want to move on with the next great part of their lives, to create new memories and of course to not be the one who top ticks the market and overpays. That’s not too much to ask, but the struggle here is real.

If you’ve spoken to me since late last year I told you we’d see a buying frenzy this spring, which is exactly what is unfolding now. The market was sidelined for the second half of last year as the buying and selling spectators could only hold off for so long. It’s why my phone blew up from buyers starting on January 2nd, it’s why contracts signed have spiked higher and it’s why good listings are seeing multiple bids today. Really? Yes.

And if you look at our area’s fundamentals, there’s that word again, inventory shortages aren’t getting solved anytime soon. So is an over ask price a price paid too much in today’s market?

If you’re a buyer it doesn’t feel good and more times than not buyers tend neither to believe the comps that support a higher price nor are they totally faithful in the supply / demand dynamics driving our market into the future. Instead, they often wince at the thought of, gulp, throwing their hat into the bidding ring. Who’s to say the listing wasn’t priced just under market to drive a quick flurried sale? But it’s much simpler than all of that, buyers who scoff at competing for a purchase, well they just aren’t ready yet. There, I said it!

A seller’s job in today’s market is easy, ignore the national headlines that you’ve missed the window of opportunity to get max value and believe in the strength of our market, and then don’t screw it all up with a vanity asking price or a cut rate commission.

A buyer’s job in today’s market is much more nuanced. But don’t panic, give up, get frustrated, sit it out or lose hope. Instead, be open minded, study the market, see lots of real estate, be creative, and… keep reading.

—

Don’t let them hold you down

Reach for the stars

—

Sometimes it takes a moment to digest the past and with the page fully closed on 2022, after 20 years in the game, last year (my first full year representing private clients) was the most fun I’ve had in my real estate career. And if I can do that in the most challenging time in real estate markets, then to all you buyers out there, you can find your happy place too.

Thanks for your continued feedback and if we haven’t done so recently, let’s catch up because worst case if we run out of things to talk about we can always mad lib some 90s hip hop together.

Craig

Craig DeCecchis

cde@corcoran.com

914-882-5011

About Me

Market Reports

PS- Who else has the song stuck in their head now too? It’s a good one though.

Where the Listings At?

So if you don’t read anything else I write in this letter, at least study the three charts below. It shows inventory trends and price action since 2010. Supply and Demand.

Look, no one can predict the future, it’s always uncertain. But we can read the story data tells, predict the future trajectory of new inventory with relative certainty and draw conclusions. My goal is to present you an unfiltered lens of the market along with guidance to help you outperform it.

The rest of this letter expands on the trends and pivot points these charts reveal.

Manhattan

Brooklyn

Westchester

New Developments

I shared this post 7 months ago. I also track the new development pipeline so I can see what’s coming over the next 24 months or so. Not much.

New developments are the lifeblood of any real estate market, it’s the new supply. It gives buyers the opportunity to trade up, which opens up supply to new entrants and first time buyers on the lower price end. When the upstream supply is cut off, the market’s belt gets squeezed and you see pivot points like in my charts above. Westchester is even worse off because the amount of buildable land is about all gone, so new supply is even more constrained and is why it’s time for developers to seriously consider delivering more vertical condos to the market.

The last time we saw a historically low inventory cycle in the NYC new development market was coming out of ‘08/‘09 and the buyers during that cycle were the ones who saw great returns going forward. Even more specifically, those who purchased early in new development sales launches in projects built by reliable, well-heeled Sponsors, are the ones who really crushed it. These buyers got rewarded for taking the early risk and it afforded them the chance to trade up after a few years while the late comers came in and chased the market higher from 2016-2018. Ask the buyers who top ticketed the market how they feel about buying when consumer confidence pumped through the markets.

And the thing about new inventory is, it’s not like you can just snap your fingers and make more. It takes time, approvals, planning, building and oh yeah, development financing, which is easy or hard to get these days? If anyone listened to Senator Warnock question Powell earlier today (3/7/23) then you’ll know the unintended consequences higher interest rates have on creating more housing.

History rhymes and it’ll be interesting to see if these next few years are anything like 10 or so years ago.

Buyer’s Delight

A true story. Just happened. Loaded with buyers’ lessons to be learned. I could have also titled this section, Do the Right Thing, but that was a movie and I’m sticking to songs this month. Anyway, here we go…

A mutual friend referred me to a new client who had been in the market for a while. She had looked at a lot of places, lost out on bidding wars and I quickly got the sense she developed that next buyer up mentality. Meaning she was educated on the market, knew what she wanted, but needed a little boost to feel confident in plowing ahead with a purchase.

A target property was quickly found, exactly what she was looking for. I shared some stats, including insider knowledge that this product type was the last of it’s kind to ever be able to be built in the neighborhood. There’ll be no more.

She said, “Ok, tell me what to do.”

We put in a strong bid, 3% below ask, but 4% more than the closet comp that closed only a few months earlier. The sellers accepted the offer without negotiating and off to contract we went. We moved swiftly, confidently and gave the sellers no reason to think we’d flake. Once our offer was in, all the sideline buyers showed up. They waived higher offers at the sellers and chased what they could have had if only they stepped up first.

Contract signed and the mortgage process started.

And then my eyes were opened to something I thought was an obvious next step, but discovered that I’m in the significant minority.

1. Prospective home buyers spend more time researching their next vehicle purchase and vacation options than researching mortgage lenders.

2. Seventy two percent of prospective home buyers have not shopped around for, nor have any plans to shop around for, their mortgage.

“Holy sh*t!”, I said “my passion just happens to be hunting for the best possible deal.”

We bid out her mortgage and vs her lender’s original quote (a major bank), saved $7,000 in closing costs and shaved off 1% on her mortgage rate, almost $1,000 per month. That’s real money folks. That’s like a vacation a month for as long as she’ll live there. And just wait until she can refi, it’ll be like vacation a month for her and for my family to tag along with. Or if she’s smart, which she is, will allow her to put that money back into the loan and shave 10+ years off a 30 year mortgage. That’ll be $120,000+ in interest savings.

And the punchline is —> it was her original lender who ended up giving her the best deal… we squeezed out all their juice, but hey, they are still making money and it pays to shop around. Juicy.

But wait, there’s more.

A few days after her contract was signed, her soon to be new neighbor’s apartment went on the market for 15% more than what she’s paying. The neighbor’s apartment is essentially a replica. We both said, well that’s kind of crazy. And then something amazing happened… it sold a week later at full ask. Her new closest comp, 15% more than what she just paid.

Boom.

I cannot guarantee these results for you, but good things happen when you Do the Right Thing.

The OG

Warren Buffett May Think The Housing Market Has Bottomed: Berkshire's Bet On A Strong Recovery

Did you notice I made the above link big and bold and underlined?

It’s from a recent headline highlighting Berkshire adding to it’s position in Louisiana-Pacific Corp (NYSE: LPX). Buffet now controls 7% of the company. LP is one of the largest homebuilding solution companies in the country.

Ask yourself, is it a coincidence Buffet just added 1.2 million shares to his position while existing-home sales fell for the 12th consecutive month in January? Seems pretty obvious what direction The OG thinks the housing market is headed.

At the same time, as we zombie scroll through our phones, we get hit with articles like this one:

Would you rather side with Buffet’s money or click bait?

Meanwhile, investors seem to be backing off single family homes

They are either short sided, over leveraged or operate with herd mentality. Whatever the case, buried in the data is New York has seen the smallest decline vs any major metro areas, less than 10% year over year. Nationally, the decline is 45% and pandemic boom towns like Phoenix and Las Vegas are down over 67%. It says something about a market that performs best when times are worst.

And then there’s this…

Home remodeling is slowing down, but ‘historic boom' is coming

I’ve talked about this before and I don’t delete my letters, so right or wrong I stand by what I predict. With a lack of inventory and buildable homesites and development sites there’s only one place for new product to come from. Remodeling and converting.

So if you’re an investor or home buyer, you should strongly consider getting ahead of the trend, Buffet just did. Plus, remodels are a way to buy what’s not in demand and bake in a profit through the work you put in.

And this…

ARMs vs 30 Years

To keep drilling the lack of inventory point home for you buyers out there and maybe to help justify the price of that new home and offer confidence for the future of price appreciation…

Yes, the Fed is cranking up rates, but what has worked in the past might not work as well this time. Because of the Dodd-Frank world we live in, the % of riskier mortgages is down by multiples and the underwriting standards are up by multiples. Only 12% of mortgages are ARM products vs 35% at the peak before ‘08/’09. This means more mortgages are fixed rate today than during any other Fed rate hiking cycle in the last 30 years, probably longer. So what? So more homeowners sleep easier not worrying about an ARM spike and not being able to afford their payments. So what then? Homeowners by and large will sit and wait it out until conditions loosen and then reevaluate. Fewer great properties will hit the market and yes, renovations will trend higher.

= Low Inventory for Longer

= Higher Prices When the Dust Settles

= Don’t Bet Against the OG

And lastly, I’ll leave you with this…

Expert panel expects home prices will grow at a steady pace starting in 2024

A great summary of past, present and future in the linked Zillow research. I think I’ve said enough for now and the graph tells the story. Even pessimists are optimists.

A Shout Out

No, not a shout out to myself! Kind of. It is award season in real estate after all.

I am proud to share the two 2022 awards I won — one in Westchester and the other in NYC. A most sincere THANK YOU to my family, clients and referral partners.

However, the shout out goes to the most modest person I know in real estate, I happen to be married to her, and who will probably kill me me for this but who deserves the recognition.

Angeli DeCecchis

1. 2022 New Development Deal of the Year Winner

2. Head of Sales for the Top Selling NYC New Development in Q4 2022 (and is only selling faster in Q1 2023)

3. Two top 5 Manhattan Luxury Sales in February 2023

4. And she has a trophy case filled with lucite achievements… like Head of Sales for the #1 Selling Building in 2021… And on and on, and on and on

— outro —

It’s all good

You know very well

Who you are

Don’t let ‘em hold you down

Reach for the stars

—

Share Inside the Market

Because it shouldn’t be any other way, this year is already off to the races…

Some things change, AI, and ChatGPT setting a record for fastest growing user-base in history.

And some things don’t, the Fed hinted at rates hikes coming to an end and even said disinflation more times than inflation last week. Maybe the next phrase Powell coins will be transitory disinflation, who knows. Mortgage rates continue to drop, causing what feels like whipsaw in buyer and seller sentiment, prices and negotiations. Middle management tech jobs are being purged while over 500,000 other jobs were added last month, truly confounding experts and economists alike.

Feeling dizzy?

Not that I have the cure, but if you’ve read my letters for any length of time you’ve grown to stumble upon a few (too many) puns I’ve shared to offer strategies to instill confidence in your real estate decisions amidst otherwise complicated times.

See the Tree Through the Forest (I know it’s the other way around)

A Flight to Quality

The Fundamentals

A Tail of Two Markets

OMOF

I hope these have helped in some way because when the going gets tough the tough get going. Sorry, couldn’t help it.

Remember, opportunities in real estate are born in complicated times, a little stress goes a long way. When markets go up, up, up complacency sets in. We are entering a time when digging in and opportunity hunting will seize the day, so don’t be blinded by turbulence or surprised when you find something others have missed. Focus on fundamentals and make sure to work with those who share the same passion as you!

Enjoy this month’s newsletter and please reach out with feedback, comments and to discuss opportunities.

Craig

Get in touch: reply to this email or 914-882-5011

About Me

Market Reports

PS- I promise the ending is worth it.

Share

What I Read Last Month

Yes, I did read more than just the below articles last month; definitely got through a few children’s books too :)

Seriously though, as far as the most relevant real estate reads go, I think the topics below capture the major residential real estate trends currently impacting NYC, Westchester and surrounding areas.

Click the images to link to the articles and of course I’ve added my two cents (sense) as well.

A NYC Rental Market Frenzy?

A curious client forwarded this article to me and like I suggested to him, please read with a grain of salt. While the reporter did an impressive deep dive and scratches towards certain conclusions, it’s important to consider what segments of the market (1) left NYC and never came back (2) left and kept a part-time residence (remember the data I showed in December showing NYC is the second home capital of the country, if not world) and (3) left and returned(ing).

Regarding multifamily supply, warehousing, shadow inventory and the like… very true that a lot of newly constructed rental inventory hit the same four NYC neighborhoods at the same time (Downtown Brooklyn, LIC, Hudson Yards and Greenpoint) driven in large part by NY State letting the 421a tax abatement expire and the race to build before a deadline, so naturally absorption will seem slow. The immediate benefit, which is left out of the article, is all of the affordable housing apartments delivered alongside these projects as well as reimagined parts of the city, like Greenpoint’s riverfront promenade. And no, developers are under no obligation to rent (or to sell) apartments, so yes, warehousing and shadow inventory is a thing; it’s the risk early adopters take renting and purchasing in new buildings → I talked last month about those in the industry with the least best intentions or more politely said, an industry filled with those looking out for themselves. So all the more reason to work with a trusted advisor ;)

Lastly, keep in mind a multifamily developer’s incentive is to get the highest valuation for their real estate, this is achieved by getting the highest rents, not the fastest absorption. And for any consumer curious what large landlords automatically set their rents using Real Page, you can often tell by watching asking rents that go up and down a few times each month.

Foreign Buyers

I’ve been sharing thoughts on when to expect foreign buyers to re-enter the NYC market for a while now. Here are some things that need(ed) to happen and as they fall into place let’s see if foreign buyer demand continues to perk up.

1. US lifts travel restrictions (check)

2. Dollar begins to weaken (happening now)

3. Other countries lift their travel bans, China (happening now)

4. Foreigners reacting to their tighter domestic policies / political unrest / currency debasement (happening now)

And when your closest neighbor closes their door…

you should continue to lead global markets and keep yours open NYC.

Making NY Work for Everyone

NY State and NYC’s mission statement is “to make New York the best place to work in the world—no matter what you do—that can fuel a new generation of inclusive growth.”

Below is a high-level summary, flip to page 50 in the PDF to read a bit more and good luck reading the other 158 pages.

This all sounds great and time will tell how it’s executed. As far as residential real estate goes — hopefully we’ll begin to see office to resi conversions and removal of other red tape for future development. I also think, given how much access to public transportation and reduction of car demand is stressed, housing near mass transit hubs will continue to outperform over time both in NYC and suburban markets.

Goal #1: Reimagine New York’s Business Districts as Vibrant 24/7 Destinations

• Create flexibility to repurpose space and fill vacancies with a variety of uses

• Invest in beautiful, permanent public space

• Offer new reasons to go to business districts

Goal #2: Make It Easier for New Yorkers to Get to Work

• Increase supply of mass transit options

• Reduce demand for cars and trucks

• Strengthen employment hubs and workspaces across all five boroughs, so that people can work closer to their homes

Goal #3: Generate Inclusive, Future-Focused Growth

• Establish New York City as a hub for future industries and innovation

• Ensuring that workers have access to housing by dramatically increasing our supply, with a “moonshot” goal of meeting the need for 500,000 units over the next decade

• Ensure that growth and access to opportunity is fair and equitable

Additional on the topic:

https://www.nytimes.com/2023/01/10/nyregion/hochul-ny-state-of-state.html

https://www.nyc.gov/assets/planning/download/pdf/plans-studies/office-reuse-task-force/office-adaptive-reuse-study.pdf

Suburban reaction to adding more housing supply:

As you can imagine, small towns are pushing back. They don’t want (1) the density (2) the state telling them what to do or (3) the charm of their areas to change. So I expect bigger projects to happen where we already see them happening and more small to medium sized projects in underutilized sections of towns that will require changes to zoning. And if you’ve followed me for a while you’ll know how bullish I am on forgotten areas in Westchester towns within walking distance to train stations → opportunity for individual investors.

https://gothamist.com/news/gov-hochuls-ambitious-housing-plan-meets-suburban-blockade

National Real Estate Market Forecast

Another data point forecasting NYC prices to be relatively flat amidst national doom and gloom real estate headlines. The #1 projected market for 2023 is Miami, which continues to build upon it’s impressive demand.

Hudson Valley Trends

The Greater Hudson Valley saw a surge of Covid related real estate demand with prices 2-3x in some areas. But with only 2.5 months of supply currently on the market (a buyer’s market is over 6 months of supply), and little new construction on the horizon, these counties (Westchester included) should expect prices to flatten, but not crater. I for one think 2020-2021 was the start of a continued renaissance for second home buyers in the Hudson Valley and while we might see a pause in prices, demand will persist.

It’s a Seller’s Market Somewhere

You are not alone.

I’ve had numerous clients frozen in disbelief as they are caught up in bidding wars and above ask trades. Wondering how pervasive the sellers market still is, I went to the data to see if it’s just what we were looking at or if there was a larger trend at play. The trend I see is good real estate + affordability = a seller’s market. Like I said last month, a flight to quality. On the contrary, zip codes that are clustered with luxury property and expensive homes are the weakest relative performers.

Here are the Top 10 NYC and Westchester neighborhoods ranked by % of closed sales over the asking price, Q4 2022 data.

Brooklyn has 8 of the top 10 neighborhoods.

Westchester still favors sellers in some northern towns, a few river towns and pockets of LI Sound towns.

It’s a buyers market somewhere too, but you’ll have to call me to find out where. I can’t just give it all away for free, right?

New Developments for Everyone

Here are a few new development projects I saw this past month that I believe the buyer in you, from entry level to the most luxurious, should know about.

Mandarin Oriental Residences on 5th Avenue

When your original boss in the industry calls, tells you she’ll be in town on a certain day and time and wants to meet, you clear your calendar and make it happen. For me, it was great catching up with Louise Sunshine last week; a real estate icon from whom the entire new development marketing and sales industry was born. Louise is now head of sales and marketing for SVHO; the irony is palpable!

I was fortunate to get an overview of their residential portfolio and a personal introduction to SHVO’s latest project in Manhattan, Mandarin Oriental Residences on 5th Avenue. It’s been their strategy to not advertise apartments for sale here, but rather have buyers come to them — so to the broader market their inventory is unknown.

My experience with the Mandarin brand dates back to the early 2000s with their first branded residences in NYC at the Time Warner Center. I was also fortunate to explore projects with MO in Chicago and the Turks and Caicos and am still in touch with some execs at the brand, so am very familiar with their standards and level of service. And for a period of time MO was my favorite hotel in Miami until Ang and I stayed at the Raleigh, oh wait, SHVO will soon be selling what will be the most expensive condos to hit the Miami market at the Raleigh, the coincidence. I digress.

Hotel branded residences are not unique anymore, but what distinguishes this one is that there is no hotel at the property. 65 owners will benefit from full hotel services, a rooftop Daniel Boulud restaurant, spa, pool, etc. without the transient nature of hotel guests, this doesn’t exist elsewhere. The homes are delivered fully furnished and accessorized to make it the most turnkey, private and effortless ownership opportunity on the market, anywhere.

Based on how NYC has recently received other hotel branded residences like Four Seasons, Aman, the NoMad Ritz, I expect that once MO on 5th Avenue is complete this spring and doors are opened for buyers to see, it will be next on the list of sought after pieces of collectable real estate.

Pssst, prices start at $2.5M and I was shocked at what the comps are ($$$) for full serviced, fully furnished, extended stay options in Manhattan. Investors, can you say cashflooow?

Tribeca Green, 210 Warren Street

I first talked about this in December, so you can go back and read what I said. The short story, this is a Robert AM Stern building, and as a reminder RAMSA buildings are the #1 price performers in every Manhattan neighborhood.

So here’s your chance! The sales team just gave me a nod and said it’s time to bring buyers in and with prices starting from the $700,000s; both primary users and investors should give this a hard look as there is limited inventory for sale.

Post House | 533 Pacific Street

I was a little late to the party going to see Post House in Brooklyn, but boy what a pleasant surprise. The rendering above is the entrance from Pacific Street, quintessential Boerum Hill. Through a gated arched entrance crafted from the former post office, you land upon a landscaped garden and the building’s front door beyond. Private, serene and really well done.

There are only 41 homes, the amenity suite has everything you need and monthly carry is very low for all that it offers. Prices start in the $1s, $2s and $3s for corresponding bedroom counts and all inventory types have been selling extremely well. Sometimes buying later in a project’s sales cycle is the right thing to do, it takes risk off the table, and I would certainly put Post House in the category of it’s not too late to buy. A testament to quality over quantity that deserves a look from all Brooklyn buyers.

AI Did Not Write This

Thank you to a friend, who runs a digital agency in NYC, for clueing me in to ChatGPT. A few days after he convinced me to try it out, ChatGPT blew up and now who hasn’t heard about the fastest adopted piece of tech, ever.

I promise I didn’t use AI to write anything up until this point, but it did write the answers to my questions below. Disclaimer, this is a real estate newsletter so I didn’t get off color with the back and forth, but there are some really smart and other hysterical use cases popping up. Enjoy and I can see a future where a human’s value is in his/her ability to prompt the software to return the best content as it gets plugged into unique and valuable data sets. And it’ll be exciting to see how this fits into the realm of real estate beyond listing copy and tweets.

The following is me experimenting, my real questions and it’s unedited answers, and as you can see, even my use got better the more I tried it out.

Enjoy and please make it all the way to the end :)

Please draft a bio for me in Italian:

Craig DeCecchis è un esperto immobiliare con oltre 20 anni di esperienza nel settore. Ha aiutato centinaia di clienti a comprare e vendere proprietà in tutta la regione, offrendo un servizio personalizzato e una conoscenza approfondita del mercato immobiliare locale. Con una solida formazione accademica e una vasta rete di contatti, Craig è in grado di fornire ai propri clienti informazioni preziose e opportunità uniche per aiutarli a raggiungere i loro obiettivi immobiliari. La sua passione per l'immobiliare e la sua dedizione ai clienti lo hanno reso un intermediario affidabile e rispettato nella comunità immobiliare.

Translation

How can you help buyers and sellers of real estate in the East Village in NYC?

For a buyer interested in purchasing a property in the East Village in New York City, I can provide the following information:

• Average prices: In the East Village, properties can range in price from around $500,000 for a studio or one-bedroom apartment, to over $1 million for a larger condo or townhouse. The exact price will depend on the size and condition of the property, as well as its location within the neighborhood.

• Market trends: Currently, the real estate market in the East Village is competitive, with low inventory and high demand for properties in the area. This can make it challenging for buyers to find the right property, and they may need to act quickly when they find a property they like.

• Popular neighborhoods: Within the East Village, there are a few sub-neighborhoods that are popular with buyers. These include Alphabet City, the Lower East Side, and St. Mark's Place. Each of these neighborhoods has its own unique character and vibe, and buyers may want to research which one is the best fit for their lifestyle and preferences.

• Getting pre-approved for a mortgage: In a competitive market like the East Village, having a pre-approval letter from a lender can give a buyer an advantage when making an offer on a property. This letter demonstrates to the seller that the buyer is a serious and qualified buyer, and it can help the buyer make a more competitive offer.

• Negotiating tips: When making an offer on a property in the East Village, it's important to be aware of the current market conditions. If the market is competitive, buyers may need to make a strong, attractive offer right away in order to stand out from other buyers. Additionally, buyers may want to consider including a personal letter to the seller, explaining why they are interested in the property and why they believe they would be good owners. This can help the seller see the buyer as a person, rather than just another offer, and can increase the chances of the offer being accepted.

Write a real estate blog for February 2023 focused on Westchester County, NY. Include Scarsdale, Sleepy Hollow and Armonk. Write in a casual, funny tone:

Westchester County Real Estate Report - February 2023

Attention all real estate enthusiasts! The Westchester County market is on fire, and you don't want to miss out on the action. Let's dive into what's happening in some of the hottest towns in the area.

Scarsdale: This upscale community is one of the most sought-after in Westchester County, and for good reason. With its top-rated schools and beautiful homes, Scarsdale is a popular choice for families and professionals alike. But, be prepared to pay top dollar for a slice of this suburban paradise.

Sleepy Hollow: This charming town is located along the Hudson River and is known for its rich history and breathtaking views. With its affordable homes and relaxed lifestyle, Sleepy Hollow is a great choice for first-time homebuyers and those looking for a quieter pace of life.

Armonk: This affluent town is located in the heart of Westchester County and is known for its upscale homes, beautiful parks, and excellent schools. With its close proximity to New York City and top-notch amenities, Armonk is a popular choice for those looking for a suburban lifestyle with urban conveniences.

The spring buying season is almost here: As the weather warms up and more properties hit the market, the spring buying season is the time to shine for Westchester County real estate. So, whether you're in the market for a luxurious home in Scarsdale or a charming cottage in Sleepy Hollow, now is the time to act.

The Westchester County real estate market is hot, hot, hot and these towns are at the top of the list. Whether you're a first-time homebuyer or a seasoned pro, now is the time to get in on the action and find your dream home in Westchester County. Happy house hunting!

Can you write an Instagram post and include 5 hashtags for my recent signed contract at 50 Bridge Street Brooklyn apartment 409

"🎉Big news alert! The contract for 50 Bridge Street, Brooklyn Apartment 409 is officially signed! This stunning property has it all and I couldn't be more excited for my client to call it home. From the soaring ceiling height to the unbeatable location, this lofty apartment is a true gem. Congrats to the new homeowner! #50BridgeStreet #BrooklynLiving #HomeSweetHome #LuxuryRealEstate #RealEstateSuccess"

Draft an email with the following: A reply regarding the Sponsor’s counter offer for the penthouse at Central Park Tower. Include our proposed price of $100,000,000 and that we are asking for 2.5% in credits. Request a later closing date because we want the staircase sealed in gold first.

Subject: Re: Counter Offer for Penthouse at Central Park Tower

Dear [Seller's Agent],

Thank you for your email and for presenting the counter offer on behalf of the Sponsor for the penthouse at Central Park Tower. I appreciate your time and effort thus far.

After reviewing the counter offer and discussing a few of the points with my client, we understand the value and potential of this stunning property and believe that a mutually agreeable deal can be reached.

Regarding the price, we propose a purchase price of $100,000,000. We understand the Sponsor’s position, but believe this figure is a fair and reasonable offer based on market conditions and other recent penthouse sales along 57th Street.

In addition, we would like to request an additional 2.5% in credits towards closing costs, which we believe will help to further align our offer with the Sponsor's expectations.

Additionally, my client has a specific request for the closing date of [closing date]. They would like to request this later date to ensure the staircase is sealed in gold prior to closing and believe this will allow sufficient time for the work to be completed.

I would be more than happy to schedule a call with you to discuss further as we work towards a mutually acceptable agreement.

Thank you again for your time and I look forward to your response.

Best regards,

Craig DeCecchis

Write an ending to my February 2023 real estate newsletter focusing on Manhattan, Brooklyn and Westchester called Inside the Market. Please thank my readers. Politely ask them to forward to those they think would be interested and subtlety remind them that referrals are most welcomed. Include a dad joke and write it like Shakespeare.

And so, dear readers, we bringeth this missive to a close. In the realm of Manhattan, Brooklyn and Westchester, 'tis a market most fair, with many a tale to unfold. My newsletter, Inside the Market, doth bringeth thee news and insights with glee, And I hope thee hath foundeth it most informative, verily.

Now, we thank thee, kind sirs and madams, for thy patronage most true, And asketh of thee, to spreadeth this news to those who might be interested too. Thy referrals are most welcomed, we say with grateful hearts, For they be the very lifeblood of our business, and keepeth it from falling apart.

And lastly, a jest for thee, a dad joke most silly, "Why did the scarecrow win an award? Because he was outstanding in his field, willy-nilly!"

Fare thee well, dear friends, until our next correspondence dost unfold, In the realm of real estate, our adventures shall always be bold!

Share Inside the Market

Happy New Year and please enjoy my annual letter.

—

Since going off on my own three years ago, in the middle of Covid lockdowns, it was an uncertain time to start a new venture. Supported by my family, most significantly my wife, I was fortunate to have the opportunity to set out on this journey representing great properties and advising private clients like yourself.

Staring at a blank canvas in front of me and with no directions on how to get where I wanted to go, I listened to some sage advice to navigate the uncertainty by starting with the fundamentals.

While the purpose of the newsletter I craft each month is to take you inside the real estate market; to share what I see, what I hear, what you might not know, as well as opportunities I believe are special and unique — this month will be bit less heavy on all of that and instead will lean hard into more broad considerations in real estate for 2023 and beyond.

As this year started, what quickly occurred to me is how important psychology is in real estate, the funda‘mentals’.

So much of the time we as advisors and you as clients get caught up in comps, square footage, $psf, photos, videos, finishes, amenities, taxes and on and on. It’s understandable that we do, because a lot of the time these data points are tricky to assemble and compare as our market can be fraught with incomplete data, unreliable sources and sometimes controlled by players with the least best intentions (yes, your suspicion is true).

What I mean is, it’s hard enough finding the right property and underwriting it for yourself that we forget how hard it is to make the bigger decisions, like if now is the right time to buy, sell or invest. The bigger / broader decisions become hardest because they carry the weight of uncertainty and the consequence of making the wrong one with a lot of money on the line. It becomes psychological as doubt peeks over our shoulder. You know, when the market is going up, we all get drunk on euphoria; let’s flip a house, buy the dip, Roaring Kitty, meme stonks, FOMO… and when the market stops, most get paralyzed, do nothing and miss the next best opportunities even as the assets they want are now on sale. Let’s call those OMOF, Opportunities Missed Out of Fear.

As far as annual predictions go — we all love reading them, but like unfulfilled resolutions do they actually help us in the year ahead? My take… predictions are good for headlines and clicks because human nature grasps for certainty in the unknown that lies ahead. But the bad is, as educated guesses, even the best-intentioned predictions are usually wrong.

Here’s an example I recently shared; at the end of 2021 the top Wall Street analysts predicted no Fed rate hikes until Q1 2023. If you listened to that as fact or didn’t adjust, boy was 2022 a rude awakening!

Ok, so now it’s 2023 and the first Fed rate hike was like so 10 months ago and the indigestion from your declining home value might not sting as bad… This happens, prices go down. It’s happened before, then prices go up, and then they’ll go back down again, and up. What matters now is being the most prepared you can be to make the best decisions on the home you own, what you’re considering buying, selling, investing in, or with the portfolio you manage.

So if we all accept uncertainty is something we can’t control, let’s focus on what we can — the fundamentals.

—

Before we get to the meat and potatoes of this note, let’s pause for a data break. For those itching for numbers, click here for all the latest market reports. In the meantime, my top 5 data points of 2022 are as follows:

1. The best-selling new development in Q4 was 450 Washington in Tribeca. Told ya so! It’s not too late, call me and I’ll remind you why it’s leading the market. Hint: it’s the fundamentals!

2. Some perspective — in Manhattan, Q4 closings totaled just over 3,000, which still exceeded the sales figure for every fourth quarter from 2017 through 2020.

3. The luxury market in NYC was incredibly resilient in the back half of 2022 when the broader market weakened. Wealthy buyers are not as effected by a slowing economy and are using softer prices and more concessions to their advantage.

4. The luxury market in Westchester cooled, so it’s a good time to shop for a great big house or a weekend home for the city folk.

5. In NYC and Brooklyn, gravitation towards value increased, one bedroom and studio inventory dropped as first-time home buyers jumped at lower prices. In contrast, two- and three-bedroom inventory increased as demand waned.

I wish you a safe, healthy and prosperous 2023 and look forward to connecting with you at some point during the year.

Craig

Get in touch: reply to this email or 914-882-5011

About Me

Market Reports

PS- A friendly reminder that my newsletters aren’t meant to digest in just one sitting. So when you’re looking for something to do during your Dry January, consider coming back here and picking up where you left off.

Share

Subscribe now

Real Estate Fundamentals

Your future self will thank you for reading.

Supply

While higher interest rates have cooled housing prices as well as the pace of sales, it’s also crippled inventory today (sellers aren’t selling) and will have a tail whip on the longer term (builders have slowed building).  As the cost of capital increases (interest expense on acquisition and construction loans) developers will sideline and delay projects. This will have a compounding negative impact by not materially adding to the housing supply that is already in a 5 million home deficit. Check out this tracker for markets across the US. The darker the red, the greater the shortage.

Fannie Mae talks about it on a national level.

I’ve talked about shrinking supply on a local level.

And here is the last 10 years of for-sale inventory in Westchester, wow!

Affordability

Interest Rates, duh

Welcome to Finance 101. The yield curve has inverted, which means investors are buying more long-term certainty (10-year notes) vs short-term risk (2-year notes).  It’s when the yellow line goes above the green in the chart below, 2-year now higher than 10-year.

The bond market typically leads the Fed, just like how the 10-year went up this time last year before the Fed started raising rates (yellow and green moved higher before grey line in March 2022). And because mortgage rates are most closely tied to the 10-year, that’s why during these last few Fed hikes mortgage rates have actually been dipping. Who knows for sure, but the data is hinting we are closer to the end than the beginning of rates going up.

Utilities

I don’t know about you, but my heating and electric bill sucks. However, over time, the cost will go down as the US has passed laws and is investing heavily to drive down energy prices. It’s already happening on the margin where homeowners are selling their unused solar capacity back to the grid, and well, that’s about to become more mainstream. This is one example of many that will bring costs down and affordability up across the board over time.

Start watching at 35:00, just for a few minutes. Innovation is a wonderful thing!

Real Estate Taxes

Probably won’t go down :) But we know how meaningful abatements are and what lower taxed suburban towns like Rye and Armonk can do for property values. In NYC 421a or 485w or the 123xyz will come back in some form or another because the city and state need to incentivize affordable housing development. And when it does, the condo projects that benefit will be great places to invest.

Maintenance

In city buildings maintenance has been going up the last few years, inflation. As a result, buyers are more price sensitive and therefore willing to sacrifice building amenities for cost savings and have looked to co-ops and efficiently run condos to offset the higher costs. A long-winded way to say, austerity pays.

Quality of Life

Desirability of NYC and Westchester

Go back and read my note from last month reiterating the appeal and demand for owning real estate in our area, it’s compelling, and many of you have reached out to me expressing feelings of reassurance. I didn’t expect that and thanks for the wonderful feedback!

The Government is trying to be proactive

It’s also a priority of the city and state, read more here. Including finally showing signs of supporting office to resi conversions.

The Covid Impact

We all know that Covid had a generational impact on how and where people live. Private outdoor space, workspaces at home, weekend homes outside the city and part-time residences in cities like Miami have become essentials to those who can afford. I think the early adopters made quick changes and as they settle into their new lives those they influence will follow suit.

—

What does this all mean?  Simple.  Supply and Demand.  While we are seeing a softening market today, the shortage of housing supply is a problem that’s not getting solved and is actually being made worse in today’s higher rate environment.  An unintended consequence with dare I say longer term housing price inflation on the horizon?!

Tying it together, if you believe demand in our area isn’t going away, when affordability picks back up what do you think happens to price?

The Real Estate Scale

Unlike the smooth sound of the 70s love song, real estate prices don’t go up ‘Always and Forever’.  And so when prices don’t, but you still want or need to buy, sell and invest what do you do?

You look at the fundamentals and opportunities will appear amidst the disjointed puzzle.  Huh?  Well, if the market was a scale, which it actually is, it would have more than two sides.  Many things applying pressure from different directions to make price go up and down.  And because there are many things, many opportunities emerge in different places in times like these.

However, this is difficult for most to see when prices stop going up Always and Forever.  Why?  Well, the work gets harder when prices are on the way down, going against the herd is tough and a little thing called lack of confidence plays with our rational selves. OMOF.

So what can you do to find buying opportunities or to get the most $ out of your sale?

Take the time to understand what’s going on and driving the real estate market.  Both the narratives and the reality.

Here’s the simplest way I can illustrate and explain what I mean, where we are today and as a tool you can use to plot and evaluate your real estate transactions.

Macro drivers are Affordability and Supply. Property specific drivers are things like Location, Condition, Uniqueness and Amenities, which can push down or pull up price.

We are somewhere near the yellow arrow as prices are being pushed down by declining affordability but propped up because of lack of supply.

Here are some takeaways I see:

1.    As supply stays low, prices will stay higher than you might expect even as affordability drops.

2.    As supply stays low, there will be less mint condition, well located, move-in quality real estate so don’t be surprised by continued bidding wars when buyers come across these better than the rest listings.

3.    As supply stays low, areas that have been underdeveloped or previously ignored, but with good access to transportation are the opportunities investors should be scouting out.  

4.    Demand factors are things sellers can control even in a buyer’s market. Maximizing value for a seller is not about telling them how great what they own is or over-inflating a valuation to win their business, they already believe that more than anyone, it’s about turning their weights into balloons so their property can connect to a buyer on an emotional level.

5.     The green line is bubble territory. It starts out when prices have come down, borrowing costs are lower than they’ve been, and builders are adding supply. NYC and Westchester are not in the green zone.

A Flight to Quality

If I had to summarize today’s market it would be that we are experiencing a Flight to Quality. Great real estate’s prices are still strong, still have multiple offers and owners will be rewarded for creating and maintaining value. Real estate with flaws will languish, sit on the market, get price chopped and will be the casualties of this new environment. Don’t believe me? Go to your favorite real estate site and sort listings by days on market, you’ll see what I mean. I’ve been describing this environment as a Tail of Two Markets; one will prosper and the other will suffer. Use the real estate scale to help you see your situation more clearly and take advantage of this time to fly to quality in real estate for yourself. Here are a few tips to consider.

For Buyers

Consider trading up. Here’s an example you can apply to your budget. Math alert, be patient, it’s worth it! You just might figure out how to get more donuts too.

Say you own a house that would have sold for $1.2M last year and today you’d get $1.05M or 12.5% less.

You need more space and can afford to buy a bigger place, but you’re hung up on the lost $150,000.

If you trade up to the bigger house that would have sold last year for $1.75M that you can get for $1.53M (12.5% less) today, you’d be saving $220,000.

$220,000 - $150,000 = $70,000 Yes, you’re net $70,000 better off buying today vs last year.

You say, “yeah, but mortgage rates are higher.”

I say, “do the math.”

Last year: $1.75M purchase, $1.4M mortgage, at 4%, $6,685 / month.

Today: $1.5M purchase, $1.2M mortgage, at 5.75%, $7,000 / month.

$7,000 - $6,685 = $315 / month more today.

$70,000 better off / $315 more in a monthly mortgage payment = 222 months.

This means it would take 18 years for you to be worse off by trading up in today’s market.

But, you’ve bought the same house you would have last year and since you’re financing you put down $50,000 less! Go buy some new furniture or a nice gift for your broker.

Let’s keep going… by paying less this year you put $50,000 less down and apply that to your down payment it would lower mortgage to $6,700, only costing you $15 more per month.

And when prices go back up by whatever %, the gain will be more on the $1.5M house vs staying put PLUS you’ll enjoy living in the new house.

Don’t paralyze yourself because you’re upset you can’t sell your house today for what you could have last year, it’ll cost you money!

This is what you call a no brainer. Fly to quality and put yourself in a better position when the market turns. Problem is, most people don’t think about the fundamentals.

For Sellers

Your job is to give buyers reasons to fly to quality in your property, and if you do it right, they’ll pay you a premium for it. Be candid with yourself about the weights keeping value down and listen to a trusted advisor who can guide you if money needs to be spent to fix up this or that. Brokerages, like Corcoran, also have programs in place to front these costs with the intention to yield more value. Spend a dollar to make five more type thing. Don’t settle, be creative and find experts who are passionate to help.

For Investors

This is your season, acquisition season. Find opportunities to make quality real estate and you’ll be rewarded. I have some ideas, let’s discuss.

I urge you to find your place on the real estate scale and to turn your weights into balloons because when the market stops going up Always and Forever, like it is now, is when opportunity should be harnessed and readied for the next time. Look Up and buy quality, make quality and sell quality. Stick to the fundamentals, OMOF, your future self will thank you.

Share Inside the Market

Subscribe now

As we get ready to close out 2022 I want to sincerely thank you for reading my newsletters and I’m grateful to have helped many of you navigate the markets.

For me, it’s been a year full of meeting new people, reconnecting with countless others and more recently popping into your inbox once a month with my thoughts on the market. And for those who know me well, know I always love to sprinkle a little sarcasm along the way — so I’m proud to report only two people have unsubscribed from my mailing list this year, which either means only two have actually read what I’ve written or everyone else it too polite to hurt my feelings ;)

In all seriousness, if you missed last month’s note I encourage you to read the Must Read Data as I believe the macro real estate story in our area is too compelling to ignore and worries about the next six months are outweighing the trajectory of the longer term.

Turning the calendar to December it’s fitting for me to take you Inside the Market with a holiday twist. So — giddy-up giddy-up giddy-up let's go!

Craig

Get in touch: reply to this email or 914-882-5011

About Me

Market Reports and More

ps- kind of like the Thanksgiving dinner you just finished, my newsletter is a plate full of mains and sides, so come back and read for seconds and thirds and as always, sharing is caring.

Share

Subscribe now

NYC is a Must Have

We all read about the season’s must have toys, electronics and fashions each year. I’m probably a bit behind the times, but my must have this year is the Samsung Frame TV — finally don’t have to stare at a big black void on the wall — it even comes on an easel to interior designers’ delight.

Speaking of must haves…

NYC is a must have on many, I mean most people’s Must Have Lists. At home and abroad, folks make their lists, check them twice, because they’re gonna make sure they come for a stay or own an address here they can come to and visit.

And for those who doubt and don’t believe here are some facts to rekindle your dimmed NYC spirit.

1. For the holiday lovers, NYC is the most visited city during the holiday season. This year, last year, the year before that and so on…

source: TripAdvisor

2. For the second home lovers, did you know NYC is the most popular second home destination? I’d argue it’s the second home capital of the world. ← There might not be a more important sentence I share in this entire note.

source: U.S. Census Bureau’s American Community Survey

3. For the aspirational, “New York City is the No. 1 place people around the world want to visit and the No. 1 place people most want to move to.” According to the most recent Time Out Index of 27,000 city-dwellers around the world.

4. And for those who already own NYC real estate, they put their money where their mouth is. Manhattan has the greatest % of all-cash buyers compared to any other city, as 60% of ownership is without mortgages. This obviously means NYC real estate owners can afford the big numbers, but more significantly suggests its buyers are most confident in the asset stability of owning in the city. If they weren’t, they’d finance, leverage and put less capital at risk.

More steady than the stock market, less volatile than crypto, more predictable than bonds, and better pegged to inflation than cash, it’s… more in-demand than ever.

—

Add up all the must haves, and as I pointed out last month, “going back the last 30 years if you were a buyer in NYC during any time of soft prices you’ve proven to be a price appreciation winner. Will that change as the city (demand) grows and inventory declines?”

Are you seeing the tree through the forest yet too?

2022’s Top Performers

And the winners are…

2022’s Top 10 Performing New and Recent Developments

Segmented by neighborhood and average $/sf of closed sales only. Yes I know, results might be skewed by disproportionally smaller or bigger sales, but no stat is perfect and I have to say, this is a really great representation of relative performance.

Fun Fact

The top performing buildings in 4 out of 5 Manhattan neighborhoods are designed by Robert AM Stern (RAMSA). Downtown is the exception this year, but if all units traded 70 Vestry would lead Downtown’s list and make RAMSA 5 for 5.

New RAMSA Buildings

I’ll touch more on upcoming building’s next month, but here are a few fresh selling new developments by RAMSA giving you the opportunity to buy at one of Manhattan’s next great buildings.

Tribeca Green, Battery Park City (Sales will start soon and when they do I know who to know to help get you in first)

The Cortland, West Chelsea (I worked on this for four years with Related so know the ins and outs quite well)

Claremont Hall, Morningside Heights (Don’t sleep on this beautiful building next to Columbia University)

—

Midtown

220 Central Park South, $7,838 / sf

Aman New York Residences, $7,742 / sf

111 West 57th Street, $5,478 / sf

432 Park Avenue, $4,872 / sf

Central Park Tower, $4,649 / sf

One57, $3,684 / sf

252 East 57th Street, $3,348 / sf

53 W 53, $3,083 / sf

Baccarat Hotel and Residences, $2,797 / sf

15 Hudson Yards, $2,640 / sf

Upper East Side

520 Park Avenue, $6,991 / sf

1010 Park Avenue, $4,103 / sf

1045 Madison Avenue, $3,815 / sf

109 East 79th Street, $3,743 / sf

150 East 78th Street, $3,288 / sf

301 East 80th Street, $2,985 / sf

151 East 78th Street, $2,813 / sf

1059 Third Avenue, $2,813 / sf

1228 Madison Avenue, $2,766 / sf

737 Park Avenue, $2,604 / sf

Upper West Side

15 Central Park West, $5,975 / sf

250 West 81st Street, $3,258 / sf

200 Amsterdam, $2,728 / sf

378 West End Avenue, $2,711 / sf

One Waterline Square, $2,683 / sf

The Park Loggia, $2,618 / sf

Two Waterline Square, $2,613 / sf

498 West End Avenue, $2,562 / sf

221 West 77th Street, $2,503 / sf

105 West 82nd Street, $2,311 / sf

Downtown

130 West 12th Street, $5,301 / sf

17 Jane Street, $5,185 / sf

155 West 11th Street, $4,648 / sf

The Puck Penthouses, $4,349 / sf

70 Vestry, $3,982 / sf

18 Gramercy Park South, $3,892 / sf

224 Mulberry, $3,815 / sf

443 Greenwich Street, $3,732 / sf

212 Fifth Avenue, $3,491 / sf

Walker Tower, $3,489 / sf

Financial District / Battery Park City

30 Park Place, $3,380 / sf

33 Park Row, $2,469 / sf

25 Park Row, $2,183 / sf

130 William, $2,180 / sf

50 West Street, $2,007 / sf

River & Warren, $1,941 / sf

77 Greenwich Street, $1,806 / sf

5 Beekman Street, $1,743 / sf

The Solaire, $1,452 / sf

123 Washington Street, $1,390 / sf

Brooklyn

5 River Park, $2,045 / sf

1 John Street, $1,896 / sf

Pierhouse, $1,881 / sf

Quay Tower, $1,847 / sf

1 Prospect Park West, $1,799 / sf

168 Plymouth, $1,792 / sf

The Greenpoint, $1,789 / sf

510 Driggs Avenue, $1,771 / sf

145 President Street, $1,722 / sf

Brooklyn Point, $1,683 / sf

Spring Starts Now in Westchester

Compared to NYC, home sales in Westchester follow a strict seasonal calendar and listings fall off a cliff in November and December. And like the bulbs we plant in the Fall the market now readies for Spring. Seasonality in the suburbs is driven by the school calendar, lush Spring landscapes and a touch of ‘this is how it’s always been done’ and a dash of ‘this isn’t NYC’.

Here are the seasons as illustrated by new single family listings in Westchester. The dips are Decembers and the peaks are Mays.

Wild how much it looks like a heart monitor.

If it was up to me, savvy sellers would list when the market is quiet to stand out from the rest. Remember, buyers have vision beyond bare trees and move to the suburbs to enjoy all four seasons… so don’t be afraid to light up your fireplace or to show off your leaf piles, holiday lights and new fallen snow!

However, I can’t prove listing now is actually more effective for sellers. So as someone who’s business is based on data and facts the following is more important for a seller to consider than all others in our suburban market. That is, getting exposure to the maximum number of potential buyers. After all, that’s primarily why you hire a real estate agent isn’t it?

Here’s the area where the Westchester MLS covers:

But here’s where the overwhelming majority of new Westchester buyers are coming from, hint it’s the only area with a net gain and it’s also highlighted in yellow!

So how is the sale of your home being marketed to?

Do you even know?

While preparation for the Spring market starts now (declutter, paint, fix this and that), the strategy to maximize exposure to your most captive yet overlooked audience should be dutifully considered as we head into the most challenging noise ridden Spring market in years.

—

*Shameless plug alert*

If you’re a seller and you ask your agent how they’ll market to the most amount of locals AND buyers from NYC and you’re not happy with their answer please give me a call. Seriously, 914 882-5011.

With an Empty Stomach in Mind

We all have our favorite holiday places and in the spirit of sharing here are a handful of mine with an empty stomach in mind. This isn’t a list of the latest and greatest, but rather time tested traditions Ang (my wife) and I have built through the years. So from my family to yours, enjoy and buon appetito!

Eataly

Because Eataly is the only store that sells Torrone Nurzia from my dad’s hometown. A must have Christmas chocolate tradition and is a bite you should most certainly try.

Myers of Keswick, West Village

Love to load up a British-themed gift bag for my brother-in-law, even though I generally won’t touch the stuff :)

La Bergamote, West Chelsea

For your Bûche de Noël.

Dil-e Punjab, West Chelsea

After pastry indulgence across the street, warm yourself up and enjoy the best masala chai in NYC.

One if by Land Two if by Sea, The Village

An oldie but goodie that Ang and I never skip. Enjoy a cocktail by the fire, piano at the bar and beef wellington perfection at a table overlooking the garden.

I Sodi, The Village

For a more casual yet outstanding holiday dinner, go here for the best meal you can eat at a bar.

Peasant, NoLita

Some serious food comes out of my favorite kitchen.

Sullivan Street Bakery

For the most authentic homemade panettone.

Dry Dock Wine & Spirits, Red Hook

For the best selection of craft spirits. The one on the left is ridiculously good.

Calabria Pork Store, Arthur Avenue

No, it’s not for a taste of the most cured ceiling in NYC.

It’s to pick up a few cases of dried Italian figs. There’s nothing else like them and no where else sells anything close to as good as these.

Zero Otto Nove, Arthur Avenue

When in Rome Arthur Avenue, you just can’t resist… stop across the street to enjoy the flavors from their wood fired oven.

—

Basta!

—

Share Inside the Market

With so much happening in the NYC and Westchester real estate markets this past month there’s a lot to touch on, so I tried to share something for everyone in this month’s newsletter.

I’ve had many spirited conversations lately with buyers, sellers, investors and other professionals who all have their opinions on the market, which inspired me to take a hard look at what the data says drives price in our market over time. So happy reading and don’t miss the Must Read Data at the end.

As always, my goal is to look at the market beyond headlines and provide meaningful content to give my clients a competitive edge when buying, selling and investing in real estate.

Please share with your network and don’t hesitate to reach out!

Craig

view my portfolio

Macro Real Estate FAQs

How much do prices in NYC need to correct compared to elsewhere?

Let’s look at it in a few ways:

1. Globally, NYC is # 20 of 25 on UBS’ Global Bubble index, which measures price appreciation, supply and other economic factors for major gateway cities. Why is NYC so low on the list? Well, it had been oversupplied with new developments leading into 2020, Covid discounts absorbed inventory, the market is now back to normalized 2017-2019 average volumes and prices, and new inventory forecasts to be multiples lower in the years ahead. Click image below for full UBS report, but on a comparative basis NYC has not been bubbly.

2. Domestically, prices in NYC and Westchester have remained relatively stable vs other parts of the country. As seen in the map below, Zillow data is being used in an interactive map showing price changes in regions across the country. The areas in red are where prices are dropping the fastest, many of these are ‘pandemic’ cities where populations exploded in 2020-2021, housing couldn’t meet demand and buying was fueled by very low rates. Other tech heavy areas, like SF, are being hit twice as hard by higher rates (1) depressed tech equity valuations and (2) mortgage rates, so it makes sense real estate prices in tech centric areas are dropping faster than others. The inverse of this chart would generally be where prices went up the most, with red areas seeing 50, 60… 200% appreciation (you can thank iBuyers for that) in a short period of time and clearly the reason why they are now leading to the downside. As rates stay elevated it’s safe to assume the red will spread, but by what % is a factor determined by more than just interest rates.

Where will new demand come from?

If 2020 - 2021 were the years of local buyers relocating or trading up, 2023 might start a period of resurgence from foreign buyers. Foreign money has been slow to come back to NYC due to Covid lockdowns curbing international travel + geopolitical noise + increasingly restrictive foreign governments + most significantly, a strong dollar. Once these factors loosen, in particular a softer dollar, expect to see a pop in foreign demand hunting for the asset safety of NYC real estate.

What is the Big Money doing?

I asked a few contacts at large real estate financial firms to go on the record and offer their take on markets and how their funds are positioned going forward. Understandably, they took a pass to go on the record.

With that said, and as I wrote about recently in a separate posts, we can look for clues to figure it out.

Click to read:

Click to watch:

Big money’s strategy is always simple, raise a lot of capital and patiently wait to deploy as prices come down. Patience is the key. They see the fundamentals of systemically low housing supply in the US and are armed to shop as prices come to them knowing supply/demand dynamics are tilted in favor of owners over the longer term. They understand economic cycles and money in real estate is made at the point of entry by the price paid. Keep this all in mind when you read the Must Read Data at the end.

Finding Luxury

Finding luxury when inventory is low, rates and inflation are high and everyone can spell recession can be difficult and might feel ill-timed for those who can afford. Here are some ways I’m advising my clients today in luxury markets.

In Westchester

…and suburbs in general, personalization is the ultimate luxury. The suburban dream is the perfect house you are able to design and build to your taste and need. Reality check, that’s not reality for most people, and with limited new houses and lots to build on being so rare these days, where can buyers turn to find the luxury of personalization?

Renovations, additions and preservations. I touched on part of this last month, so you can go back and read my thoughts on expanding a home as material and labor costs drop. Quick headline stat, here’s a chart of the price of lumber, which is back to 2017 prices and you can do the math of keeping your low mortgage rate and expanding your home…

So, here’s a new topic — preserving older and historic houses.

Some say tear down and build new is easier and more valuable, but the data says otherwise. Across the country, historic houses can sell for 25% more than homes in surrounding markets. A myriad of reasons from being on superior land that was acquired years ago and is otherwise unavailable, to the value of the history of the location / house / architect / people who lived there and because of the collectible appeal of something vintage (like cars, art, jewelry and wine) are not as affected by market downturns yet are amplified in strong ones.

I’m ashamed to admit (not really) but one of my favorite TV shows is called Restored.

Watch a few episodes and it might change your mind on what’s possible with an older home, how it can be personalized, modernized, styled with functionality, and the intrinsic value created with proper period restoration, which ultimately makes for more marketable luxury real estate.

In Manhattan and Brooklyn Resales

…luxury is about finding something unique, without significant flaws, and that is as one of a kind as possible. Not commoditized by a few dozen other identical twins and something that is not easily replicated. This can be achieved across sizes, price points and locations with the right effort and patience to search. This type of real estate commands a premium and will be less influenced by the price of what sold a floor above, below or across the street.

Here’s an example being purchased by a discerning client for less than $900,000. Wow!

At the Very Top of the Market

…privacy is the ultimate luxury. Underground garage entrances, nondescript back doors, porte cocheres, gated entrances, private elevators, full floor living, hotel services, security, private dining, noise reduction, visual privacy, NDAs, purchasing through corporations and more.

In a world with easy access to personal data, social media, financial windfalls and the like, are reasons why privacy for those in any type of spotlight is the ultimate luxury.

Here’s a view looking up from one of the most iconic porte cocheres in NYC at One Beacon Court. Private, powerful and timeless.

One-of-Kind New Developments

Why do some new developments go up in value over time and others don’t? It’s because some projects are fundamentally superior and have unique qualities that elevate their appeal. As someone who helped create these types of developments for 20 years, here are a few I believe have one-of-a-kind attributes to stand up against the rest.

One Wall Street

The only new development with a restaurant, bar and a social club. Ok yes, a few others have restaurants, but you don’t need to be a billionaire to buy at One Wall Street. And with 556 condos, it’ll actually be used and a spirited place to enjoy. As Harry Macklowe says, A City Within a City. Full disclosure, I worked on this project for 5 years and would like to think I had some influence to include this one-of-a-kind amenity. Prices start from the low $1m’s.

450 Washington Street

The last Tribeca waterfront conversion on the most valuable stretch of Manhattan waterfront real estate. Surprisingly, prices start from the low $1m’s and potential rents for investors will scratch $130-$140psf. You do the math, and if you can find better gross margin in a new NYC condo call me and I’ll buy you a beer.

111 West 57th Street

The one and only tower on Billionaire’s Row that is perfectly centered on Central Park. And with only 60 residences in the building and even fewer with this view, one-of-a-kind indeed. Perfectly centered from $25m.

Must Read Data

I’m happy to share detailed quarterly, monthly or weekly data with whoever would like, just reach out and I’ll send it along.

But, for this newsletter, I wanted to share a mile high view using data to show what primarily drives price in our markets. Apologies the time frames aren’t aligned, but there’s enough here to tell the story.

Follow along.

1. Here’s a 30 year price study that Corcoran prepared. You can layer in the Dotcom Bust, 9/11, ‘08/‘09 Financial Crisis, Covid, 2022 Inflation + Rate Hikes to see the general impact these events have had on pricing in Manhattan. Some, but not much to change the trend.

2. This chart from Corcoran shows average price per foot from 2007 to 1st half 2022 and includes an average trend line. Notice the peaks above the line and dips below the line.

3. This chart from Corcoran shows total listed inventory from 2007 to 1st half 2022. Notice the peaks above the line and dips below the line. Even considering leads and lags, when you compare this to the average ppsf chart, you’ll see the impact inventory has on price as these two sets of data are inversely correlated. And to remind you of a stat I’ve been talking about for months already, next year new supply will be down 60 - 70%. This is a trend that likely won’t reverse anytime soon due to rental to condo conversion restrictions, fewer developable sites, and supply chain issues that have punted new projects further into the future.

4. Lastly, this is NYC’s population data sourced from the United Nations. Starting in 1992 and they forecast out to 2035, notice the flattening of growth during Covid and the projected increase over the next 10 to 15 years.

5. Tying it all together:

   Yes, mortgage rates have had an impact over the last 6 months and probably will for the next 6 months, but rates won’t go up forever. They’ll level off or come down, but most importantly will find a new equilibrium that we’ll all manage our lives around. What’s more certain and what the data clearly shows are the drivers of long term price appreciation 1) population growth and 2) declining inventory. With less supply and more demand, what will happen to prices in a market compounded with cash buyers?

   Manhattan

   Going back the last 30 years if you were a buyer in Manhattan during any time of soft prices you’ve proven to be a price appreciation winner. Will that change as the city grows and inventory declines?

   Brooklyn

   The same holds true for Brooklyn, only it’s a lifestyle choice and not a discount choice anymore, so the price delta to Manhattan is closing with Brooklyn prices rising at a faster clip over time.

   Westchester

   Here’s Westchester single-family inventory for the last 10 years. Yes, there are some large Toll Brothers style developments that add product, but those homes are on the margin and so where else is significant new supply coming from? It’s no wonder the rent is too damn high :)

7. Actions to consider:

   Owners

   If you currently own, be honest about your real estate and consider trading into something more unique, better insulated from any further downturn and in position to increase in value more than what you currently own.

   Buyers

   If you are looking to buy, remember that better returns are made by the price you pay. Use the short term trend to your long term advantage.

   Sellers

   If you are a seller, sometimes cost effective improvements can yield big results. On a recent sale of mine the owner agreed to spend a modest amount on improvements netting him 5% more than the direct comp, which sold by the way when the market was in a frenzy. Here were the end results!

   

   Investors

   Get ready to go shopping.

Thanks for reading and if you’ve made it to the end please consider forwarding to those you think will value the content. Thanks!

Share Inside the Market

Subscribe now

I’ve been putting out a variety of data, trends, and recaps on social media and to a number of you individually. The feedback has been positive along with encouragement to share with a wider audience, so here we go. As always, my goal is to look at the market beyond headlines and provide meaningful content to give buyers, sellers and investors a competitive edge.

Please share with your network and thanks for your support!

Craig

Something Rare

This is a view from 450 Washington Street in Tribeca that I took last week. On the left is 70 Vestry, the most expensive price per square foot condominium in downtown Manhattan.

450 Washington is about to launch sales and will present the rarest of opportunities to own an attainable piece of real estate on the most valuable waterfront block in all of New York City. That’s what you call Real Estate 101.

As I always say, great real estate will outperform any market, and this is great real estate. Location, location, location. Location! In NYC we are seeing dollars come out of the stock market and crypto and go into premium real estate, aka a flight to quality of hard assets.

I don’t talk about general real estate opportunities often simply because they are rare, but this is one of the best value buys to hit the NYC market in years and you'll be surprised to learn how attainable the starting prices are and for those investors out there, what the rental comps can yield.

And for those who think prices will come down in NYC and they should wait, maybe so, but new inventory in 2023 will be 60% less than this year and this is on the heels of record absorption over the last two years. Supply ⬇️.

Return of the Co-op?

One hidden trend no one is talking about (yet) is the relative strength in co-op sales in both Manhattan and Brooklyn. The trend since mortgage rates spiked is now clear in my opinion. Buyers are looking for value in total dollars, lower monthly carry and cheaper closings costs → co-ops offer this vs condos. The tradeoffs are the co-op board process, rental restrictions and traditionally slower price appreciation. However, if we are entering a sustained higher rate environment then co-ops just might outperform condos as a primary housing option.

As the data shows from the chart I put together below, % year-over-year change in weekly Manhattan co-op contracts has been increasing and even turned positive over the past 6 weeks (grey area) as mortgage rates spike vs condos, which steeply dropped (blue and orange areas). Certainly something to keep an eye on in the coming weeks and months.

Here’s the math driving this trend for price sensitive NYC buyers, using the average 1BR condo vs co-op to compare today vs last year. The $2,000+ monthly savings is clearly starting to outweigh the co-op trade-offs. And if interest rates drop the cost to refi a co-op is negligible, which will further widen the gap.

Westchester Strong

A few interesting suburban observations the headlines aren’t covering, but are happening while the real estate market continues to rebalance:

1. The prices of building materials, like lumber, continue to drop. As a result some buyers are noticing and I’ve actually been getting inquires from clients looking to build on vacant lots and others are beginning their renovation plans. These folks have been sidelined the last few years waiting it out. I expect this trend to pick up steam as land prices and building costs decline.

https://www.barrons.com/articles/housing-market-lumber-prices-51664305104

2. There are neighborhoods in Westchester where empty nesters continue to sell their houses and downsize / cut costs, so much so that there are all cash bidding wars happening in nearby areas for the smaller downsize friendly properties. This type of product is dramatically undersupplied and presents opportunities for builders and developers.

3.

Applying data to the observations, the above chart points out the steady drop in months of housing supply in Westchester County since the financial crisis in ‘08/’09 vs the national average. Note the divergence between the US and Westchester starting in 2020. This supports what price data is showing; nationally prices are dropping fast and in Westchester single family prices went up in 3Q and any recent dips appear to be in-line with typical early fall seasonality. Despite an increase in interest rates the data in Westchester indicates a continued tight market and stable prices. A leading indicator to watch going forward will be days on market, if that drifts higher expect prices to soften.

3Q Data Teasers

In the coming weeks I will share a comprehensive 3Q update and end of the year outlook. In the meantime, here are some data points that are hot off the press.

Manhattan + Brooklyn

1. The markets are still incredibly strong despite rising mortgage rates and concerns about inflation. 3Q 2022 has been the second strongest quarter for sales in the last 10 years.

2. In good news for buyers, prices are starting to stabilize. More buyers gravitating towards lower-priced homes led to a slight dip in median prices.

3. While contract activity will show a significant annual year-over-year decline, the signed contract activity is equivalent to 3Q’s of 2016 and 2017 and performed better than 2018 and 2019.

4. Inventory reached its lowest 3Q levels since 2017, mainly driven by demand for less expensive listings.

Wait, but the headlines are covering 3Q this way, screenshot below. Context matters and this doesn’t offer context. They had to use dreary cloudy pictures too huh?

Westchester

As mentioned above, the theme in Westchester is lack of supply, which has resulted in:

1. About 15% less homes sold in 3Q 2022 vs 3Q 2021 mainly driven by a 24% drop in available inventory.

2. The average single family home price increased 8% year-over-year.

3. The high-end of the market (over $3M) is the only category that has slowed, the rest remained strong supported by those who missed out the last few years as well as plenty of all-cash buyers remaining in the market.

Subscribe now