Apartment Hunter, Heal Thyself!

Nothing equalizes people like an infectious disease. Even the emotional wounds of a tumultuous love triangle can be soothed when all three scorned and pained lovers take a good look at one another and realize that they all have the same cold sore, just on opposite sides.

Is it too far a stretch, then, to believe that the healing of the ailing New York City real estate market could begin with apartment “buyers, sellers, agents, lenders, and any other stakeholder that has the propensity to allow emotions to enter their decision-making process” admitting to a shared unflattering and unsightly disease?

Realtor Denny Grimes tells Real Estate Radio USA that until all of the players involved in each and every NYC apartment purchase admit to their advanced case of what he calls “expectation-itis”, the real estate market cannot begin to heal. According to Mr. Grimes, "expectation-itis" is an infectious little bug of a mental disorder that’s primary symptom is “wishing things were one way, when in fact, they are not.” Once we get that under control, he says, the market will take care of itself:

“[L]ike water will seek its own level, supply and demand will equalize with some predictability, if the human factor can be minimized. [...] One of the best ways to keep your emotions in check is to keep your expectations in check.”

So how do you know if you're infected and unknowingly spreading expectation-itis to everyone you bump up against in your NYC apartment dealings? Mr. Grimes has a handy checklist of questions with which you can diagnose himself, but it requires you to be brutally honest with your self:

Do you often say, "I don't want to give my home away"?
If yes, then you are a seller who has tested positive for expectation-itis. You believe that you are not getting a fair price for the property you are selling.

Do you believe "today's buyers are bottom feeders"?
If yes, then you are a broker who has tested positive for expectation-itis. You are tired of dealing with buyers who want to pay as little as possible for an apartment and sellers who want to get the highest price possible.

Have you missed out on good property deals because you automatically offered 20% below a very reasonable asking price?
If yes, then you are a buyer who has tested positive for expectation-itis. You believe you should pay less than the asking price no matter how low it is.

Are you waiting for prices to continue to fall before you purchase?
If yes, then you are a "fence-sitting buyer" who has tested positive for perhaps the most grave strain of expectation-itis. You are waiting for NYC apartment prices to fall further, but it might not matter anymore, because financing will be so difficult to come by.

In short, every one walks away from the transaction feeling like a chump, and no one feels more like a chump in NYC's confusing real estate market. So what do you do now? Well don't expect any star-studded telethons or anonymous support groups forming anytime soon. Just be sure you're not looking at that NYC apartment transaction through expectation-colored glasses.



Image: Esophageal Herpes, courtesy of Alex Brollo
GNU Free Documentation License

The New York City Apartment Underground

In a city like New York, “underground” can mean a lot of good things: cutting edge music, avant guard art, exclusive happenings, and/or harmless fun of the illegal variety. When it comes to NYC apartments, however, “underground” is much more likely to mean: illegal sublet, mildew, powerful enemies (real and/or imagined), relapse, outstanding warrants, overgrown alligators, a career in the arts, and almost certainly sharing the bathroom with one or more cannibalistic humanoid underground dwellers (CHUDs).

But according to the New York Times, in the hands of developers of NYC luxury apartment buildings underground space increasingly means 10-foot ceilings with track lighting and imported wood flooring and your very own sauna, indoor pool, gym, movie theater, wine bar, game room, artist studio, and/or tasting room--no word on what flavors they can build those in yet.

Some of these subterranean rooms even have glass bricks set into the sidewalk above that reportedly let in a great deal of sunlight, although one can easily imagine your view of pedestrians walking over your skylight can occasionally taking a disturbing turn toward the Lohan.

The catch in scoring one of these super-deluxe basements, is that it comes with the garden-level apartment above it. According to the NYC building code, underground space that lacks natural light and ventilation is considered “cellar space” and “uninhabitable”, so it is illegal to rent or sell an underground unit as freestanding NYC apartment or bedroom, luxury or no. To discourage this practice, developers cannot put full bathrooms in below ground apartments, just half-baths. As if that’s going to discourage CHUDs—it doesn’t even discourage most non-cannibalistic families! According to one broker:

"[B]uyers often wind up renovating and create full baths and guest rooms or bedrooms. […] Although it’s not prescribed to be used that way, a couple might have a child and decide to use it as a dwelling area even though legally it’s not living space."

When it comes time to sell the property, the owners must market it as a one-bedroom with basement space […] but other families will see it as a two-bedroom that’s selling for $150,000 less than a real two-bedroom, so why not? It’s an unwritten rule of thumb.”

Averaging 30 to 50 percent less than above ground space, subterranean NYC luxury properties may not remotely resemble their CHUD-infested, hell-hole brethren, but buyers certainly benefit from their troubled brethren's reputations.

NYC Apartment Buyers, Set Your Alarms: June 30, 2009!

In recent months, even the most unflaggingly optimistic New York City real estate insiders have been finding it increasingly difficult to pass off the NYC real estate market’s symptoms of the property value pox devaluing the rest of the nation as an empathy pimple.

As in medieval times, when hair-shirted Europeans flogged themselves to appease angry gods and hasten an end to the Black Death, many nervous NYC apartment buyers and sellers are ready to entertain supernaturally divined reassurance that there is meaning in their acid reflux and that their vexation is finite.

Enter James Cramer, New York Magazine’s “resident financial expert”, wearing a comically over-sized turban that even Johnny Carson would consider ethnically insensitive when Mr. Cramer then clutches at his crystal balls and boldly asserts, “I got your prediction—right here!—June 30th, 2009, total NYC real estate market turn around!”

OK, maybe he didn't announce it quite like that, my imagination has an overactive costume department. But to those who have come to see the NYC real estate market’s empathy pimples as a pox of biblical proportions, Mr. Cramer’s claim to know the precise date on which NYC property values will reverse their downward slide may seem no less wacky. In his actual words, Mr. Cramer states:

“The converted bears, as well as the panicked sellers desperate to bail out and nervous buyers afraid to jump in, will be dead wrong nine months from now, when housing prices bottom. In fact, I’ll call the precise date of the housing-market turnaround. It will begin on June 30, 2009.”

So according to Mr. Cramer, if you purchase your NYC apartment on June 30, 2009, you will potentially see the greatest possible return on your investment since NYC real estate values tanked in 1989-1991.

Mr. Cramer offers 10 very compelling—and not at all wacky—reasons he believes you should be on the phone with your favorite real estate broker no later than June 29, 2009. Here are his top three reasons, nutshelled:

1) The rate of new come construction has slowed waaay down...

"By next June we won’t be building enough homes to accommodate demand, and the gap between supply and demand won’t be made up by unsold inventory."

2) Troubled homeowners will begin benefiting from federal bailouts...

"By nine months from now, the FHA will have taken millions in terrible floating-rate loans with high interest rates and turned them into 30-year mortgages with much lower rates. That’s going to reduce the number of foreclosed homes, and the supply of available homes, dramatically."

3) Bargains! Sweet, sweet, cut-rate, dirt-cheap, fell-off-the-back-of-a-truck NYC apartments!

"[B]y June of next year, I believe real-estate prices will have fallen 25 percent nationwide from their previous highs, with some of the hardest-hit areas of the country down as much as 50 percent. At those price levels, homes will seem irresistible to the many millions of potential buyers who have stayed on the sidelines."