Archive for Buyers

 Are you enticed by the mortgage interest lowest rates in decades? If so you’re not alone, but they are often out of borrowers’ reach. Lenders base their rates on perceived risk. Only if you can show you’re low-risk would you qualify for a rate that matches those seen in headlines.

If you’re looking for the lowest available rates consider these basic factors:

  • Credit Score: The ideal FICO score is around 740 or higher. This will put you in the best place for pricing.
  • Points: 1% of the loan amount is a point, and by paying points you can reduce your mortgage rate. Be sure to ask for a zero point quote as well to compare the two rates.
  • Property Types: Such property types as duplexes, condominiums in newer buildings or with lower down payments, commercial properties or non-owner occupied properties come with higher rates.
  • Down Payment: Experts say putting down at least 25% could lead to more attractive pricing. Lenders offer different breaks on rates if equity is higher.
  • Loan Length: ARM and 15-year loans are often lower than those on the 30-year loan. Consider how long you plan to live in the property and weigh your options.
  • Other considerations:
    • Lock-in: You may receive a lower rate for a shorter lock period 30-45 days rather than the usual 60 days
    • Additional ownership costs, taxes, insurance and maintenance.

 Inspired by New York Times Article by Vickie Elmer published January 12, 201

 

 

 

 

 

 

 

For most buyers in Manhattan, getting past the asking price of a co-op or condo is only the first in a series of seemingly insurmountable obstacles.  The monthly maintenance fee is the second.  From a few hundred dollars a month to a few thousand depending on the various buildings, most owners find the maintenance fee never goes down, and rarely stays constant.   Most are adjusted on an annual basis.

Buyers need to be concerned about the fee as a direct impact on the property value, not just because of the cash going out every month.  The maintenance fee covers operating costs:  Staff Salaries, management fees, heat, water and sewer and other items.  In co-ops, the real estate tax bill and underlying mortgages on the entire building is part of the maintenance fee, and is proportional to the number of shares you own in the co-op corporation.

Condos are different. The common charges still cover the operating costs the same as co-ops, but the property tax bill goes directly to the owner because of the different ownership type.  Condos may have more amenities but lower common charges due to this distinction.

According to the Council of New York Tax Cooperatives and Condominiums, the fees have skyrocketed over the last decade.  For example, the median maintenance fee for co-ops on the West Side of Manhattan rose by 59% between 2000 and 2009, while condo common charges increased by 38% city-wide for the same period.

Increasing Real Estate Taxes are the main reason for the rise in co-op fees.  Both the tax rate and the assessment of property values have increased in recent years.  On the West Side, co-op median real estate taxes increased by 116% between 2000 and 2009.   On the East Side in 2000, 23% of the maintenance paid was attributed to taxes; by 2009, that figure had risen to 33.3%, indicating that taxes were a larger portion of the maintenance fees.

Land Leases are another issue for increased maintenance fees for some co-ops.  As a number of co-ops do not own the land their building sits upon, rather rents the land.  Some of those leases are coming up for renewal soon, and the experts predict there will be a huge jump in cost.

Finding savings to offset the increases is difficult.  Most costs are fixed, including salaries, taxes, insurance, upkeep and utilities.  Several co-ops have hired consultants to check for water leaks, while others are switching to natural gas from oil heat.  Still others are metering each apartment’s utilities separately.

Many co-ops are refinancing their underlying mortgages to take advantage of low interest rates.  Others are generating income by imposing or increasing fees for using the bike room, moving in or out or renting a unit.

Reviewing a building’s financials will give a buyer an understanding of how a building spends its money.  If you disagree with how a building spends the fees, there’s little point in moving there.   See our Series on reviewing building financials starting with  ‘Tis the Season: Many Manhattan Coop Financial Statements Are Released In May.

Inspired by New York Times Article on Jan 15, 2012 by Jim Rendon.

Recnetly,  U.S. Senators Charles Schumer (D-NY) and Mike Lee (R-UT)  introduced a bill that would allow foreigners who spend at least $500,000 on residential property to obtain visas allowing them to live in the United States.  The “Visa Improvements to Stimulate International Tourism to the United States of America Act”, or VISIT-USA Act is similar to an existing program that puts foreigners on a fast track to a green card if they invest at least $500,000 in an American business that creates at least 10 jobs.

The legislation would create a new homeowner visa that would be renewable every three years, but would not be a path to citizenship.  There are a number of stipulations and restrictions, however:

  • To be eligible, a person would have to buy a primary residence of at least $250,000 and spend a total of $500,000 on residential real estate.  Other properties could be rented.
  • The purchase would have to be in cash, no mortgage or home equity loan allowed.
  • The property would have to be bought for more than its most recent appraised value
  • Buyer would have to live in home for at least 180 days each year, requiring paying US Income taxes on any foreign earnings.
  • Visa eligibility would be revoked if property was sold.
  • Work visas still must be obtained to hold a job.
  • Neither buyer nor dependents would be eligible to receive Medicaid, Medicare or Social Security benefits.

Some brokers say that a visa incentive to foreign buyers could potentially even triple sales in their markets. 

“California, Florida, New York, Colorado, Hawaii, and Texas — those states will see a huge increase in demand,” Sandra Miller, a broker at Engel & Volkers in Santa Monica, told the Los Angeles Times.

Source:  Los Angeles Times story

1/6/12:  From the New York Times:  Living Above the Stove.  “The Five Boroughs of New York have more than 23,000 restaurants.  But what of the tenants who live above them?  Read about it in the New York Times.

1/13/12:  From the New York Times:  Not for Vampires Only.  “Some New Yorkers seek dim, dark spaces that admit little sense of the throbbing city outside their doors.  Read about it in the New York Times.

1/16/12:  From the  New York Post:  Rents Soar as Apartments Dwindle:  “Manhattan rents soared 8.6 percent last year — reaching pre-2007-crash highs — while vacancy rates plummeted and residents grabbed apartments at a near-record pace, new industry reports show.  Read more about it in the New York Post.

 1/19/12: From Prudential Douglas Elliman:  Exclusive 4th Quarter  2011 Queens Sales Market Report.  Get the full report

1/19/12:  From Prudential Douglas Elliman:  Exclusive 4th Quarter 2011 Brooklyn Sales Market Report.  Get the full report

1/20/12:  From New York Times:  Big Ticket:  Sold $9.5 Million:  The biggest sale of the past week according to city records was a TriBeCa penthouse selling for $9.5 Million.  Read about it in the New York Times.

This week, we released our Fourth Quarter report for the Manhattan Residenital Rental Market.  Manhattan Residential Rentals Market Overview Q4 2011 reported here and summarized below was prepared by Miller Samuel for Prudential Douglas Elliman.

“Tight mortgage credit conditions continued to drive rental prices and activity higher.”

  • The median net effective rent (face rent less landlord concessions) jumped 9.5% from $2,950 to $3,121 in the same period last year. The year-over-year-gains were consistent across all rental price indicators.
  • The 2-bedroom and 3-bedroom markets outpaced their smaller counterparts,increasing 14% and 18.1% respectively over the same period.
  • New rental activity (excluding lease renewals) was up 10% from 7,217 to 7,942 in the same quarter last year.
  • About 7.4% of new leases had some form of landlord concession compared to the 40.5% in the prior year quarter. For those leases with concessions, the average amount was the equivalent of 1.2 months of free rent.
  • Days on market—the number of days from original list date to lease signing—was at its second fastest pace of 37 days in 15 years, which is when we began tracking this metric.

With an aging housing inventory, new condominiums have quite an appeal in Manhattan.  Luxury amenities like pools and play areas, high end finishes add to the appeal.

New condos have a few drawbacks, however: often higher selling prices and closing costs as well as difficulties in obtaining loans.  New buildings must have offering plans approved by the state attorney general’s office, detailing important points about the building.  This complex document can be intimidating to the lay person. 

Bringing in a good attorney familiar with new construction to review the offering plan early in the process can save a client thousands of dollars by identifying taxes and fees that can be negotiated.

Tax abatement is another point that bears close scrutiny.    While it is a great selling point because it keeps monthly costs lower for a while, an attorney can help determine the time span of the abatement and what the tax bill could be when the abatement expires.

Closing costs are much higher on new construction.  Expect to pay the transfer tax and the seller’s attorney fees in addition to the customary closing costs for established apartments.

Be sure the building has a temporary certificate of occupancy, required before you can close on an apartment in a new building.  Check the Building Department Website

Financing a new condo can be difficult.  Buyers may be approved for a loan, but it is entirely possible the building will not qualify.   Certain FHA and Fannie Mae requirements may preclude the building, such as flood zone or percentage of sold apartments.  Individual banks may have their own additional requirements.  Many new buildings have preferred lenders and mortgage brokers to overcome this hurdle.

Appraisals must match the purchase price.  It is not unusual to have difficulties finding nearby comparables to the new apartment you wish to buy, causing appraisals to come in lower than expected. 

Inspections are recommended for new construction.  Cost cutting measures like lower-quality windows and problem with floors or exterior stucco may affect the quality of your life.  Significant problems can be addressed in the contract.  Smaller issues like paint drips or broken screens should be addressed on a ‘punch list’.

Doing your homework now can save you a lot of aggravation down the road.

 Inspired by New York Times Article by Jim Rendon, published October 30, 2011

 

Our Q4 Manhattan Market Overview was released today and summarized below was prepared by Miller Samuel for Prudential Douglas Elliman.

“After a year of mixed economic news, the Manhattan housing market, while continuing to experience overall price stability, closed out the year with a slower pace of sales.”

  •  Median sales price was $855,000, a modest 1.2% increase from $845,000 in the prior year quarter. Price per square foot increased 5.6% to $1,117 from $1,058 over the same period.
  • There were 2,011 sales in the fourth quarter, 12.4% less than 2,295 in the prior year quarter. The fourth quarter had the lowest number of sales since the same period six years ago, perhaps related to the unusual surge in sales in the prior quarter. Pending sales were also below the prior year level.
  • There were 7,221 active listings at the end of the fourth quarter, essentially unchanged from the same period last year, but 2.6% less than the ten-year quarterly average of 7,412.
  • Days on market—the number of days from the last price change if any to the contract date—saw a modest 5 day increase to 130 days from 125 days, still consistent with the 132 day average for the prior decade.
  • Listing discount—the percent difference between the list price at time of sale to the sales price—fell to 4.9% from 8% in the same period last year.

MARKET RECAP

The news is understandably slow the week between Christmas and New Year’s Day. The most notable release was last Friday’s news on new home sales, which rose to an annualized rate of 315,000 units in November, a 1.6-percent gain over October.

To be sure, we have a long way to go until we reach the normalized construction rate of 1.5-million units per year. Nevertheless, we expect the new-home market to gain pace in 2012. After all, there are only 158,000 units in inventory. Even at the current slow sales pace, this equates to a record low six-month supply
Over the past three years, new-home construction has fallen far below historical norms and also below the level needed to keep pace with population growth. The fact is our country gains roughly 2.7 million people and one million new households annually.

You might not see supply as a problem. We are all familiar with the glut of distressed properties. Indeed, Bank of America expects eight million distressed homes to come to market over the next four years. These homes, we’ve so often heard, will continue to depress new home construction.

We view B-of-A’s outlook with a skeptical eye. There is a likely prospect that many of these distressed properties will simply go away. Destruction is too frequently overlooked in many supply projections. A house is not a permanent structure. Many are destroyed by fire, wind and flood each year. Many more are lost through simple decay and abandonment. Based on U.S. Census data, 300,000 homes are lost annually. That number will surely rise in years to come.

In short, the math – low inventory plus more households minus more home destruction – suggests to us a rebound in new-home construction. We are not alone in this contention, either. Wells Fargo projects that housing starts will continue to rise each year for the next five years before reaching once again the normalized construction rate of 1.5-million units annually by 2017.

Of course, projections are one thing, betting on those projections is another. Here, we see an encouraging trend. Big money is starting to wager on housing. The Wall Street Journal reports that many large hedge funds are investing billions in housing-related investments. Other investors have followed suit. Shares of homebuilders are up 30 percent over the past three months, making them one of the best performing investments in the market.

Up For A New Year

As we approach the end of the old year nearly all of us stop to ask, “How will the new year unfold?” Of course, none of us know with any certainty the answer to that question, but it can be insightful (and fun) to ponder. So, how will 2012 unfold, at least as it pertains to the housing and mortgage markets?

Both markets will obviously be influenced by economic growth, which, in turn, will spur job growth. We see a pick up in economic growth and job growth in 2012.
The economy has been growing at a sluggish rate for too long now. The United States is unique in that Americans tire of pessimism quicker than most other cultures, and then we do something about it. In our opinion, rising consumer confidence points to a lot of pent-up demand that is waiting to bust loose, and will bust loose in 2012.

A pick up in demand, in turn, necessitates new hires. In fact, a recent survey by CareerBuilder.com found that nearly one in four employers is keen to add new permanent full-time employees. These employers are simply waiting for a clear sign the coast is clear. We think they will get that sign in the first quarter of 2012.

Greater economic activity will obviously impact the housing market. We see accelerated sales volume in both the new and existing home markets. We also expect to see prices stabilize in the first half of the year, and then appreciate perceptibly in the second half.

As for the mortgage market? This is much more difficult to call. The Federal Reserve has stated it intends to hold rates low through 2012. However, all it takes are a few persuasive signs that the economy is back on track, and the Fed could easily backtrack from its stated goals. All we can say is that we would be much less surprised to see mortgage rates 50 basis points higher six months from today than 50 basis points lower.

Graph Courtesy from NY Times in an article by Vickie Elmer December 29, 2011.  Data and Commentary provided by Fred Ashe, from DE Capital Mortgage.

Roughly 10,000 baby boomers turn 65 each day.  Born between 1946 and 1964, there are an estimated 72 Million American baby boomers, all considering how to age and where. 

In a new book “Unassisted Living:  Ageless Homes for Later Life” (Monacelli Press; $45) Wid Chapman, Architect, and Jeffrey P. Rosenfeld, a gerontologist specializing in the relationship between aging and the built environment collected 33 examples of residences that have been designed to bridge the distance between ‘one’s vital and declining years’.

Design features such as lack of thresholds at doors, surfaces that diffuse sunlight and accessible bathrooms and showers all contribute to a house suitable for aging.  Almost minimalist by design, the less-cluttered, more open pathways and fewer places to slip or bump into furniture are key.   By removing tripping hazards and streamlining the design, accessibility is achieved.

Today’s baby boomers want to remain independent as long as possible.  The whole idea of retirement is changing.  Technology allows people to combine leisure and work from a remote setting.  Gone is the idea of going south at a specified age.  Connection to family, grandchildren, parents are keeping people in one area rather than becoming snow birds and migrating south.

 

From New York Times article on November 24, 2011 by Julie Lasky

Making up 75% of all housing stock in New York, Co-ops are the most common type of housing excluding rentals.  The average co-op maintenance fee in New York City climbed 19% from 2009 to 2010 to $1.76 per square foot per month, according to Miller Samuel, a Manhattan-based appraisal company that tracks maintenance costs.

Maintenance fees  usually cover debt service for the underlying mortgage, property taxes, maintenance, personnel and other items.  These fees are usually apportioned per share of stock in the corporation, and are in addition to the owner’s individual mortage (if any).  A review of a co-op’s financial documents will give you the breakdown on the expenses.

What’s behind this increase?

  • Property Taxes:  New York City Property Tax revenue increased 9.68% in 2009 according to the NYC Department of Finance.
  • Utility costs:  Natural Gas and heating oil costs continue to increase. Water costs are up slightly.
  • Building Staff. Salary and benefits, usually renegotiated under union contracts every two to 3 years. 
  • Insurance Costs:  Varies by building and location, usually covering liability and disaster damages
  • Building upkeep, including major repairs to plumbing, electrical, heating and the roof.

What can the Board do?

  • Cancel or delay discretionary projects
  • Request several estimates for upcoming projects.
  • Refinance underlying mortgages.
  • Impliment a flip tax.

When faced with rising costs, there is little a co-op board can do but pass the costs throught to the shareholders as either increased maintenance fees or temporary (or permenant) assessments.  The decision to raise maintenance fees ultimately rests with the co-op boards.

Inspired by Smart Money article by Annamaria Androitis.

As we reported in May,  the Federal Government backed new mortgage lending limits program expired in September, 2011.  This week, the U.S. House and Senate voted to restore the FHA loan limits to the previous maximum $729,750.  According to the National Association of Realtors, this will help provide stability to communities as credit restrictions continue to prevent some qualified buyers from becoming home owners.

The restoration of the limits only apples to FHA mortgages, not Fannie Mae and Freddie Mac, which also expired at the end of September.  The conforming loan limit for these two secondary mortgage market companies will remain at a maximum of $625,500.

While this may be good news for many markets, in Manhattan, where over 70% of the apartments for sale are Co-ops, it probably won’t make much difference.  Most co-op boards require 20-50% down payments and higher income to debt rations (25-30% maximum debt to income).   Lenders for most condos are asking for at least 20% down payment to qualify for a loan.

Excerpts from Daily Real Estate News, November 18, 2011

 It’s every parent’s worst nightmare; an accident harms your little darling, especially a preventable accident.  Outlets, dresser drawers and cabinets filled with chemicals are child magnets.  Being naturally curious, a child will explore everything with their hands and mouth.  Choking, shock and strangulation hazards are everywhere.

 Some advice from the experts:

  • Start before the child comes
  • Get down on their level.  Crawl around on your hands and knees and see things from a child’s perspective
    • Outlets:  use outlet covers with horizontally sliding doors.  Easy for parents to use, don’t need to be removed and reinserted.  Check out Safety 1st Swivel Outlet cover about $2.25, or Levitons Decora tamper-resistant duplex receptacle, $2.50 at Home Depot.
    • Choking and strangulation hazards:  Cords on window treatments and power cords.  Secure the electric cords out of reach with Safety 1st’s Cord Short’ner, about $4.  Forego the venetian blinds for something that is completely cordless.
    • Secure the TV to the wall, a child reaching and grabbing could tip the TV onto themselves.
    • Secure furniture more than 30 inches tall with wall restraints.  Be sure to screw the straps into a wall stud.
  • With all the temptations in the kitchen and bath, toxic chemicals, sharp utensils, etc., think Operation Lockdown:
    • Use latches that automatically reset upon closing.  Safety 1st No-Drill Deluxe latch kit (about $31/set of 4) uses a magnetic handle to release the latch.  Once installed, keeping track of the handle will be the hardest part.
    • In the bath, get a toilet lock.  KidCo makes one that automatically resets and is relatively easy to clean (about $15).
    • Keep the bathroom doors closed and put child-proof doorknob covers on the knobs.
  • Stairs:  Use a child safety gate top and bottom. 

 While this list isn’t all inclusive, it gives you a good start.  Consider calling in a consultant.  Every home is different, and poses different potential hazards. 

 Based on New York Times article by Bob TedeschiOctober 26, 2011

Today we released third quarter sales  for theHamptons/North Fork residential market.  The Hamptons/North Fork Market Overview Q3 2011 reported here and summarized below was prepared by Miller Samuel for Prudential Douglas Elliman.

“East End market conditions reflected increased activity, especially in the luxury market as listing inventory slipped”

  • There were 538 sales in the third quarter, 14.7% above 469 sales total in the same period last year, but 13.1% below the prior quarter total of 619 sales.
  • Median sales price was $700,000 in the third quarter, 12% higher than $625,000 in the prior year quarter. In the third quarter, 67.1% of all sales fell below the million dollar threshold consistent with the 65.9%, five-year average.
  • There were 2,238 listings at the end of the third quarter, 1.5% less than the 2,271 listings in the same period last year.
  • Although price indicators and sales activity increased from the same period last year, the listing discount measuring the negotiability between buyer and seller edged higher to 11.3% from 10% in the same period last year.
  • Days on market, the number of days from the last price change to contract date, increased 6 days to 170 days from 164 days in the prior year quarter.

Today we released third quarter sales  for the Long Island residential market.  The Long Island Market Overview Q3 2011 reported here and summarized below was prepared by Miller Samuel for Prudential Douglas Elliman.

“Sales activity jumped above last year’s levels, as listing inventory slipped.  Negotiability between buyers and sellers held steady.”

  • Median sales price declined 3.2% to $365,000 from $377,250 in the prior year quarter. Average sales price followed a similar pattern, declining 3.9% to $457,496 from $475,946. The decline is largely attributable to last year’s federal homebuyers tax credit that had pushed sales prices higher.
  • There were 5,141 sales in the third quarter, 18.4% above the 4,343 total in the prior year quarter and 22.3% above the prior quarter total of 4,205. The current total is the fourth highest quarter in three years, led by three quarters significantly impacted by the federal homebuyers tax credit from the second half of 2009 through early 2010.
  • There were 21,462 listings on the market at the end of the third quarter, 1% less than 21,670 listings in the prior year quarter and 5.8% less than 22,772 listings in the prior quarter.
  • The average number of days to sell a property from its original list date to contract date was 116, nominally longer than 112 days in the prior year quarter.
  • The listing discount, or negotiability between buyer and seller, measures the percentage discount from the original list price and the sales price, was essentially unchanged at 6.5% in the third quarter compared to 6.6% in the same period last year.

Today we released third quarter sales  for the Brooklyn residential market.  Brooklyn Market Overview Q3 2011 reported here and summarized below was prepared by Miller Samuel for Prudential Douglas Elliman.

“Sales noticeably increased, as all price indicators edged higher, and listing inventory remained stable.”

  • There were 2,219 sales in the third quarter, 18.1% more than 1,879 sales in the prior year quarter, and the second highest quarterly total in three years.
  • Median sales price increased 5% to $510,000 from the prior year quarter, reaching its highest level in three years, and tying the 2008 third quarter level.
  • Listing inventory edged 0.9% higher to 6,688 in the third quarter from the prior year quarter. With the rise in sales outpacing the increase in inventory, the absorption rate fell to 9 months from 10.6 months over the same period.
  • Days on market expanded by nearly a month over the same period to 149 days from 109 days in the prior year quarter, as stable inventory, and higher sales resulted in an increase in sales from older listings.
  • The listing discount—the difference between the listing price at time of contract and the contract price—was 3% in the third quarter, down from 5% over the same period last year.