Manhattan Real Estate Update: Meltdown or Showdown

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My favorite go-to paper, The Financial Times, recently reported that the IMF’s World Uncertainty Index is at a record high, “largely due to tensions including the US trade war with China and Britain’s exit from the EU.” We’ve become so numb to all the negative global and domestic sentiment and anxiety that we’ve self-prophesized driving ourselves full-tilt toward a cliff. However, the Coronavirus (Covid-19) has side-swiped our vehicle and careened us off a neighboring cliff instead…ironically, precipitating the same result. This unforeseen event abruptly triggered the expected equity market correction early. I believe we have taken a needed body-blow, forcing us to slow down and actually realize the extraordinary position we have been in economically, as a country and in Manhattan…well, until yesterday.

That said, opportunity knocks. Remember Warren Buffet’s investing advice, ” Be Fearful When Others Are Greedy and Greedy When Others Are Fearful .” One of my dearest clients, purchased in the Spring of 2009, seven months into the financial crisis on a month when the Dow had dipped to 6,500. In my 22 years, no one has fared better with their purchase. It reminds me of where we are today.

Political polarization makes us forget that our domestic economy has been strong. Virtually every economic indicator has been positive (unemployment is near record lows, the strong $US etc.) and we have interest rates at levels we never dreamed of 18 months ago. Back then, the Jumbo 30 year-fixed mortgage rate was 4.65%; today it is only 3.125%. That is a 1.5% drop; meaning that you can borrow 20% more right now. Example: 18 months ago, a $1M mortgage at 4.65% would have cost you $5,157/month. Today, at 3.125% that same $5,157 would allow you to borrow $1.2M. That’s $200K more; that’s real purchasing power. For perspective, when my client (above) bought in 2009, rates were at 5.5%; imagine the difference from then to now.

If you further consider the marketplace is down anywhere from 10-20% (since the 2015/2016 peak) depending upon what specific market sector you are comparing, your purchasing power is even greater yet. Note: in some cases the uber-luxury market is down 25-40%.

Savvy sellers have capitalized and struck deals with willing buyers, often times still generating multiple bid situations when priced right. For buyers, if you add the above factors to a notoriously sluggish election year, as far as deal-volume is concerned, you begin to formulate a form of arbitrage, where you can take advantage of current market dynamics, which have just become more extreme. Note: every individual has a unique set of circumstances and I am happy to discuss those privately. So please do not hesitate to reach out, as I am at your disposal.

So what does this all mean for you? If you’re a seller it means, get to it. Get in and get out. The Manhattan marketplace is quite efficient and purely price driven. When priced right, sellers succeed. Time on the market erodes your value. For buyers, very simply, it is likely the best buying opportunity of our lifetime. I know, you’ve heard it from me before, but it’s true. Again, I’m happy to discuss.

As I always ask:

Are you prepared to dive in? You should always know what you are in a position to buy or sell at all times. If you don’t know, reacquaint yourself with the marketplace. What is your property worth? What can you afford to buy? Anyone interested in buying or selling, should be rolling up their sleeves to determine whether the time is right to sell or if there’s a home or investment property out there for them.

Roberto Cabrera
Licensed Real Estate Broker
Brown Harris Stevens

212.906.0554

rcabrera@bhsusa.com

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