Competition for apartments started to heat up about a month ago, and now the flames burn more intensely than ever as a result of withering inventory.
I went on Sunday to eight or nine open houses that had been listed on the Upper West Side in just the prior week, and they were mobbed. The only one that wasn’t packed in the first five minutes was a $279,000 studio remarkable only for how oppressive it was.
Worse for buyers, at least two of them had offers, including that studio. In some cases, there were multiple offers — even before those initial open houses.
Listing agents were running out of show sheets, prospective buyers were literally bumping into each other, there was a palpable sense of panic.
“Irrational exuberance,” one of the agents muttered none too originally but emphatically accurate.
We are not alone in that observation. Indeed, confirming that the housing market is galloping once again, the new Real Deal proclaims in a headline that bidding is “absolutely insane.”
Lord Keynes had a point.
A sellers’ market that is so robust is not a good thing, occasionally even for sellers.
Buyers who purchased new homes in the frenzied expansion of our housing bubble five and six years ago have learned the hard way that they had paid too much.
Not only is it irrational and expensive to get so caught up in the stampede of other buyers thirsting for fewer acceptable properties than in years, but appraisal issues can hurt both them and sellers.
Buyers can suffer because the sold prices of comparative properties are outdated even before the transactions are publicly recorded — and lower than the heady sums of today.
They’re not going to get a loan. If those buyers are rash enough to waive financing loopholes in their contracts, they will be out their substantial deposits. In other words, all cash is fine so long as you don’t need a mortgage.
By the same token, sellers who accept contracts with financing or funding contingencies face the risk of taking their properties off the market for weeks or months only to have the transaction fall apart.
Also, sellers are in jeopardy of losing some of the most acceptable prospective buyers as they reflexively turn away from bidding wars. Prospective may be so cynically fatalistic over time that they’ll simply adopt a new strategy of lowballing.
Washington, D.C. apparently has been even wilder than here in New York — at least it was before the sequester — as a former broker colleague of mine related to me.
She had 44 offers for a listing of hers in the Columbia Heights neighborhood around Christmas.
As I’ve written previously, buyers of mine lost out against 10 others bidders for a Brooklyn house despite offering way above the asking price. Then they failed to win an offer on a second property that had seven competitors despite a significant bid also substantially above the listing price.
They are still looking.
Although we had become used to listings remaining available for approximately three months on average, desirable and well priced ones go to contract sometimes in a mere week or two.
With regard to pricing, every broker with whom I’ve discussed today’s market agrees that no one can know these days what “well priced” means. It is almost as if no asking price is too high, though I admit to a fair amount of exaggeration.
It is rough out there, at once anxiety provoking and depressing for buyers.
(In my weekly Out and About column, which I publish a few weeks after I’ve visited the listings that I describe, I always hope to critique those still showing as active. Lately, I’ve found that goal to be all but hopeless as properties are gone almost as fast as I can see them.)
Neither a sellers’ nor a buyers’ market is defensible — or, of course, controllable. Either market is bad.
A balanced market is what works best. How long this sellers’ market will endure is anyone’s guess.
Tomorrow: Going blind
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Licensed Associate Real Estate Broker
Senior Vice President
Charles Rutenberg Realty
127 E. 56th Street
New York, NY 10022
Tags: Apartments, Appraisal, Brooklyn, Co-ops, Condos, Contingencies, Contracts, House prices, Inventory, Keynes, Manhattan real estate, Mortgages, New York City, The Real Deal, Upper West Side, Washington